CHAPTER 17
Performance
& Remedies
Conditions
• Types of Conditions
– Precedent - Event that must occur before
performance
– Subsequent - Event occurring that
discharges a duty
– Concurrent - Duties to be performed at the
same time
Conditions
• Creation
– Express (by words)
• Question 5 at end of chapter.
– Yes. No particular form is necessary to create a conditional promise. Catch
phrases, such as “if,” “provided that,” “when,” and “subject to,” while helpful,
are unnecessary to create a condition. Whether one was meant must be
determined from the language and circumstances. In the contract virtually
every substantive paragraph refers to the “John Joint Venture,” as does the
agreement’s title. In fact, the agreement states that its purpose is to carry out
the men’s obligations under the joint venture. This unambiguously
established the formation of the John Joint Venture as a precondition to the
enforcement of the contract. Since the joint venture was never organized, it
could not be discontinued. Thus, Standefer cannot collect under the contract.
Standefer v. Thompson, 939 F.2d 161 (4th Cir. 1991).
– Constructive/Implied
Standards of Performance
• Express Requirement for Complete Performance
– Perfect Performance = Entitlement to Full Contract Price
– Incomplete Performance = Entitlement to Compensation for Benefits Conferred Under
Quasi-Contract
• Johnson v. Schmitz, p. 284
– A graduate student is allowed to sue the University for breaching its promise to safeguard students
from academic misconduct, to investigate and deal with charges of academic misconduct, and to
address charges of academic misconduct in accordance with its own procedures. The court
states, students are not normally allowed to sue for educational
malpractice because courts feel unable to determine whether a
failure to learn is the fault of the students or the institution.
For the same reason, students are generally prohibited from suing
for breach of contract challenging the overall quality of their
education. The courts find they are ill-equipped to assess the
soundness of a university’s educational services. Also, they do not
want to have students suing schools. Here, however, Yale made a
specific promise that did not require the court to evaluate
subjective aspects of the quality of Yale's graduate academic
program or otherwise make judgments on purely academic issues, but
instead required the court to determine whether or not Yale had a
contractual duty to safeguard its students from faculty misconduct,
and, if so, whether that duty was breached in Johnson's case. In
making this assessment, the court recognized that it may be
required to evaluate the adequacy of policies designed to prevent
Standards of Performance
• Express Requirement for Complete Performance
– Perfect Performance = Entitlement to Full Contract Price
– Incomplete Performance = Entitlement to Compensation for Benefits
Conferred Under Quasi-Contract
• Question 9 at end of chapter
– Ross v. Creighton University, p.220-221
– A former student is allowed to sue the University for breaching its promise to provide
him with a “meaningful education.”
– `What does a “meaningful education” mean? Ross argued that
he should have been given a variety of tutoring and other
services.
– Situations such as Ross’s happen frequently enough that
there has been much discussion regarding what should be
done about bringing academically unprepared students who
are top athletes to universities, using their talents, but
failing to give them an adequate education.
– The court states, students are not normally allowed to sue
for educational malpractice because the courts feel unable
to determine whether a failure to learn is the fault of the
students or the institution. Also, they do not want to
have students suing schools. Here, however, the University
made a specific promise. It was important to the court
that this was a private university; they would have held
Standards of Performance
• Substantial Performance
– (in re: Contracts difficult to perform perfectly, e.g.
Construction, Agricultural, etc.)
– Where Performance Falls short in minor/non-material
respects
– Where an Honest, Good Faith Attempt to Perform
– Depends on the Circumstances
– Equals entitlement to compensation
– M.J. Oldenstedt Plumbing Co., Inc. v. K-Mart Corp., p.286
• A subcontractor’s performance under the contract was so slow as
to be a material breach.
• Time is not generally considered to be of the essence in such
conditions. A contractor must fall significantly behind before it
will be in breach.
Standards of Performance
• Substantial Performance
– Question 4 at end of chapter.
• Yes. In order to decide if there was a breach, the parties’ pertinent obligations under
the contract must be determined. Midwifery promised to perform childbirth delivery
services as part of a package of services, including pre- and postnatal care. The
Weisses received services on at least a dozen occasions. Although the failure to attend
the birth was unfortunate, Midwifery did expend a significant amount of time, energy,
and expertise. Therefore, it performed a substantial portion of its obligation. The
failure to perform one part of the package is not a breach. Midwifery is not in breach
for another reason. There was an implicit understanding that Midwifery would make
its “best effort” to attend the birth after being notified that childbirth was imminent.
