Contracts+(Group+5)

= = =Topic: Contracts = toc “Contract law deals with, among other things, the formation and keeping of promises. A promise is a person’s manifestation of an intent to act or refrain from acting in a specified way.”[1] The contracts are part of our life. During a contract you acquires rights and obligations. This relationship brings a kind of security for both parties for example buyer and seller of a car.

= I. Contract Formation = Contributor: Dulce R. Diaz-Campos

Definition of Contract
A //[|contract]// is a legal agreement between two or more parties; those agree to perform some act in the present or in the future. Also, it is defined as “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” [2] The contracts establish the agreement and could include the sanctions if the promise is not fulfilled.

“Contract law deals with, among other things, the formation and enforcement of agreements between the parties (in Latin, pacta sunt servanda – 'agreements shall be kept').”[3]



The objective theory of contract
The objective theory of contracts is defined as “a theory under which the intent to form a contract will be judged by outward, objective facts (what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the transaction) as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.”[4]

Element of a contract
The contract should have four basic elements that are [|mutual assent], [|consideration], [|capacity] and [|legality].

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Requirements of a valid contract


A contract in order to be valid should comply with the following requirements:

1. **Mutual Assent or Agreement**- A contract should have an agreement that includes offer and acceptance. “One party must offer to enter into a legal agreement, and another party must accept the terms of the offer.”[5]

An agreement includes:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Mutual assent
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Evidence offer and acceptance
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Voluntary consent from both parties

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Requirements for an offer to be effective:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Intention
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Definiteness of terms
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Communication

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">2. **Consideration** –The promise that each party made need to be supported by “legally sufficient and bargained-for consideration. Often consideration is broken down into two parts: (1) something of legally sufficient value must be given in exchange for the promise, and (2) usually, there must be a bargained-for exchange.[6]



<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">3. **Contractual Capacity** –The parties entering in a contract should have the capacity and possess characteristics that qualify them as competent parties.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Situations when someone could lack of contractual capacity:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Minor – when a person is young
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Intoxication – inhibited by alcohol or some other drug.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Mental incompetence – in the person is declared mentally incompetent by the court prior to entering into the contract, then the contract is void; however it may also be valid if the person had capacity at the time the contract was formed.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">4. **Legality** – The purpose of the contract must pursue some legal goal and not defy public policy.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contracts contrary to Statute:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contracts to commit a crime
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Usury
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Gambling
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Licensing statutes

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contracts Contrary to Public Policy
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contracts in Restraint of Trade
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Unconscionable Contracts
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Exculpatory Clauses

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Defense of the enforceability of a contract
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The enforceability of a contract must include:

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">1. **Voluntary consent**– The consent must be voluntary from both parties. A voluntary consent could be lacking because of mistakes, fraudulent misrepresentation, undue influence and duress.



<span style="display: block; font-family: Arial,Helvetica,sans-serif; font-size: 110%; text-align: left;">2. **Form** – The contract must be according with the form required by law. The status varies slightly from state to state, but all states require certain types of contracts to be in writing or evidenced by written (or electronic) memorandum signed by the party against whom enforcement is sought, unless certain exceptions apply.[7]

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Types of contracts
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The contracts are categorized based on formation, performance and enforceability.

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contract Formation **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">[|Contract formation] - http://law.anu.edu.au/colin/lectures/off_acc.htm

Bilateral versus Unilateral contract
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contracts involve two or more parties. Each party is identified as an offeror and offeree. The offeror is the party making the offer.[8] The offeree is the party to whom the offer is made.[9]

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The contracts are classified as [|unilateral] or [|bilateral]. A unilateral contract is a contract created by an offer than can only be accepted by performance.[10] This type of contract is formed when the promise is performed. A bilateral contract is a type of contract that arises when a promise is given in exchange for a return promise.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The unilateral contract can be revoked before the performance begins.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Formal contracts are contracts that require a special form of creation in order to be enforced. One example is letters of credit, which are frequently used international sales contracts.[11] The contracts that do not require a special form are informal contracts, also known as simple contracts. Some contracts must be written.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The contracts could be expressed or implied. In the express contract, the terms of agreement are fully and explicitly stated in words, oral or written.[12] A contract formed in whole or in part from the conduct of the parties is an implied contract. This can also be called an implied-in-fact contract. A contract could include express and implied terms. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Here is an example of an implied contract [13]:
 * 1) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The plaintiff furnished some service or property.
 * 2) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The plaintiff expected to be paid for the service or property, and the defendant knew or should have known that payment was expected.
 * 3) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The defendant had a chance to reject the services or property and did not.

