Performing Contracts and Breach
What happens if a party does not perform to the
satisfaction of another party to whom performance
was owed?
OBE 118, Section 3
Fall 2004
Professor McKinsey
A Valid Enforceable Contract
1)
2)
3)
4)
5)
6)
Mutual Agreement
Consideration
Capacity
Legality
Genuineness of Assent
Writing
Performance
Each enforceable promise in a valid enforceable
contract creates a duty that must be discharged
by performance, breach, agreement, or law.
Duty
Two types of promises:
Absolute Promises
Conditioned Promises
Discharge by Performance
_________________________ is usually enough.
Sometimes contract requires _______________.
Checklist for Substantial Performance
1. Exact performance called for not a material term.
2. Performance close to complete.
3. Substantially the same benefits created.
Whose Satisfaction?
Performance of personal contracts can be
specified to be to the satisfaction of a party.
Performance of contracts dealing with
mechanical fitness or utility must only be
satisfactory to a reasonable person.
Discharge by Breach
A material breach discharges the other party’s
duty.
Material breach occurs when performance is not
substantial or when strict performance was called for
and performance is not exact.
Anticipatory repudiation discharges the other
party’s duty
Party rejects, refuses, or denies performance and other
party treats it as a breach.
Discharge by Agreement
Parties can agree to discharge one or more
duties.
Mutual Rescission –
Novation Compromise Accord and Satisfaction –
Discharge by Operation of Law
The law can also discharge a duty by:
Statute of Limitations
Bankruptcy
Impossibility
Impossibility
Objective impossibility may discharge a duty
Death or disablement
Party to a personal contract dies or becomes disabled
Destruction of Subject Matter
Must be the specific subject matter
Intervening Illegality
Breach of Contract
• Material Breach
• Anticipatory Repudiation
• Other party can stop performance and seek
remedies (Damages)
• Minor Breach? (less than perfect
performance?)
Contract Remedies
• Damages for breach:
– Compensatory – usually the expectation interest,
the direct damages
– Consequential – indirect damages that were
foreseeable by breaching party
– Incidental – small costs caused by the breach
Contract Remedies
• Equitable Remedies
– Reliance interest – through promissory estoppel, no
contract required
– Restitution- “make whole again”, where one party is
would get a benefit they do not deserve.
– Specific Performance – where $ will not do
justice, real property or unique personal property
– Injunction – Stop the party from doing something
– Reformation – rewrite the contract
– Rescission – undue or cancel the contract as if it
never happened (usually includes restitution above)