Contracts Essay Rules Flashcards
Memorize Relevant Contracts Essay Rules (20 cards)
(Common Law) The 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 been tendered. However, there is no substantial performance if the incomplete performance was a material breach of contract.
Common Law Material Breach
When the nonbreaching party fails to receive the substantial benefit of the bargain
(Common law) Must a nonbreaching party perform after a material breach?
The nonbreaching party may withhold any promised performance and pursue remedies for the breach, including damages. The breaching party who failed to substantially perform generally cannot recover contract damages, but may be able to recover through restitution. However, most courts hold that recovery in restitution is only available if the breach was not willful.
What happens when a party intentionally furnishes services materially different from the contract?
Substantial performance is less likely to be found; such a breach is more likely to be treated as a material breach for which contract damages are recoverable. Consequently, a party who intentionally furnishes services that are materially different from what was promised cannot recover anything in restitution unless the non-breaching party has accepted or agreed to accept the substitute performance.
Divisible or Installment Contract
The parties’ obligations are divisible into distinct units of performance. Recovery is limited to the amount promised for the unit of the contract performed.
When parties agree to a Condition precedent (or a concurrent condition)
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.
Restitutionary Relief Under the Theory of Quasi-Contract
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 this case, the court can permit the plaintiff to recover the value of the benefit to prevent this unjust enrichment. Although this type of action is 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.
Quantum Meruit
Equitable doctrine - “What they deserve” that is not dependent on the existence of an actual contract.
What law applies?
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. If a transaction includes both goods and services, the predominant purpose test is applied to resolve whether the common law or the UCC applies to the entire transaction.
Non-breaching party’s duty after a minor breach
Under common law, if the breach is minor (i.e., the breaching party has substantially performed), then the non-breaching party must still perform under the contract. This allows a party who substantially performs to recover on the contract even though that party has not rendered full performance. Generally, the substantially performing party can recover the contract price minus the cost to the other party of obtaining the promised full performance.
Measure of damages for a contractor’s failure to complete or begin a construction contract
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 delay in completion of the construction.
Defective or unfinished construction contract resulting in economic waste
When a breach results in a defective or unfinished construction, if the award of damages based on the cost to fix or complete the construction would result in economic waste, then a court may instead award damages equal to the diminution in the market price caused by the breach. Economic waste occurs when the cost to fix or complete the construction is clearly disproportional to any economic benefit or utility gained as a result.
Compensatory Damages
Compensatory damages are meant to put the non-breaching party in as good a position as performance would have done by compensating the non-breaching party for actual economic losses. Include expectation, consequential and incidental damages.
Expectation Damages
Expectation damages are intended to put the non-breaching party in the same position as if the contract had been performed. Expectation damages must be calculated with reasonable certainty. Part of compensatory damages.
Consequential Damages
Consequential damages are a direct result of the breach but need not be the usual result of the breaching party’s conduct. Instead, consequential damages need only be a reasonably foreseeable result of the breach given the parties’ specific circumstances. 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 if they were otherwise foreseeable. Consequential damages do not concern the value of the lost performance due to breach, but there must be a causal link between the breach and the consequential damages for them to be recoverable. And the plaintiff must prove the dollar amount of consequential damages with reasonable certainty not speculatively.
Mitigation of Damages
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 inconvenience. A non-breaching party is held to a standard of reasonable conduct in preventing loss. The non-breaching party’s failure to mitigate does not give the breaching party a right to sue the non-breaching party for such failure; it only reduces the non-breaching party’s damages recovery.
Statute of Frauds UCC
Under the UCC, a contract for the sale of goods for $500 or more falls within the Statute of Frauds (SOF) and is generally unenforceable unless evidenced by a writing. The writing need not be formal but must be signed by the party to be charged and contain the essential elements of the deal. The writing must indicate that a contract has been made, identify the parties, and contain a quantity term. So long as the parties intend to create a contract, the UCC “fills the gap” if any other terms are missing—e.g., the time or place for delivery, or the price.
Statute of Frauds - UCC Exceptions
A writing is not required (1) for specially manufactured goods, (2) to the extent that payment has been made and accepted for goods, (3) to the extent that goods are received and accepted, or (4) when a merchant fails to object to a memorandum from another merchant within 10 days of receipt of the memorandum.
Doctrine of Anticipatory Repudiation
The doctrine of anticipatory repudiation applies when a promisor repudiates a promise before the time for performance is due. The repudiation must be clear and unequivocal, then the promisee can either treat the repudiation as a breach or ignore it and demand performance. A repudiating party may not retract the repudiation after the other party (1) acts in reliance on the repudiation, (2) signifies acceptance of the repudiation, or (3) commences an action for breach of contract.
UCC Seller Resale After Buyer Breach or Repudiation
Under the UCC, when a buyer breaches or repudiates a contract for the sale of goods, the seller may resell the goods and sue for the contract price minus the resale price. A seller intending to resell the goods in a private sale must first give the buyer reasonable notice of his intent to resell. But the resale must (i) be only of goods identified in the contract and (ii) must be commercially reasonable. In such cases, the seller can recover the difference between the contract price and the resale price. Additionally, the seller is entitled to recover incidental damages, which include storage and shipping costs.
