Contracts rule statements Flashcards
Compensatory damages
Compensatory damages are meant to compensate the non breaching party for actual economic losses.
Expectation damages
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
Measure of damages for a contractor’s failure to begin/complete a building project
In construction contracts, the 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.
Consequential damages
Consequential damages are a direct result of the breach but need not be the usual result of breaching party’s conduct. Instead, consequential damages need only be a reasonably foreseeable result of the breach given the parties specific circumstances.
Foreseeability of consequential damages
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 they were otherwise foreseable
Mitigating damages
Contracts
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 invoncenience.
Standard non-breaching parties are held to for preventing loss
A non breaching party is held to a standard of reasonable conduct in preventing loss.
Nonbreaching party’s failure to mitigate
The non breaching party’s failure to mitigate does not give the breaching party a right to sue the non breaching party for such a failure – it only reduces the non breaching party’s damages recovery
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 ben tendered.
Substantial performance in light of material breach
There is no substantial performance if incomplete performance was a material breach of the contract.
Effect of a material breach of contract
Under 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 breach
Hybrid goods and services K
When a transaction involves both the sale of goods and the rendering of services, the predominant purpose test applies to determine whether the common law of contracts or article 2 of the UCC applies to the entire transaction.
What if the sale of goods aspects predominates?
If the sale of goods aspects predominates, the UCC applies to the entire transaction, but it does not preclude the application of other law in appropriate circumstances to aspects of the transaction that do not relate to the sale of goods
What if the services aspect predominates?
If the services aspect predominates, only the provisions of the UCC that relate primarily to the sale of goods aspects transactions apply.
and the common law will govern
Parol evidence rule
The common law parol evidence rule prevents the introduction of prior extrinsic evidence that contradicts the terms of the written contract.
Prereq. for the PER to apply
For the PER to apply, there must be a determination as to whether the parties’ writing is integrated – i.e., whether they intended for it to be their entire agreement.
What if a writing completely expresses all the terms of a parties’ agrement?
If a writing completely expresses all of the terms of a parties’ agreement, then it is a total integration, and the parties cannot introduce any extrinsic evidence of prior or contemporaneous understandings or negotiatins.
What if a writing does not set forth the parties’ agreement on all terms
If the writing sets forth the parties’ agreement about some terms, but not all, then it is a partial integration. The parties are then permitted to introduce supplementary extrinsic evidence of other terms as long as it is consistent with the writing.
What do courts look to to determine intent re: integration
CL
Under the common law, a court was permitted to look only to the writing itself (the four corners of the document) for evidence of the parties’ intent.
Modifying a K at CL
At common law, modification of an existing contract must be supported by consideration. An agreement to modify a contract may be enforced if there are new obligations on both sides
Intentionally furnishing different services than what was promised
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 damages are recoverable
Divisible/installment contracts
A divisible or installment contract is one in which the parties’ obligations are divisible into discrete units of performance
recovery for breach of divisible/installment K
Recovery is limited to the amount promised for the unit of the contract performed
Complying with a condition before performance
When parties expressly agree to a condition precedent, 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
fairness when P confers benefit to D and expects compensation
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 these cases, the court can permit the plaintiff to recover the value of the benefit to prevent unjust enrichment
Quantum meruit and existence of an underlying K
Although restitution actions are 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
Bodies of law that apply to Ks
The common law applies to contracts for services or real estate, and Article 2 of the UCC applies to contracts for the sale of goods
minor breach and performance
Under the common law, if the breach is minor (i.e., the breaching party has substantially performed), the nonbreaching party must still perform under the contract. This allows a party who substantially performs to recover even though they have not rendered full performance.
What can a substantially performing party recover
Generally, the substantially performing party can recover the contract price minus the cost to the other party of obtaining promised full performance
When does a material breach occur
A material breach occurs when the nonbreaching party does not receive the substantial benefit of the bargain
Effect of material breach
Material breach allows the nonbreaching party to withold any promised performance and pursue remedies for the breach, including damages.
What can a breaching party who fails to substantially perform recover
The breaching party who fails to substantially perform generally cannot recover contract damages, but may be able to recover through restitution. However, many courts hold that recovery in restitution is only available if the breach is not willful
Party who intentionally furnishes different services, and what they can recover
A party who intentionally furnishes services that are materially different from what was promised cannot recover anything in resititution unless the nonbreaching party has accepted or agreed to accept the substitute performance
When construction damages would result in waste, what is the appropriate measure of damages
When a breach results in defective or unfinished construction, if damages based on the cost to fix or complete construction would result in economic waste, then a court may instead award damages equal to the dimunition in the market price caused by the breach.
When does economic waste occur
Economic waste occurs when the cost to fix or complete construction is clearly disproportional to any economic benefit or utility gained as a result
