Contract Breach Flashcards
What is a contract condition?
An essential term of the contract. Breaching a condition allows the non-breaching party to discharge the contract and sue for damages or force the other party to perform
What is a contract warranty?
A non-essential term of the contract. A breach of a warranty still makes both parties bound by the contract but the non-offending party can sue for damages if they have suffered a loss
What is the difference between a minor and major breach?
A minor breach is the breach of a non-essential term of a contract or a minor breach of an essential term of the contract.
A major breach is a breach of the whole contract or an essential term so the contract’s purpose is defeated
What is the effect of a contract breach?
The non-offending party is not held to their promise. The offending party must choose to treat the contract as discharged and communicate to the other party
When can a contract not be breached?
If the innocent party decides to proceed with the contract and accept benefits from it. If the innocent party already received benefit without knowledge of the breach. The parties can sue for damages but they must still uphold their responsibilities
What are the ways in which breach can occur?
Express repudiation, impossibility, failure to perform
What is express repudiation?
One party communicates to the other by words or conduct that it does not intend to perform
What happens when a party chooses to employ express repudiation?
If the repudiation is a major breach, the innocent party can consider the contract at an end and can sue for damages but if it is a minor term they cannot treat it as discharged. The innocent party must inform the repudiating party that they are treating the contract as terminated
What is impossibility?
An intentional or negligent act that destroys a promisor’s ability to perform and amounts to a breach of contract
What is failure to perform
When one party is not able to perform their end of the contract. Usually only becomes apparent at the time for performance.
What are some important considerations for failure to perform?
If the failure amounts to making the performance more onerous, it may not amount to contract discharge. Must consider if future performance will be equally defective or if the deficiency is relative to the whole performance
What is the doctrine of substantial performance?
A promisor is entitled to enforce a contract when it has substantially performed even if their performance doesn’t comply in a minor way with the contract
What is an exemption clause?
A clause in a contract that exempts a party from liability for failing to perform all or some of their contractual duties
What is the 3 step test to determine whether or not to enforce the exemption clause from the Tercon Contractors case?
- Determine whether or not the clause applies to the facts of the case (any ambiguity is interpreted against the drawing party)
- Determine if the contract is unconscionable (must be both inequality and an unfair outcome during bargaining)
- Determine if the injured party can identify a consideration of public policy sufficient to overrise public interest in freedom of contract
What are the purposes of damages?
To compensate the injured party for their loss, not to punish the other party. Also awarded to compensate for non-economic injury
What are the prerequisites to receive damages from a breach of contract?
- Damages must have flowed naturally from breach of contract. Must have been foreseeable by the parties as a consequence of failure to perform based on knowledge at the time of contract formation
- A party suffering a loss is expected to mitigate losses as much as possible. They cannot sue for damages they could have reasonably avoided
How are the amount of damages decided?
If there is a term in the contract, parties agree to the amount of damages to be awarded. The court will hold to this amount as long as it was a genuine attempt to estimate loss
What are some challenges in measuring damages?
Pain, suffering, and humiliation are hard to compensate for. However, hurt feelings are not enough to get recompense, there must be conduct that is unfair, misleading, or very insensitive.
What are the different types of damages?
Expectation damages, consequential damages, general damages, reliance damages, and punitive damages
What are expectation damages?
The typical remedy for breach of contract which is the difference between the current position of the plaintiff and their expected position after contract completion
What are consequential damages?
Secondary losses that were foreseeable at the time of contracting like when a seller becomes liable for a buyer’s lost sales when they fail to perform
What are general damages?
An estimated amount for intangible injury
What are reliance damages?
An alternative to expectation damages to put a party back into pre-contract position by compensating for wasted time, effort, and expenses
What are punitive damages?
Additional damages awarded by the courts for the purpose of punishment. Rarely used in cases of reprehensible misconduct
What is equitable remedy?
When no amount of money will fulfill the purpose of the contract so the courts enforce payment in methods other than cash
What are the prerequisites to receive an equitable remedy?
- Plaintiff comes to court not having acted unethically
- The plaintiff must not delay in bringing the action to court
- The court will not intervene if the remedy would negatively affect an innocent purchaser
- The plaintiff must have paid meaningful consideration for the defendant’s promise
- The plaintiff must be a party against whom the remedy would be awarded if he were the defendant instead
What is specific performance?
A court order to require a defendant to do a specified act rarely used for acts of service and for the sale of goods
What is an injunction?
When the court restrains a party from acting in a certain way. This requires a clause in the contract which is a promise to not do something. They may also impose an injunction to prevent immediate, irreparable harm being done
What is recission?
Returning a party to their pre-contract condition
What is quantum meruit?
When valuable benefit is conferred at the request of the promisee and the contract is breached, the non-breaching party deserves payment for the benefit they gave
What takes precedence? Cost of performance or economic loss?
Economic loss takes precedence as the contract principle states there must be a loss involved
How can a contract breach judgement be enforced?
An execution order which gives the sheriff authority to seize and sell goods and arrange for the sale of debtor’s lands.
A garnishee order which is placed against a debtor’s wages to have the debtor’s employer retain a portion of the wages for the creditor
