Breach of Contract
“a situation in which one of the parties
to a contract fails or otherwise refuses
to perform the obligations established
in that contract”
Conditions Resulting in Breach

1) performance is not completed within
the time limits agreed to by the parties

2) performance has been negligent or
unskillful

3) wrongful performance or
nonperformance
Remedies for Breach

1) Damages

2)Equitable Remedies
Damages
Compensatory (Actual)
 Incidental and Consequential
 Punitive (Exemplary)
 Nominal
 Liquidated

Equitable Remedies
Two most common:

1) specific performance

2) injunction
Third Party Contracts and
Assignments

Third Party: a person who may in some
way, be affected by a contract but who is
not one of the contracting parties (outside
party)

Third Party Beneficiary: “person not party
to a contract, but whom parties intended to
benefit”
Third Party Beneficiary
Types:

1) creditor beneficiary

2) donee beneficiary
Assignments
means whereby one party in a contract
conveys right to another person, who is
not a party to the original contract
 3 parties involved:

1) assignor
 2) assignee
 3) obligor: the remaining party to the original
agreement

Commercial Paper
(Negotiable Instruments)
“a writing drawn in a special form which
can be transferred from person to person
as a substitute for money or as an
instrument of credit”
 2 basic types:

1) notes (including CDs)
 2) checks (including drafts)

“Promises to Pay”
(Promise Instruments)

Notes:
1) promissory
 2) demand: payable whenever the payee
demands payment
 3) installment: the principal together with the
interest on the unpaid balance is payable in
installments at specified times


Parties: maker and payee
Certificates of Deposit
“the acknowledgement of a bank of a
receipt of money with an agreement of
repayment”
 CD is a note of the bank
 written for specific period of time
 higher interest for longer-term CDs

“Orders to Pay”
(Order Instruments)

Drafts

Checks
Drafts
“a written order signed by one person
requiring the person to whom addressed
to pay a particular sum of money, to order
or to bearer, on demand or at a certain
time”
 more complicated than notes because
they require 3 parties
 Parties: drawer, drawee, and payee

Drafts (cont’d)

Money Order: type of draft that may be
purchased from banks, post offices,
telegraph companies, and express
companies as a substitute for a check
drawn on the funds of the organization that
issues it
 purchaser fills in their name and address and
the name of the payee on the instrument
 purchaser is given a receipt

Checks
“an order by the depositor on the bank to
pay a sum of money to a payee”
 parties: drawer, person/business, bearer


Types: 1) certified
2) cashier’s
Requirements of Negotiable
Instruments
1) In Writing
 2) Signed by Maker or Drawer
 3) Unconditional Promise or Order to Pay
 4) State a Fixed Amount of Money
 5) Payable on Demand or at a Definite
Time
 6) Payable to Order or to Bearer

 Order
Paper
 Bearer Paper
Transfer of Negotiable Instruments

2 methods:

Negotiation: “the act of transferring
ownership of a negotiable instrument to
another party”

Indorsement: “the signature or statement of
purpose by the owner on the back of a
negotiable instrument, which indicates the
future control of the instrument”
Types of Indorsements
Blank: “having no words other than the
signature of the indorser”
 Special: “designates the particular person
to whom payment is to be made”
 Restrictive: “prevents the use of the
instrument for anything except the stated
use”
 Qualified: “limits the liability of the
indorser”

Mental Anguish
“mental suffering resulting from grief,
severe disappointment, indignation,
wounded pride, shame, public humiliation,
despair, etc. usually accompanied by
physical injury or by an outrageous
intentional or grossly negligent act”
 Physical Impact Rule

Exceptions to Physical Impact Rule

Intentional Infliction of Mental Distress

Contractual Breaches

Negligent Infliction of Mental Distress

Punitive Damages
Negligence
“failure to exercise ordinary care; omission
to do something which a reasonable
prudent person would do under ordinary
circumstances or the doing of something
which a reasonable and prudent person
would not do; the lack of due care”
 intentional or accidental