Here the labor pains did not begin until just a few minutes before the birth, making
proper notification impossible. Since the purported breach was caused by Weiss’s
failure to notify, and notification was a condition to performance, Midwifery is not
responsible. One who frustrates another’s performance, even unintentionally, cannot
claim breach. Weiss v. Nurse Midwifery Associates, 476 N.Y.S. 2d 984 (Civ. Ct. N.Y.
1984).
Standards of Performance
• Material Breach = mere quasi-contract
or no entitlement for compensation and
liability for damages
• Anticipatory Breach/Repudiation - where
indication of intent not to perform
Standards of Performance
• Special Problems
– To Personal Satisfaction vs. Reasonable
Person
– Architect’s/Engineer’s Certificate - Normally
no duty to pay contractor until certificate
issued
Standards of Performance
• Time of the Essence vs. Reasonable Time
(w/deduction/setoff)
– Question 6 at end of chapter.
• No. Parties to a contract may provide that time is of the essence. Such a
clause ordinarily means the time fixed for performance is a vital element
of the contract. If a contract specifies a certain time for performance, the
contract must be performed at that time, even if time is specified by the
hour. Here the contract specifically stated that time was of the essence, and
required closing at 10:00. It was not ambiguous. Miceli’s failure to appear
until 10:30, without notice, and failure to tender the money until 1:30,
meant that Dieberg had to arrange alternative financing for her other
contract purchase. Miceli materially breached the contract, and is not
entitled to specific performance. TF. J. Miceli and Slonim Development
Corp. v. Dieberg, 773 S.W. 2d 154 (Ct. App. Mo. 1989).
Excuses for Nonperformance
• Prevention - Promisee fails to cooperate or actively hinders
= relief from liability to
• Impossibility (Only where event arises after or without
knowledge)
– Illness/Death Promisor
• for personal service contracts
– Intervening Illegality
– Destruction of Subject Matter
• where no fault of promisor
Excuses for Nonperformance
• Impossibility
– Commercial Impracticability/Frustration
•
•
•
•
•
only in some courts
where nonforeseeable
where performance makes unreasonable
and where no express assumption of risk
Question 7 at end of chapter.
– No. Commercial frustration is not a general excuse whenever performance becomes
difficult or expensive. If the risk was foreseeable and allocated, it does not excuse
performance. Thus, frustration does not apply here because Score’s death was
foreseeable, as witnessed by Arabian’s purchase of insurance. The purchase also
shows Arabian assumed that risk. Also, promotion of Score is possible, so the
doctrine of impossibility does not apply. Promoting a dead horse is apparently not
pointless. It is done regularly to enhance the reputation of the owner and the value of
the stallion’s progeny. Although the thought of spending almost $200,000 to promote
a dead horse borders on the bizarre, the parties to this agreement were sophisticated
and, we assume, well –heeled businesspersons, and what we may find to be unusual
may be commonplace to those who inhabit the wealthy world of the horsy set.
Arabian Score v. Lasma Arabian Ltd., 3 U.C.C. Rep. Serv. 2d 590 (8 th Cir. 1987).
Contract Release/Discharge
• By Mutual Agreement
• By Waiver
• By Material Intentional
Alteration
– where a written agreement
• Statute of Limitations
Damages in Contract Cases
•
•
Compensatory- to make whole from actual loss
Consequential - foreseeable consequence of
– Dupont v. Discovery Zone, p. 290
• The court found that Discovery Zone could not recover for lost profits because it failed
to prove its loss with reasonable certainty. Note that Dupont actually sued
Discovery Zone first for breach of contract for money it
owed the company; Discovery counter-sued for lost profits.
The court ruled that lost profits and destruction of
Discovery Zone’s business was not within the reasonable
contemplation of the parties. The court noted that it is a
bedrock principle of contract law that a breaching party
is only responsible for consequential damages flowing from
a breach of contract to the extent those damages are
within the contemplation of the parties at the time of
contracting, or are reasonably foreseeable. In determining
the reasonable contemplation of the parties, the nature,
purpose and particular circumstances of the contract known
by the parties should be considered as well as what
liability the defendant fairly may be supposed to have
assumed consciously, or to have warranted the plaintiff
reasonably to suppose that it assumed, when the contract
was made. The court found that while both parties
Damages in Contract Cases
• Compensatory- to make whole from actual loss
• Consequential - foreseeable consequence of
– Question 8 at end of chapter
• No. The once generally accepted rule precluding all new businesses
from recovering damages for lost profits has been replaced with a rule
of evidence. Lost profits are now recoverable in contracts where there
is enough evidence to establish them with reasonable certainty. While
it is difficult for a new business to establish lost profits with the
requisite degree of certainty, it can be done. Tristar has the expert
testimony of a Wharton School marketing professor as to the profits
that could be expected. While there is some skepticism about such
projections, the jury should be allowed to decide its probity. The
summary judgment is denied. Tristar Cosmetics, Ltd. v. Westinghouse
Broadcasting, 1992 U.S. Dist. LEXIS 3248 (E.D. Pa. 1992).
