ls311 – business law i seminar presentation unit 6 contracts – part iii chapter 12: breach &...

LS311 – Business Law ILS311 – Business Law I

Seminar Presentation

UNIT 6Contracts – Part III

Chapter 12: Breach & Remedies

Chapter 13: E-contracts & E-signatures

Unit 6Unit 6

• Three (3) items to complete in Unit 6. They are: – Unit 6 Written Assignment (40 points)– Unit 6 DB (20 points) – Unit 6 Case Study (25 points)

• Let’s discuss Chapter 12

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

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Chapter 12: Breach & Chapter 12: Breach & RemediesRemedies

• Breach of Contract – is a failure to perform what a contracting party is under an absolute duty to perform.

• When a party fails to perform adequately, a wronged party can sue to obtain a remedy.


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Chapter 12: Breach & Chapter 12: Breach & RemediesRemedies

• A remedy is the means employed to enforce a right or to redress an injury.

• The 4 most common remedies:– Remedies at Law:

• Damages– Remedies in Equity:

• Rescission & Restitution• Specific Performance (Unit 6 Written Assignment topic)

• Reformation


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Remedies at Law: DamagesRemedies at Law: Damages

• The basic/most common remedy is Damages.• A “breach of contract” entitles the non-breaching party to

sue for money damages.• Damages are designed to compensate the non-

breaching party for the loss of the bargain. • The innocent parties are to be placed in the position they

would have been had the contract been fully performed.


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• There are 4 types of Damages:

– Compensatory Damages

– Consequential Damages

– Punitive Damages

– Nominal Damages


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• Compensatory Damages – Compensate an injured party for injuries or damages actually sustained by that party.

– The amount of Compensatory Damages is the difference between the value of the breaching party’s promised performance under the contract and the value of his actual performance.

– For example – You own a catering service & you KT w/KU to perform during August for $3,500. KU cancels the KT & is in breach. You are able to find another job during August but only earn a total of $1,000. If you sue KU, what would be your Compensatory Damages?


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• Example Cont’d…

– Your Compensatory Damages would be: $2,500 – the difference from $3,500 (what you would have received if KU would have performed) and $1,000 (what you actually received from another KT during August).

– NOTE: Incidental Damages – you can also recover the amount that you spend to find the other job. For example, if you had to advertise to receive another job in August.

– Incidental Damages – expenses that are directly incurred because of a breach of contract – such as those incurred to obtain performance from another source.


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• Consequential (Special) Damages– Foreseeable damages the breaching party is aware--

or should be aware—of that cause damage as a consequence of the original injury. cause the injury party additional loss.

• Punitive (Exemplary) Damages– Designed to punish the wrongdoer and deter similar

activity in the future (in tort law) but not recoverable in a breach of contract.

• Nominal Damages– No financial loss.


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Mitigation of DamagesMitigation of Damages

• Generally, an injured party has a “duty to mitigate” damages. An award may be reduced by the amount that could have been mitigated.

• When breach of contract occurs, the innocent injured party is held to a duty to reduce the damages that he or she suffered.


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Liquidated Damages vs. PenaltiesLiquidated Damages vs. PenaltiesUnit 6 DB Topic Unit 6 DB Topic

• “Liquidated” means determined, settled, or fixed.

• A liquidated damages provision in a contract specifies a certain amount to be paid on a default or a breach.

• Liquidated damages differ from penalties.

• A Penalty specifies a certain amount to be paid in the event of a default or breach of contract and is designed to punish the beaching party.


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Liquidated Damages vs. PenaltiesLiquidated Damages vs. Penalties

• Liquidated damages provisions are normally enforceable.

• However, if a Court finds that a provision is a penalty provision and not a liquidated damages provision, the agreement as to the amount will not be enforced, and recovery will be limited to actual damages.


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Liquidated Damages vs. PenaltiesLiquidated Damages vs. Penalties

• To determine whether a particular provision is for liquidated damages or for a penalty, the court must answer two questions: – (1) when the contract was made, was it difficult to

estimate the damages that would be incurred on a breach and (2) was the amount set as damages reasonable (not excessive).

– If the answers to both questions are yes, the provision normally will be construed as a liquidated damages provision and be enforced.

– If either of these is not met, the provision will be construed as a penalty and not be enforced.


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Equitable RemediesEquitable Remedies

• Rescission− Cancel or undo a contract− A remedy whereby a contract is canceled and the parties are restored to the original positions that they occupied prior to the transactions.

