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MT 311MT 311
Seminar 6
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
2
Contract DischargeContract Discharge
• Conditions to Performance:– Condition is a possible future event that may or
may not happen.– Triggers or terminates performance.– Condition Precedent: prior to performance.– Condition Subsequent: follows initial
performance.– Concurrent: occur simultaneously.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Contract DischargeContract Discharge
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Discharge by Discharge by PerformancePerformance
• Complete vs Substantial Performance.– Complete Performance: perfect
performance under the contract.– Substantial Performance: technically a
minor breach but as long as in good faith, the non-breaching party remains liable to pay.
– Satisfaction Contract: performance is conditioned on reasonable satisfaction.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Discharge by Discharge by PerformancePerformance
• Material Breach of Contract. – When performance is not substantial.– Innocent party is excused from performance
and has the right to sue for damages.– A minor breach may be cured.
• Anticipatory Repudiation.– One party gives notice of refusal to perform.– Innocent party treats AR as material breach.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Discharge by AgreementDischarge by Agreement
• Discharge By Mutual Rescission: parties must make another agreement.
• Discharge by Novation: new contract with substitution of a third party for one of the original parties.
• Accord and Satisfaction: settlement to discharge original contract.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Discharge by Operation Discharge by Operation of Lawof Law
• Contract Alteration.• Statutes of Limitations.• Bankruptcy.• Impossibility of Performance
(Objective).– Party’s incapacitation.– Subject matter is destroyed.– Performance becomes illegal.– Commercially impracticable.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Discharge by Operation Discharge by Operation of Lawof Law
• Temporary Impossibility. – Suspends performance until the impossibility
ceases.
• Commercial Impracticability.– Performance may be excused when it
becomes extremely more difficult or expensive than originally contemplated.
– CASE 11.3 Facto v. Pantagis (New Jersey, 2007).
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Types of DamagesTypes of Damages
• Compensatory Damages:– Compensates injured party (Plaintiff).– Plaintiff must prove actual damages
caused by breach. Amount:• Generally: difference between Defendant’s
promised performance and actual.• Sale of Goods: difference between the
contract price and market.• Sale of Land/Construction Contracts.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Types of DamagesTypes of Damages
• Consequential (Special) Damages– Foreseeable damages that result from breach
of contract.– Caused by other than breach of contract.
• Punitive (Exemplary) Damages.– Deter wrongdoer; set example.
• Nominal Damages.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Types of DamagesTypes of Damages
• Mitigation of Damages.– Injured party has a legal duty to mitigate
damages.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Types of DamagesTypes of Damages
• Liquidated Damages vs. Penalties.– Liquidated: fixed, certain dollar amount
agreed to by parties, paid in the event of breach. LD’s are enforceable.
– Penalty: designed to penalize a party. Generally not enforceable.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Equitable RemediesEquitable Remedies
• Rescission: cancel or undo a contract.– Available for fraud, mistake, duress and
failure of consideration.
• Restitution: recapture the benefit conferred on the defendant that has unjustly enriched her. – Parties must return goods, property or money.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Equitable RemediesEquitable Remedies
• Specific Performance.– Sale of Land. CASE 12.2 Stainbrook v.
Low (Indiana, 2006).
• Reformation: court re-writes the contract to reflect parties’ true intentions.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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• Plaintiff must show:– Benefit was conferred on the other party.
– Party conferring benefit expected to be paid.
– Party seeking recovery did not volunteer.
– Retaining benefit without payment would be unjust enrichment.
Recovery Based on Recovery Based on Quasi ContractQuasi Contract
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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RemediesRemedies
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Election of RemediesElection of Remedies
• Nonbreaching party usually has several remedies available.
• Purpose is to prevent double recovery.