Remedies for Breach Flashcards
(38 cards)
When does a breach of contract occur?
Once a duty to perform exists, nonperformance is a breach of contract unless the duty is discharged.
What is the difference between a material breach and a minor breach of contract?
A material breach is a breach that deprives the nonbreaching party of the substantial benefit of the bargain. The effect is that the nonbreaching party can withhold performance and pursue remedies.
A minor breach is a breach that arises after the breaching party has substantially performed. The effect is that the nonbreaching party can pursue remedies but must still perform.
Under the UCC, what must a seller do to avoid breach?
A seller must strictly perform all contractual obligations or be in breach. The doctrine of material breach only applies in the context of installment contracts or when the parties stipulate.
What is anticipatory repudiation and when does it apply?
Anticipatory repudiation applies to BILATERAL contracts when a promisor repudiates a promise BEFORE the time for performance is due. The repudiation can be made by words or conduct and must be clear and unequivocal.
What is the remedy for anticipatory repudiation?
The nonbreaching party may:
(a) treat the repudiation as a breach;
(b) ignore the repudiation and demand performance (but the promisee must suspend its performance when continuing would increase the promisor’s damages); OR
(c) if the date of performance has not passed and the only performance left is payment, wait for actual breach before filing suit.
Is retraction of a repudiation allowed?
Yes, but ONLY if the other party has not cancelled the contract or materially changed it position in reliance of the repudiation.
When can a party demand assurances of performance and what impact does this have on performance?
A party can demand assurance of performance if there are reasonable grounds for insecurity about the other party’s ability or willingness to perform. Under such circumstances, performance may be suspended until assurances are provided.
What effect does failure to give assurances have?
Failure to give assurances within a reasonable time can be treated as a repudiation.
Under the UCC, what are the requirements for assurances?
Under the UCC, the demand for assurance must be in writing AND reasonable time for giving assurance is limited to 30 days.
What types of damages are there for breach of contract?
- Compensatory Damages
- Expectation Damages
- Incidental Damages
- Liquidated Damages and Penalties
- Punitive Damages
- Nominal Damages
- Attorney’s Fees
- Mitigating Damages
What is the “normal” way to calculate damages in contracts?
Expectation damages
What is the goal of expectation damages?
To put a party in the same economic position it would be in if the contract had been performed as promised.
How are expectation damages measured?
By comparing the value of performance without breach to the value of the performance with the breach
Example: I hire you to build the Geis Towers, a 150-story building in Charlottesville, Virginia, for $100 billion. You never start the project and tell me that you are breaching the contract. What are my expectation damages if I hire a replacement builder for $110 billion? $10 billion.
What are the limits on the calculation of expectation damages?
There are three major limits on the calculation of expectation damages.
1. Reasonable Certainty
2. Unforeseeable Consequential Damages
3. Mitigation
What is the reasonable certainty requirement for expectation damages?
Expectation damages must be proven with reasonable certainty.
For expectation damages, can unforeseeable consequential damages be recovered?
Not recoverable UNLESS the breaching party had some reason to know about the possibility of these special damages at the time of contract (the Hadley rule).
What are the two categories of unforeseeable consequential damages under expectation damages?
- General Damages (type of loss that almost anyone would incur from a breach; includes incidental damages such as the cost of storing rejected goods, or finding a new buyer/vendor)
- Consequential Damages (losses that are unique or special to this plaintiff
What is the mitigation requirement for expectation damages?
A breached-against party must take reasonable steps to reduce damages from breach.
What happens if a party refuses to mitigate?
If a party refuses to mitigate, the law will calculate damages as if the party did mitigate.
Who bears the burden of proving a mitigation failure?
The defendant
What are the requirements for mitigation efforts?
Mitigation efforts must be reasonably similar to the original contract
What are the three special problems with expectation damages?
- Lost Volume Profits
- Incomplete Performance
- Economic Waste and Diminution in Market Value Damages
What is lost volume profits (LVP)?
If the paying party breaches, then normally the selling party needs to mitigate by reselling the goods or services to another person.
BUT, if the seller is a retailer who sells this type of product all the time, the seller might try to argue for LVP, which would put the retailer in the situation they would have been in with the contract as promised.
How do you calculate damages in the event of incomplete performance?
Contract Price — Amount Already Paid — Amount that Would Be Needed to Finish the Job
***Typically seen in building contracts, such as when the paying party breaches and the builder is forced to stop working on the job.