Damages in Contract Cases
• Emotional Distress?
• Deli v. University of Minnesota, p. 291
– A gymnastics coach is not allowed to collect damages for
emotional distress when her employer broke a promise and
showed a tape of her and her husband having sexual relations to
others. This case nicely points up the difference between contract
and tort damages. Tort damages are designed to compensate for
the injuries resulting from the unreasonable interference with
interests of others. Contract damages are based on voluntarily
accepted duties, and are limited to those damages which the
promisor should have anticipated when the contract was made.
Obviously Deli would rather have sued in tort, but she could not
sue for invasion of privacy in Minnesota. Deli had been awarded
$675,000 for the emotional distress she suffered.
Damages in Contract Cases
• Liquidated - agreed to by prior provision
– Void if courts view as a penalty (e.g. if unreasonable)
• Guilliano v. Cleo, Inc., p.292
– A liquidated damages clause is found not to be punitive, and is
therefore enforceable.
– Why would the damages be difficult to determine?
– Does Guilliano get a windfall by the court’s decision?
– Constructive firing (the employer changes the working
conditions so radically that the reasonable employee would be
compelled to quit – something this employer was obviously
trying to get Guilliano to do).
Damages in Contract Cases
• Liquidated - agreed to by prior provision
– Void if courts view as a penalty (e.g. if unreasonable)
– Example: Parties can set damages in advance as long as they are reasonable estimates of
the damages that may, or actually do, result from a breach. They cannot be a penalty.
Consideration also is given to the difficulty of proof of loss, and the inconvenience or
nonfeasibility of otherwise obtaining an adequate remedy. Here the $1,500 per
photograph figure may bear no relationship to the actual value of a photograph that (a)
may never have generated past revenue; (b) is neither unique nor novel; and (c) may be
able to be duplicated by the photographer who submitted the photograph. The amount
required for loss of a photograph would, of necessity, vary depending on the nature and
quality of the photograph. Therefore, the liquidated damage provision is invalid because
it is not a reasonable estimate of the anticipated or actual harm. Stock Shop, Inc. v.
Bozell & Jacobs, Inc., 39 U.C.C. Rep. Serv. 1295 (Sup. Ct. N.Y. 1984).
Damages in Contract Cases
• Nominal - small, symbolic, where no actual loss
• Punitive
– Ordinarily not recoverable in contract cases
– Alternative, sue in tort for bad faith, etc.
Remedies
• Duty to Mitigate (Avoid/Minimize)
– If can do so w/o undue risk, expense, etc.
– Not able to recover for damages easily avoided
– Manuma v. Blue Hawaii Adventures, Inc., p. 293
» Dinner cruise entertainer did not fail to mitigate his
damages by refusing employer’s offers of alternative
employment because the alternative work of manual
labor or light maintenance was not “substantially
similar” to his lost position as an entertainer. Note
generally, that the measure of recovery by a wrongfully
discharged employee is the amount of compensation
agreed upon for the remaining period of service, less the
amount which the employer affirmatively proves the
employee has earned or with reasonable effort might
have earned from other employment.
Remedies
• Duty to Mitigate (Avoid/Minimize)
– If can do so w/o undue risk, expense, etc.
– Not able to recover for damages easily avoided
• Question 10 at end of chapter
– Curtis O. Griess & Sons, Inc. v. Farm Bureau Insurance
» A pig farmer is allowed to collect his mitigation damages from
the insurance company that insured him against damages due to
windstorms.
» In addition to the common law duty to mitigate damages,
Griess had a contractual duty to do so. Since the court found
that the contractual imposition of the duty implied that the
insurance company would pay for such damages, it was held
liable.
» Form contracts are generally construed against the maker,
especially when it is an insurance company.
Equitable Remedies
• Specific Performance
– Where unique subject matter (e.g. real estate)
• i.Lan Systems, Inc. v. NetScout Services Level Corp., p.
294
– The court finds that copyrighted software is not sufficiently
unique to warrant specific performance.
• Injunction- Mandatory Act vs. Prohibitory
Enjunction
– Where threat of irreparable injury