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contract Performance **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The contracts could be classified according with the performances: executed contracts or executory contracts.

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contract Enforceability **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A valid contract may be enforceable, voidable, or unenforceable.





**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Promissory of Estoppel **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A person that has reasonable and substantially relied on the promise of another may be able to obtain some measure of recovery.[14] <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The following elements are required:[15]
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">There must be a clear and definite promise.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The promissory should have expected that the promisee would rely on the promise.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The promisee reasonably relied on the promise by acting or refraining from some act.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The promisee’s reliance was definite and resulted in substantial detriment.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Enforcement of the promise is necessary to avoid injustice.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">More information about contracts in: [|Contract News]

=<span style="color: #ff5700; font-family: Arial,Helvetica,sans-serif; font-size: 130%;">II. Types of Contract Discharge = Contributor: Thomas Michalik

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%; line-height: 115%; margin: 0in 0in 0pt;">All contracts must be discharged, or terminated, at some point so that all parties know when they are justifiably discharged from their obligations under the contract. There are three different types of contract discharge: discharge by performance, discharge by agreement, and discharge by operation of law.

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Discharge by Performance
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The most common type of contract discharge is by the performance of the contractual duties. This occurs when both parties fulfill their contractual duties by performing the acts they have promised in the contract, thus bringing the contract to its end.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Another way that performance can be accomplished is by tender. “Tender is an unconditional offer to perform by a person who is ready, willing, and able to do so.” [1]

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">After a performance has been tendered, the tendering party has done everything possible to carry out the contract terms. This party can then sue for breach of contract if the other party then refuses to perform their contractual duties.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Some contracts contain a condition, which is a possible future event that will determine whether or not the performance of a contract will be a legal obligation. One example of a contract with such a condition would be a lawn care company that signs a contract to mow all of the lawns in a neighborhood on a scheduled day in exchange for a sum of money unless the temperature is at or above 100 degrees Fahrenheit. The obligations of this contract are conditioned on the temperature that day. If the temperature is below 100 degrees Fahrenheit on the scheduled day, then both parties are obligated to fulfill their duties on that day. If the temperature is at or above 100 degrees Fahrenheit on the scheduled day, then the obligations of both parties are discharged and cannot be enforced.



<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">There are two basic types of performance: complete performance and substantial performance.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Typically, a contract will be performed completely. Complete performance is when “a party performs exactly as agreed, there is no question as to whether the contract has been performed.” [2] In this case, a party’s performance is complete when its performance is perfect.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Sometimes the performance cannot be perfect. If the duties of a party cannot be performed perfectly, then a court can hold that the contract has been substantially performed. In order to qualify as substantial, “the performance must not vary greatly from the performance promised in the contract, and it must create substantially the same benefits as those promised in the contract. If the omission, variance, or defect in performance is unimportant and can easily be compensated for by awarding damages, a court is likely to hold that the contract has been substantially performed.” [3]

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">In cases of substantial performance by a party, the other party is entitled to damages in order to compensate for the failure to perfectly perform and fully comply with the contract. These damages are typically enough to match the difference between what was performed by the party and what complete performance would have been, provided that this difference is reasonable.

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Discharge by Agreement
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contract discharge can occur by agreement of the parties involved in the contract. This can occur with any contract, and it can either be included in the original contract or in a new contract that is formed by the parties for the express purpose of discharging the original contract.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A mutual rescission is one type of discharge by agreement. Mutual rescission requires both parties to make another agreement that satisfies the same legal requirements as the original contract. An offer, an acceptance, and consideration must all take place. If rescinding the original contract is agreed upon by both parties, then their obligations to not perform the duties of the original contract will be used as legal consideration for the new contract.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A novation is another type of discharge by agreement. Discharge by novation is “when both of the parties to a contract agree to substitute a third party for one of the original parties.” [4] Novation requires a previous legal contract, an agreement to the new contract by all parties, the discharge of the prior party by termination of old obligation, and validation of a new contract. A prior contract is revoked by a novation, whether it is done expressly or impliedly.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A settlement agreement, or compromise, is another type of discharge by agreement. This agreement occurs when a legitimate dispute over obligations under an existing contract will be recognized at law. The agreement will expressly or impliedly revoke and discharge the obligations of any previous contracts as the new contract is implemented.



