ES 2 UNDERSTAND
CONTRACT LAW
Obj. 2.02 Understand terminating, transferring, and
breaching a contract.
Terminating a Contract

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Discharge by performance
Discharge by agreement
Discharge by impossibility of performance
Discharge by operation of law
Discharge by Performance

Complete
 All
terms have been carried out properly and
completely.

Time
 Court
will honor time request, if it is deemed “of the
essence.”
 If not mentioned in contract, then a reasonable time
will be assumed.

Satisfactory
 Law
requires that services be completed in a
satisfactory manner.
 Reasonable person test
 Would a
reasonable consider the work to done in
satisfactory manner?

Substantial
 Slightly
 Must



less than full performance
meet the following rules:
Acted in Good Faith
Completed Major Components of Contract
Only Minor Details Incomplete.

Tender of Performance
 Tender
– Offer to Perform
 Must make tender even if you know the other party
will not perform their part of the contact.
Discharge By Agreement

Mutual Release (Rescission)
 Each

side releases the other side from the contract.
Accord and Satisfaction
 Substitute one
contract for another.
Discharge By
Impossibility of Performance

Death or Disability
 Only
allowed in Personal service contracts.
 What is personal service?
 Photographer
 Artist
 Any
other contract must be completed.

Destruction of subject matter
 If
the subject matter is essential to the contract
then it will be discharged.

Performance becomes illegal
 Any
illegal contract is void.
Discharge by Operation of Law

Wrongful Alteration
 Any
altering or changing of a contract will discharge
parties to the agreement.

Statute of Limitations
 Individual
states have a time limit on lawsuits to be
filed.
 What is the only crime/tort that doesn’t have a time
limit?
Discharge by Operation of Law

Bankruptcy
 Debtors
can be discharged from contracts after filing
for bankruptcy.
Transferring a Contract



Assignment
Delegation
Novation
Assignment

Legally transferring your RIGHTS in a contract.
Assignor – party who transfers the right.
 Assignee – party to whom the right is transferred.





No consideration needed.
Must not change the obligations in the contract.
Must be a RIGHT not a DUTY.
Assignor is responsible for contract fulfillment.
Delegation



Transfer a duty.
Delegating party is still responsible for the
contract being fulfilled.
Contracts that CANNOT be delegated:
 Promise
to perform service personally.
 Exercise of personal skill or judgment.
 Contract prohibiting delegation.
Novation


Replacing a party to a contract with a new one.
The other terms to the contract remain the same.
Breaching a Contract


Wrongful failure to perform one or more promises
in a contract.
Anticipatory Breach
 Notified
that a party to the contract will not fulfill
their part of the contract prior to the required time of
fulfillment.
 Lawsuit may be filed early in this case. Exception to
the rules: Refusal to pay money owed at a future date.
Remedies for Breach

Acceptance of Breach
 Accept
the breach of contract and discharge the
other party without asking for damages.
 Why?

Rescission and Restitution
 Canceling
the contract and returning anything that
has been received

Money Damages




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Actual – Damages DIRECTLY related to breach.
Compensatory – Award only for injuries suffered nothing more.
Consequential – Damages that DO NOT flow directly from breach.
Incidental – Reasonable expenses that INDIRECTLY from breach of
contract.
Liquidated – Anticipated damages agreed prior to contract being
signed.
Nominal – Award to proved legal injury but no actual damages
caused.
Punitive – Damages in excess of losses suffered in order to punish
party for breach.
Speculative – Damages awarded not on fact but on expectations
from contract fulfillment.

Specific Performance
 Ask
court to order the other party to do what they
agreed to do.
 Subject matter must be unique in nature.
 Which of the following is unique?
 Real
Estate
 Stocks of General Electric
 ’65 Ford Mustang with 44,000 miles
 A brand new Ford F-150
 Dozen Eggs
Injunction



Court order that prevents a party from performing
an act.
Temporary or permanent.
Violators are in contempt of court.