contracts Flashcards
- Substantial Performance (2616)
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. Under the common law, a material breach of contract (ie. when the nonbreaching party fails to receive the substantial benefit of its bargain) allows the nonbreaching party to withhold any promise performance and to pursue remedies the breach, including damages. Substantial performance is less likely to be found when a party intentionally furnishes services that are materially different from what he promised. Such a breach is more likely to be treated as a material breach for which contract damages are recoverable.
Installment/Divisible Contract (2616)
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.
Condition Precedent (2616)
When parties expressly agree to a condition precedent (or 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.
Unjust Enrichment/Quantum Meruit
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 quasi contract, quantum meruit does not depend on the existence of a contract.
Substantial Performance (5321)
Under common law, if the breach is minor (ie. 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.
Predominant Purpose Test (5321)
First, it must be established whether the common law or UCC applies to the kitchen contract in order to determine if the contractor appropriately performed and is entitled to recover on the contract. The common law applies for services or real estate and Article 2 of the UCC applies to contracts for the sale of goods. 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. Common law principles remain applicable to the extent they are not displaced by the UCC.
Material Breach (5321)
By contrast, a material breach of contract occurs when the non-breaching party does not receive the substantial benefit of the bargain. The material breach allows the non-breaching party to withhold any promised performance and to pursue remedies for the breach, including damages. The breaching party who failed to substantially perform generally cannot recover damages, but may be able to recover through restitution. However, most courts hold that recovery 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.
Construction Contracts/Economic Waste (5321)
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.
Expectation Damages (5318)
Compensatory damages are meant to compensate the nonbreaching party for actual economic losses. Expectation damages are intended to put the nonbreaching party in the same position as if the contract had been performed. Expectation damages must be calculated with reasonable certainty. 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 to the breaching builder and compensation for the delay in completing the construction.
Consequential Damages (5318)
Actual damages can be either direct or consequential. Consequential damages are a direct result of the breach but need not be the usual result of the breaching part’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 the natural and probable consequences 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 to do not concern the value of the lost performance due to breach, but there must be causal link between the breach and the consequential damages for them to be recoverable. The plaintiff must prove the dollar amount of consequential damages with reasonable certainty, not speculatively.
Mitigating Damages/Preventing Loss (5318)
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 nonbreaching party is held to a standard of reasonable conduct in preventing loss. The nonbreaching party’s failure to mitigate does not give the breaching party a right to sue the nonbreaching party for such failure. It only reduces the nonbreaching party’s damages recovery.
UCC Contract Requirements (2245)
The UCC Article 2 governs transactions involving the sale of goods. Under the UCC, a contract is formed if both parties intend to enter a contract and there is a reasonably certain basis for giving a remedy. Other than the identity of the parties and subject matter of the agreement, the quantity is the only term essential to forming the contract. As long as the parties intend to create a contract, the UCC fills the gap if other terms are missing, such as time, place, or delivery.
Statute of Frauds (2245)
An oral contract for the sale of goods is valid and enforceable unless the contract is for the sale of goods for $500 or more. In that case, the contract must be in writing and signed by the party to be charged. (ie. the one against whom enforcement is sought) in order to satisfy the SOF and be enforceable. The writing need only be sufficient to indicate that the parties intended to enter into a contract. A contract for the sale of goods is outside the UCC Statute of Frauds to the extent that goods are received and accepted, and to the extent that payment has been made and accepted.
SOF Requirements (2245)
The UCC requires a memorandum for a sale of goods for $500 or more to: (1) indicate that a contract has been made, (2) identify the parties, (3) contain a quantity term, and (4) be signed by the parties to be charged. A signature is any authentication that identifies the party to be charged, such as a letterhead on the memorandum. A mistake in the memorandum or the omission of other terms does not destroy the memorandum’s validity. An omitted term can be proved by parol evidence. However, Enforcement of the agreement is limited to the quantity term actually stated in the memorandum.
Merchant to Merchant (B2B) Transaction (SOF Exception) (2245)
There is an exception to the writing requirement under the UCC known as the merchant’s confirmatory memo. This requires: (1) that both parties be merchants, (2) there to be a writing that accurately reflects the agreement between the parties, and (3) requires that the writer sign the memo. Additionally, the memo can be enforced against the recipient if the recipient received the memo and did not object to the terms within 10 days of receipt. A merchant is someone who deals in the kind of goods that are the subject matter of the contract.