<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%; line-height: 115%; margin: 0in 0in 0pt;">An accord and its satisfaction is another type of discharge by agreement. “An accord is a contract to perform some act to satisfy an existing contractual duty that is not yet discharged. A satisfaction is the performance of the accord agreement.” [5] In order for a contract to be discharged by accord and satisfaction, both parties must accept performance that is not the same as what was originally promised. Once an accord has been created and implemented, the obligation from the original contract is suspended and the obligor can discharge the obligation by performing the obligation in either the old contract or the accord.

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Discharge by Operation of Law
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contractual obligations may sometimes be discharged by operation of law. This can occur under such circumstances as material alteration of the contract, the running of the statute of limitations, bankruptcy, and the impossibility or impracticability of performance.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">If a party materially alters a written contract without consent, then the law allows the innocent party to be discharged from the obligations of the contract. This is meant to discourage parties from altering written contracts.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Statutes of limitation exist to restrict the period during which a party can sue on a particular cause of action. Once this period has passed, the parties can no longer sue. This period of time varies based on state law and the type of contract that was used.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A discharge in bankruptcy is received by the debtor during the bankruptcy process. Most of the debtor’s contracts are barred from enforcement by creditors.



<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%; line-height: 115%; margin: 0in 0in 0pt;">Impossibility of performance occurs when supervening events make performance of contractual duties impossible in an objective sense, thus discharging a contract. Some examples of these supervening events would be a fire, tornado, or flood. These events are typically unforeseen and can cause performance to become so difficult that a court will consider it commercially unfeasible or impracticable. It is very important to understand that in order for the contract to be discharged, the supervening event must have been unforeseeable at the time of the contract’s formation. The three basic types of situations that may qualify as grounds for the discharge of contractual obligations based on the impossibility of performance are: [6]
 * 1) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">When one of the parties to a personal contract dies or becomes incapacitated prior to performance.
 * 2) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">When the specific subject matter of the contract is destroyed.
 * 3) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">When a change in law renders performance illegal.



<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Temporary impossibility of performance is very similar to objective impossibility of performance, but it simply operates to suspend performance until the impossibility ceases. When impossibility ceases, the contract typically must be performed as originally planned. The contract can be discharged in a case of temporary impossibility only if a court rules that the lapse of time and the change in circumstances surrounding the contract make it substantially more difficult for the parties to perform the obligatory duties.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Commercial impracticability of performance occurs when a supervening event makes performance substantially more difficult or expensive than the parties initially estimated. However, the courts must determine that the added burden of performance must not have been foreseeable at the time of the contract’s formation.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The doctrine of frustration of purpose is very similar to the doctrine of commercial impracticability. It is similar in that a contract will be discharged if an unforeseen supervening event makes it impossible to attain the purpose of the contract when it was written. The difference, though, is the fact that frustration of purpose occurs when an event decreases the value of what a party receives upon performance rather than increasing the cost of difficulty of performance.

=<span style="color: #ff5700; font-family: Arial,Helvetica,sans-serif; font-size: 130%;">III. Remedies for Breach of Contract = Contributor: Anthony Castillo

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Paper Chase One
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">First - Please see the video (1:10) from 'The Paper Chase" TV series - It was also a movie. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Also at the end of this discussion is a second link so please try to catch it.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The story is about a Contract Law Class at Harvard Law School. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Included mainly for the last statement from the professor.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">[|Paper Chase Intro]

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">What is a breach of contract?

 * Breach of Contract **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%; text-indent: -0.25in;">Occurs when there has been failure to adhere to the terms of a valid contract


 * Five Types of Breach: **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Breach of time term by the debtor (mora debitoris)
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Breach of time term by the creditor (mora creditoris)
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Repudiation (rejection of contractual obligations)
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Positive malperformance (defective performance)
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Prevention of performance

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Mora debitoris
· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;"> failure to perform timeously <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· occurs when performance is possible

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Elements: <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· The performance must be due and possible
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Due date stipulated in a contract or in a demand for performance by the creditor (interpallatio)

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Demand for performance:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">must stipulate date for performance
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">may be written or oral
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">must allow debtor reasonable time to perform

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The obligation must be enforceable
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">creditor must have a valid right to claim performance
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">debtor must not have a defense for failure to perform

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Mora creditoris
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">A delay or refusal by the creditor to assist as the law requires in cooperating with debtor to enable him to perform

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Elements: <span style="color: #ffffff; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">- <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">e.g a landlord who does not answer the door because he is watching television
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Performance must be due or creditor has been given reasonable notice to accept performance
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· The debtor tenders proper performance
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· frustration by the creditor does not excuse debtor from performing unless > repudiation by the creditor
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· however creditor may not use debtor’s non-performance as grounds for claiming breach

