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Chapter 16Remedies for Breach ofTraditional and E-Contracts

Performance and Breach

Three types of performance Complete performance (strict performance) Substantial performance (minor breach) Inferior performance (material breach)

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Performance and Breach

Complete Performance Strict performance

Contract is executed Contractual obligations are discharged

Tender of performance also discharges contractual obligations

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Performance and Breach

Substantial Performance Minor breach of contract Performance deviates slightly from complete

performance Nonbreaching party may recover damages

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Performance and Breach

Inferior Performance

Material breach of contractual obligations

Nonbreaching party excused from any further

performance

Nonbreaching party is permitted to:

Rescind contract and seek restitution, or

Sue to enforce contract and seek damages

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Case 16.1: Breach of Contract

Case Turner Broadcasting System, Inc. v. McDavid 693 S.E.2d 873, Web 2010 Ga. App. Lexis 317 (2010) Court of Appeals of Georgia

Issue Is there an enforceable contract between McDavid

and Turner?

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Performance and Breach

Anticipatory Breach Party repudiates – indicates that he or she will not

perform duties Nonbreaching party is immediately discharged Nonbreaching party may sue immediately

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Monetary Damages

Available to nonbreaching party upon: Minor breach Material breach

Types Compensatory damages Consequential damages Liquidated damages Nominal damages

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Compensatory Damages

Purposes To compensate the nonbreaching party for the loss

of the bargain

To place the nonbreaching party in the position it would have had if contract had been fully performed

Restore benefit of the bargain

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Compensatory Damages

Amount awarded depends on: Type of contract Party that breached the contract

Contracts where compensatory damages are applied: Sale of goods Construction contracts Employment contracts

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Consequential Damages

Foreseeable damages that arise from circumstances outside the contract

Can be disclaimed in a sales or license agreement The breaching party is not responsible to pay

disclaimed consequential damages

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Nominal Damages

Damages awarded when no financial loss has resulted from the breach

Usually awarded in a small amount, such as $1 Cases involving nominal damages are usually

brought on principle Disfavored by most courts

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Mitigation of Damages

Nonbreaching party has a duty to avoid or reduce damages caused by a breach of contract

Extent of mitigation depends on the type contract If an employer breaches an employment contract, the

employee: Must try to mitigate damages Should try to find substitute employment Can accept only comparable employment

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Liquidated Damages

Parties agree in advance that certain damages will be available if contract is breached

To be lawful: Actual damages must be difficult or impracticable

to determine Liquidated amount must be reasonable in the

circumstances Considered a penalty if actual damages can be

determined

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Rescission and Restitution

Rescission: An action to undo a contract

Available if there has been

A material breach of contract

Fraud

Duress

Undue influence

Mistake

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Rescission and Restitution

Restitution: The return of goods or property received from the other party to rescind a contract

If the actual goods or property are not available, a cash equivalent must be made

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Enforcement of Remedies

Writ of Attachment: An order of the court that enables a government officer to seize property of the breaching party and sell it at auction to satisfy a judgment

Writ of Garnishment: An order of the court that orders that wages, bank accounts, or other property of the breaching party held by third persons be paid to the nonbreaching party to satisfy a judgment

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Equitable Remedies

Equitable remedies are available if the legal remedy is inadequate

Also available to prevent unjust enrichment Types

Specific performance Reformation Injunction

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Equitable Remedies

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Case 16.2: Specific Performance

Case Alba v. Kaufmann 27 A.D.3d 816, 810 N.Y.S.2d 539, Web 2006 N.Y. App. Div.

Lexis 2321 (2006) Supreme Court of New York, Appellate Division

Issue Is an order of specific performance of the real

estate contract warranted in this case?

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Torts Associated With Contracts

Intentional Interference with Contractual Relations Arises when a third party induces contracting party

to breach the contract Elements:

Valid, enforceable contract between the contracting parties

Third-party knowledge of this contract Third-party inducement to breach the contract

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Torts Associated With Contracts

Breach of Implied Covenant of Good Faith and Fair Dealing Parties held to express terms of the contract Also required to act in good faith, deal fairly in all

respects A breach of this implied covenant is a tort for

which tort damages are recoverable

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