remedies for breach of traditional and online contracts

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Contract Law for Paralegals: Traditional and E-Contracts © 2009 Pearson Education, Upper Saddle River, NJ 07458. All rights reserved Remedies for Breach of Traditional and Online Contracts Chapter 8

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Remedies for Breach of Traditional and Online Contracts. Chapter 8. Performance and Breach. If a contractual duty has not been discharged or excused, the contracting party owes an absolute duty (covenant) to perform the duty. - PowerPoint PPT Presentation

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Contract Law for Paralegals: Traditional and E-Contracts

© 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved

Remedies for Breach of Traditional and Online Contracts

Chapter 8

16 - 2Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Performance and Breach

If a contractual duty has not been discharged or excused, the contracting party owes an absolute duty (covenant) to perform the duty.

Breach of contract occurs when a contracting party fails to perform an absolute duty owed under a contract.

16 - 3Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Types of Performance

Complete Complete PerformancePerformance

Substantial Substantial PerformancePerformance

Inferior PerformanceInferior Performance

16 - 4Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Complete Performance

Most contracts are discharged by strict performance.

A fully performed contract is an executed contract.

Tender of performance discharges contractual obligations.

16 - 5Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Substantial Performance

This occurs when there is a minor breach of contract. Performance deviates slightly from

complete performance. Nonbreaching party may recover

damages.

16 - 6Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Inferior Performance

This is a material breach of contractual obligations.

Nonbreaching party may rescind contract and seek restitution.

Nonbreaching party is excused from any further performance.

16 - 7Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Summary: Types of PerformanceType of Performance

Legal Consequence

Complete Performance

The contract is discharged.

Substantial Performance (minor breach)

The non-breaching party may recover damages caused by the breach.

Inferior Performance (material breach)

The non-breaching party may either:

(1) Rescind the contract and recover restitution, or

(2) Affirm the contract and recover damages.

16 - 8Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Anticipatory Breach

A breach that occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due.

Also called anticipatory repudiation. Nonbreaching party’s duties are immediately

discharged. Nonbreaching party may sue repudiating party

at time of breach.

16 - 9Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Monetary Damages

A non-breaching party may recover monetary damages from a breaching party.

Monetary damages are available whether the breach was minor or material.

16 - 10Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Types of Monetary Damages

Compensatory Damages

Consequential Damages

Nominal Damages

Liquidated Damages

16 - 11Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Compensatory Damages

Award of money intended to compensate a non-breaching party for the loss of the bargain.

They place the non-breaching party in the same position as if the contract had been fully performed by restoring the “benefit of the bargain.”

16 - 12Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Compensatory Damages (continued)

The amount of that will be awarded for breach of contract depends on: The type of contract involved, and Which party breached the contract.

Special types of contracts: Sale of Goods Construction Contracts Employment contracts

16 - 13Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Mitigation of Damages

A non-breaching party is under a legal duty to avoid or reduce damages caused by a breach of contract.

The extent of mitigation depends on the type contract involved.

16 - 14Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Consequential Damages

Foreseeable damages that arise from circumstances outside the contract.

To be liable for these damages, The breaching party must know or

have reason to know that the breach will cause special damages to the other party.

16 - 15Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Liquidated Damages

Damages to which parties to a contract agree in advance if the contract is breached.

To be lawful, The actual damages must be difficult

or impracticable to determine, and The liquidated amount must be

reasonable in the circumstances.

16 - 16Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Nominal Damages

Damages awarded when the non-breaching party sues the breaching party even though 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.”

16 - 17Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Enforcement of Remedies

If the breaching party refuses to pay the court ordered judgment, the court may issue: Writ of Attachment Writ of Garnishment

16 - 18Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Enforcement of Remedies (continued)

Writ of Attachment Orders the sheriff to

Seize property in the possession of the breaching party that he or she owns, and

To sell the property at auction to satisfy the judgment.

Writ of Garnishment Orders that

Wages, bank accounts, or other property of the breaching party that is in the hands of third parties be paid over to the non-breaching party to satisfy the judgment.

16 - 19Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Rescission and Restitution

Rescission An action to undo

the contract. Available if there has

been: A material breach

of contract Fraud Undue influence Mistake

Restitution Returning of goods

or property received from the other party to rescind a contract.

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

16 - 20Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Equitable Remedies

Equitable remedies are available if there has been a breach of contract that cannot be adequately compensated by a legal remedy.

They are also available to prevent unjust enrichment.

16 - 21Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Specific Performance

Court orders the breaching party to perform the acts promised in the contract.

The subject matter of the contract must be unique.

Specific performance of personal contracts are usually not granted because it will be difficult to monitor performance.

16 - 22Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Reformation

Court rewrites a contract to express the parties’ true intentions.

Usually used to correct clerical errors.

16 - 23Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Injunction

Court order that prohibits a party from doing a certain act.

Available in contract actions only in limited circumstances.

16 - 24Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Torts Associated With Contracts

Intentional Interference with Contractual Relations

Breach of the Implied Covenant of Good Faith and Fair Dealing

16 - 25Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Intentional Interference with Contractual Relations A tort that arises when a third party

induces a contracting party to breach the contract with another party.

The following elements must be shown: A valid, enforceable contract between the

contracting parties. Third-party knowledge of this contract. Third-party inducement to breach the contract.

16 - 26Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.

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Breach of the Implied Covenant of Good Faith and Fair Dealing Under this covenant:

The parties to a contract are held to the express terms of the contract, and

They are also required to act in good faith and deal fairly in all respects in obtaining the contract.

A breach of this implied covenant is a tort for which tort damages are recoverable.