<span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Positive malperformance <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Debtor performs but performance is defective or below required standard

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Forms of malperformance:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Incomplete or defective performance
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Where debtor does something prohibited in terms of the contract e.g sub-letting

Repudiation
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">When a party shows an intention not to perform all or some of his duties without a lawful excuse <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Note: repudiation permissible in certain situations: <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">May occur before performance is due (anticipatory)Repudiation requires notification of intention
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Contract induced by misrepresentation, duress or undue influence or where other party has committed a material breach
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">intention may be inferred from the facts (must be reasonable)

<span style="color: #ffffff; font-family: Arial,Helvetica,sans-serif; font-size: 17.6px;">- <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">e.g denial of existence of an obligation

<span style="color: #ff5700; font-family: Arial,Helvetica,sans-serif;">Prevention of performance
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Inability to perform occasioned by one of the parties

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Two scenarios:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Performance not possible as a result of debtor’s action

<span style="color: #ffffff; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">- <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">e.g chauffeur's drunkenness & loss of license
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Debtor's performance prevented by the creditor

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Preceding Breach of Contract types [1].

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Remedies for Breach of Contract - General
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The five basic remedies for breach of contract include the following: <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Equitable Remedies
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Money damages
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Restitution
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Rescission
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Reformation
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Specific Performance



Monetary Damages
· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;"> Award of money intended to compensate a non-breaching party for the loss of the bargain. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· 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.” <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The amount that will be awarded for breach of contract depends on:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Compensatory Damages **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The type of contract involved, and
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Which party breached the contract.

· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Special types of contracts:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Sale of Goods
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Construction Contracts
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Employment contracts

· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Foreseeable damages that arise from circumstances outside the contract. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· To be liable for these damages,
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Consequential Damages **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The breaching party must know or have reason to know that the breach will cause special damages to the other party.

· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Damages to which parties to a contract agree in advance if the contract is breached. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· To be lawful, <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Many businesses include liquidated damages in their commercial contracts, which help to:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Liquidated Damages **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The actual damages must be difficult or impracticable to determine, and
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">The liquidated amount must be reasonable in the circumstances.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Provide certainty,
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Avoid lawsuits, and
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Provide an incentive to enter into contracts.

· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Damages awarded when the non-breaching party sues the breaching party even though no financial loss has resulted from the breach. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Usually awarded in a small amount such as $1. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Cases involving nominal damages are usually brought on “principle.”
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Nominal Damages **

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Punitive (Exemplary) Damages **
· <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Generally not recoverable in contract law. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Designed to punish a wrongdoer and set an example to deter similar conduct. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Breach of contract is not a crime.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Preceeding Illustration and Monetary Damage descriptions [2].

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Restitution **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered into are voided by courts due to a defendant’s incompetence or incapacity. The law allows incompetent and incapacitated persons to disavow their contractual duties but generally only if the plaintiff is not made worse off by their disavowal.

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Rescission / Reformation **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Parties that are induced to enter into contracts by mistake, fraud, undue influence, or duress may seek to have the contract set aside or have the terms of the contract rewritten to do justice in the case. Rescission is the name for the remedy that terminates the contractual duties of both parties, while Reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. Like contracts implied in law, however, courts are reluctant to rewrite contracts to reflect the parties’ actual agreement, especially when the contract as written contains a mistake that could have been rectified through pre-contract investigation. Thus, one court would not reform a contract that stipulated an incorrect amount of acreage being purchased, since the buyer could have ascertained the correct amount by obtaining a land survey before entering the contract. Little Stillwater Holding Corp. v. Cold Brook Sand & Gravel Corp., 151 Misc. 2d 457, 573 N.Y.S.2d 382 (N.Y. Co. Ct. 1991).

**<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Specific Performance **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach. This ruling often happens when the subject matter of a contract is in dispute.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Preceding Restitution, Rescission/Reformation and Specific Performance [3]

** Remedies of the Seller or Lessor **
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">WHEN THE GOODS ARE IN THE POSSESSION OF THE SELLER OR LESSOR
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Cancel (Rescind) the contract.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Withhold Delivery.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Resell or Dispose of the Goods and Sue to Recover Damages.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Sue to Recover the Purchase Price or Lease Payments Due.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Sue to Recover Damages for the Buyer’s Nonacceptance.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">WHEN THE GOODS ARE IN TRANSIT
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Stop Delivery

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">WHEN THE GOODS ARE IN THE POSSESSION OF THE BUYER OR LESSEE
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Sue to Recover the Purchase Price or Lease Payments Due; plus incidental damages.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Reclaim the Goods in some instances.