• Restitution−Recapture the benefit conferred on the defendant that has been unjustly enriched −Both parties must return goods, property, or money previously conveyed.

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Equitable RemediesEquitable Remedies•Specific Performance

− Equitable remedy calling for the performance of the act promised in the contract.

− Remedy in cases where the consideration is: − Unique;− Scarce; or− Not available remedy in contracts for personal services.

• Reformation − Court re-writes contract to reflect intentions− Equitable remedy allowing a contract to be reformed, or

rewritten to reflect the parties true intentions.− Available when an agreement is imperfectly expressed in

writing.

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Available RemediesAvailable Remedies

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Election of RemediesElection of Remedies

• Nonbreaching party usually has several remedies available

• Plaintiff must choose among whichever remedies are available

• Purpose is to prevent double recovery

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Unit 6 Written Assignment Unit 6 Written Assignment

• Take a look at the following four scenarios. In which of the these situations might a court grant specific performance as a remedy for the breach of the contract? Explain.

• Scenario 1 – Tarrington contracts to sell her house and lot to Rainier. Then, on finding another

buyer willing to pay a higher purchase price, she refuses to deed the property to Rainier.

• Scenario 2 – Marita contracts to sing and dance in Horace’s nightclub for one month,

beginning June 1. She then refuses to perform.


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Unit 6 Written Assignment Unit 6 Written Assignment

• Scenario 3 – Juan contracts to purchase a rare coin from Edmund, who is breaking up his coin

collection. At the last minute, Edmund decides to keep his coin collection intact and refuses to deliver the coin to Juan.

• Scenario 4 – Astro Computer Corp. has three shareholders. Among them are Coase, who

owns 48%, and Cary, who owns 4%. Cary contracts to sell his 4% to DeValle but later refuses to transfer the shares to him.

• In response to these scenarios be sure to: – Discuss the elements of Specific Performance. – Analyze whether or not the scenarios in above cases are covered under the

doctrine of Specific Performance.

• Note: Your assignment must be in APA format, include a title page, the paper itself (the discussion) and a reference page


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Chapter 13 Chapter 13

E-contracts

and

E-signatures

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Forming a Contract OnlineForming a Contract Online

Online Offers should include:– Remedies for Buyer– Statute of Limitations– What constitutes Buyer’s acceptance– Method of Payment– Seller’s Refund and Return Policies– Disclaimers of Liability– How Seller will Use Buyer’s Private Information– Dispute Resolution

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UETAUETA

• Purpose is to remove barriers to forming electronic commerce

• Applies only to e-records and e-signatures relating to a transaction.

• States that a signature may not be denied legal effect or enforceability solely because it is in electronic form

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Key Provisions of the UETAKey Provisions of the UETA

• Parties must agree (not “opt out” of UETA)• Attribution

– process to ensure person sending an electronic record is in fact the real person

• Electronic Errors• E-Mailbox Rules

– Dispatched when leaves control of sender.– Received when enters recipient’s processing

system.

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E-signaturesE-signatures

• electronic sound, symbol, or process,

• attached to or logically associated with a record, and

• executed or adopted by a person with the intent to sign the record.

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E-SIGN & UETAE-SIGN & UETA

• E-SIGN explicitly refers to UETA.

• Provides that E-SIGN is pre-empted by state passing of UETA.

• But state law must conform to minimum E-SIGN procedures.

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E-Signature Seminar ScenarioE-Signature Seminar Scenario

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• Paul is a financial analyst for King Investments, Inc., a brokerage firm. He uses the Internet to investigate the background and activities of companies that might be good investments for Kings customers.

• While visiting the Website of Business Research, Inc., Paul sees on his screen a message that reads, – “Welcome to businessresearch.com. By visiting our site, you have been

entered as a subscriber to our e-publication, Companies Unlimited. This publication will be sent to you daily at a cost of $7.50 per week. An invoice will be included with Companies Unlimited every four weeks. You may cancel your subscription at any time.”

• Has Paul entered into an enforceable contract to pay for Companies Unlimited? Why or why not?

Questions & RemindersQuestions & Reminders

• Questions on Unit 6 material?

• Remember to complete all Assignments

– Unit Self Check Quiz (Not for a grade)

– Discussion (See Discussion Board Posting Requirements)

– Written Assignment & Case Analysis

• Office Hours: Thursdays 7-9PM (ET)

• Have a great week!

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ls311 – business law i seminar presentation unit 6 contracts – part iii chapter 12: breach &...

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