Contracts Flashcards
Doctrine of substantial performance
The doctrine of substantial performance provides that a party who substantially performs can recover on the contract even though full performance has not been tendered. However, there is no substantial performance if the incomplete performance was a material breach of contract.
Material Breach of Contract
Under the common law, a material breach of contract (i.e., when the nonbreaching party fails to receive the substantial benefit of its bargain) allows the nonbreaching party to withhold any promised performance and to pursue remedies for the breach, including damages.
When is a contract divisible?
A divisible or installment contract is one in which the parties’ obligations are divisible into distinct units of performance. Recovery is limited to the amount promised for the unit of the contract performed.
What happens when parties expressly agree to a condition precedent?
When parties expressly agree to a condition precedent (or a concurrent condition), they are generally held strictly to that condition, and a party must fully comply with that condition before the other party’s performance is due.
Quasi-Contract
When a plaintiff confers a measurable benefit on a defendant and the plaintiff has a reasonable expectation of compensation, it would be unfair to permit the defendant to receive the benefit without compensating the plaintiff. In this case, the court can permit the plaintiff to recover the value of the benefit to prevent this unjust enrichment. Although this type of action is often characterized as based on an implied-in-law contract or a quasi-contract, quantum meruit does not depend on the existence of a contract.
When is the predominant purpose test applied?
If a transaction includes both goods and services, the predominant purpose test is applied to resolve whether the common law or the UCC applies to the entire transaction.
What happens when there’s a minor breach under common law?
Under common law, if the breach is minor (i.e., the breaching party has substantially performed), then the non-breaching party must still perform under the contract. This allows a party who substantially performs to recover on the contract even though that party has not rendered full performance. Generally, the substantially performing party can recover the contract price minus the cost to the other party of obtaining the promised full performance.
What happens if a party intentionally furnishes services that are materially different from what was promised?
However, most courts hold that recovery in restitution is only available if the breach was not willful. Consequently, a party who intentionally furnishes services that are materially different from what was promised cannot recover anything in restitution unless the non-breaching party has accepted or agreed to accept the substitute performance.
What are the general measure of damages for breach of construction contracts?
In construction contracts, the general measure of damages for a contractor’s failure is the difference between the contract price and the cost of construction by another builder, plus any progress payments made to the breaching builder and compensation for delay in completion of the construction. When a breach results in a defective or unfinished construction, if the award of damages based on the cost to fix or complete the construction would result in economic waste, then a court may instead award damages equal to the diminution in the market price caused by the breach. Economic waste occurs when the cost to fix or complete the construction is clearly disproportional to any economic benefit or utility gained as a result.
What are expectation damages and how are they calculated?
Expectation damages are intended to put the non-breaching party in the same position as if the contract had been performed. Expectation damages must be calculated with reasonable certainty.
Value of performance w/o breach – value of performance w/breach = damages
How are Expectations damages calculated in Construction Contracts?
In construction contracts, the general measure of damages for a contractor’s failure to begin or to complete a building project is the difference between the contract price and the cost of construction by another builder, plus any progress payments made to the breaching builder and compensation for the delay in completing the construction.
What are consequential damages?
Consequential damages are a direct result of the breach but need not be the usual result of the breaching party’s conduct. Instead, consequential damages need only be a reasonably foreseeable result of the breach given the parties’ specific circumstances. The breaching party must have reasonably foreseen the consequential damages for them to be recoverable. Damages are foreseeable if they were a natural and probable consequence of breach, if they were “in the contemplation of the parties at the time the contract was made,” or if they were otherwise foreseeable. Consequential damages do not concern the value of the lost performance due to breach, but there must be a causal link between the breach and the consequential damages for them to be recoverable. And the plaintiff must prove the dollar amount of consequential damages with reasonable certainty not speculatively.
What happens when a non-breaching party fails to mitigate their damages?
A party to a contract must avoid or mitigate damages to the extent possible by taking steps that do not involve undue risk, expense, or inconvenience. A non-breaching party is held to a standard of reasonable conduct in preventing loss. The non-breaching party’s failure to mitigate does not give the breaching party a right to sue the non-breaching party for such failure; it only reduces the non-breaching party’s damages recovery.
When is a writing not required for a UCC contract over $500?
A writing is not required (1) for specially manufactured goods, (2) to the extent that payment has been made and accepted for goods, (3) to the extent that goods are received and accepted, or (4) when a merchant fails to object to a memorandum from another merchant within 10 days of receipt of the memorandum.
What is required under the Statute of Frauds
Requirements: There must be a writing signed by the person to be charged (i.e., the person against whom enforcement is sought) that contains the essential terms of the deal.