** Remedies of the Buyer or Lessee **

 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">WHEN THE SELLER OR LESSOR REFUSES TO DELIVER THE GOODS **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Cancel the contract.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Recover Goods that have been paid for if the Seller or Lessor is Insolvent.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Sue to Obtain Specific Performance if the Goods are Unique or Damages are an Inadequate Remedy.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Buy Other Goods (Obtain Cover) and Recover Damages from the Seller.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Sue to Obtain Identified Goods held by a Third Party (Replevy Goods).
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Sue to Recover Damages.

<span style="color: #ffffff; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">-- <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">o Acceptance was predicated on reasonable assumption that the nonconformity would <span style="color: #ffffff; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">-- <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">be cured and it was not. <span style="color: #ffffff; font-family: Arial,Helvetica,sans-serif; font-size: 110%;">-- <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">o Buyer or Lessee did not discover the nonconformity before acceptance.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">WHEN THE SELLER OR LESSOR DELIVERS NONCONFORMING GOODS **
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Right to Reject the Goods.
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Revocation of Acceptance. Acceptable if the nonconformity Substantially Impairs the Value and:
 * <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">· Right to Recover Damages for Accepted Goods.



<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">Preceding Remedies for Breach of Sales and Lease Contracts [4]

<span style="color: #ffa700; font-family: Arial,Helvetica,sans-serif;">Paper Chase Two
<span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">As mentioned, this is a second video of The Paper Chase (3:25), this time from the movie. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">This is the first day of class, Contract Law, Harvard Law School. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">There is a case involving a breach of contract discussed along with the question of remedy. <span style="font-family: Arial,Helvetica,sans-serif; font-size: 110%;">[|Paper Chase First Day]

Endnotes:
<span style="font-family: Arial,sans-serif; font-size: 10pt;">[1] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.184 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[2] American Law Institute (1979).//Restatement (second) of the law of contracts.//. St. Paul: American Law Institute. <span style="font-family: Arial,sans-serif; font-size: 10pt;">[3] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.184 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[4] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, G-20 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[5] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.185 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[6] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.199 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[7] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.208 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[8] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.186 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[9] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.186 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[10] Unilateral Contract | LII / Legal Information Institute. (2010, August 19). LII / Legal Information Institute. Retrieved July 15, 2012, from http://www.law.cornell.edu/wex/unilateral_contract <span style="font-family: Arial,sans-serif; font-size: 10pt;">[11] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.188 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[12] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.188 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[13] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.188 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[14] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.200 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[15] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P.201
 * <span style="font-family: Arial,sans-serif; font-size: 10pt;">Part I: **

<span style="font-family: Arial,sans-serif; font-size: 10pt;">[1] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P. 213 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[2] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P. 214 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[3] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P. 214 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[4] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P. 217-218 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[5] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P. 218 <span style="font-family: Arial,sans-serif; font-size: 10pt;">[6] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western, P. 219
 * <span style="font-family: Arial,sans-serif; font-size: 10pt;">Part II: **

<span style="background-color: white; font-family: Arial,sans-serif; font-size: 10pt;">[1] Faculty of Commerce at the University of Cape Town. (n.d.). Faculty of Commerce at the University of Cape Town. Retrieved July 16, 2012, from http://www.commerce.uct.ac.za/Organisations/Commercial_Law/Courses/CML1001F/2007/74546/Aifheli%252Tshivhase/Breach%2520of%2520Contract%252007.ppt <span style="background-color: white; font-family: Arial,sans-serif; font-size: 10pt;">[2] Wiletzky, L. (n.d.). Wiletzky and Associates. E-Commerce and Digital Law International Law and Ethics. Retrieved July 15, 2012, from myphliputil.pearsoncmg.com/student/bp_cheeseman_blaw_5/blaw5_ch16.ppt <span style="background-color: white; font-family: Arial,sans-serif; font-size: 10pt;">[3] Breach of Contract: Remedies - Contracts. (n.d.). Contracts. Retrieved July 14, 2012, from <span style="font-family: Arial,sans-serif; font-size: 10pt;">http://contracts.uslegal.com/breach-of-contract-remedies <span style="font-family: Arial,sans-serif; font-size: 10pt;">[4] Miller, R. & Cross, F. (2011). The legal environment of business (8th ed.). Mason, Ohio: South-Western
 * <span style="font-family: Arial,sans-serif; font-size: 10pt;">Part III: **