Essay Rules Flashcards
(12 cards)
Substantial Performance/Material Breach
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. Under the common law, a material breach of contract (i.e., when the nonbreaching party fails to receive the substantial benefit of its bargain) allows the nonbreaching party to withhold any promised performance and to pursue remedies for the breach, including damages.
Substantial performance is less likely to be found when a party intentionally furnishes services that are materially different from what he promised. Such a breach is more likely to be treated as a material breach for which contract damages are recoverable.
Installment/Divisible Contract
A divisible or installment contract is one in which the parties’ obligations are divisible into distinct units of performance. Recovery is limited to the amount promised for the unit of the contract performed.
But when parties expressly 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.
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.
Duty of Good Faith and Fair Dealing
In so doing, RepairCo arguably violated the implied (in all contracts) duty of good faith and fair dealing (including the duty not to hinder the other party’s performance and to cooperate when necessary) thereby materially breaching its contract with GreenCar.
Common Law v. UCC
First, it must be established whether the common law or UCC applies to the kitchen contract in order to determine if the contractor appropriately performed and is entitled to recover on the contract. 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.
Predominant Purpose Test
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.
Here, the common law applies to the kitchen contract because the predominant purpose was remodeling the kitchen (i.e., a service), that incidentally included the installation of flooring and appliances (i.e., goods).
Minor Breach (Common Law)
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.
Material Breach (Common Law)
A material breach of contract occurs when the non-breaching party does not receive the substantial benefit of the bargain. The material breach allows the non-breaching party to withhold any promised performance and to 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. 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.
Damages in Construction Contracts
In construction contracts, the general measure of damages for a contractor’s failure is 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. 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.
Mailbox Rule
An acceptance that is mailed within the allotted response time is effective when sent (not upon receipt) unless the offer provides otherwise. The mailing must be properly addressed and include correct postage.
Consideration
If there is a valid offer and acceptance that creates an agreement, the agreement is legally enforceable so long as there is consideration. Consideration is a benefit (e.g., act, money, return promise) bargained for and received by the promisor from a promisee.
Preexisting-duty
A promise to perform a preexisting legal duty does not qualify as consideration because the promisor is already bound to perform (i.e., there is no legal detriment). Note that if the promisor gives something in addition to what is already owed (however small) or varies the preexisting duty in some way (however slightly), most courts find that consideration exists.
