1
BUT FIRST
SOME ADDITIONAL
BUT IMPORTANT
DEFINITIONS AND
LEGAL CONCEPTS
2
CONTRACTS THAT
VIOLATE A STATUTE
ARE ILLEGAL
3
WHERE A LICENSE IS
REQUIRED, NORMALLY, A
CONTRACT MADE BY AN
UNLICENSED PERSON IS
ILLEGAL
4
CONTRACTS THAT VIOLATE
PUBLIC POLICY ARE
PROHIBITED
5
AN EXCULPATORY CLAUSE
IS GENERALLY
UNENFORCEABLE WHEN IT
ATTEMPTS TO EXCLUDE AN
INTENTIONAL TORT OR
GROSS NEGLIGENCE
6
AN EXCULPATORY CLAUSE
IS GENERALLY
UNENFORCEABLE WHEN
THE AFFECTED ACTIVITY IS
IN THE PUBLIC INTEREST
7
AN UNCONSCIONABLE
CONTRACT IS ONE THAT THE
COURT WILL NOT ENFORCE
BECAUSE OF FUNDAMENTAL
FAIRNESS
8
A CONTRACT SIGNED BY A
MINOR IS VOIDABLE BY THE
MINOR
9
CONTRACTS ENTERED INTO
BY MENTALLY IMPAIRED
PARTIES ARE VOIDABLE
10
A CONTRACT ENTERED INTO
UNDER DURESS IS
VOIDABLE
11
CONTRACTS WHICH MUST BE
IN WRITING
• Interest in real estate
• Agreements that can not be performed
within one year
• Promise to pay the debt of another
• Promise made by executor of an estate
• Promise made in consideration of
marriage
12
WHEN CONTRACTS MAY NOT
BE ASSIGNED
• When assignment substantially
effects obligor’s rights or duties
• If forbidden by law
• Is precluded by the contract
13
CONTRACTUAL DUTIES WHICH
MAY NOT BE ASSIGNED
• Delegation would violate public
policy
• The contract prohibits delegation
• The obligee has a substantial
interest in personal performance
by the obligor
14
PERFORMANCE
• Strict performance
• Substantial performance
15
GOOD FAITH
Every contract imposes upon
each party a duty of good faith
and fair dealing in its
performance and enforcement.
16
BREACHING THE CONTRACT
• Someone breaches a contract when he
fails to perform a duty without a valid
excuse.
17
BREACH
When one party breaches a
contract, the other party does
not have to perform and is
discharged from their
obligations.
18
“The flexible powers of a
court should enable it to
craft a just remedy for
almost any breach of
contract.”
19
REMEDY
A remedy is the method a court
uses to compensate an injured
party when a contract is
breached.
20
INTEREST
A legal right in something.
21
IDENTIFYING THE “INTEREST”
• Expectation Interest
• Reliance Interest
• Restitution Interest
• Equitable Interest
22
COMPENSATORY DAMAGES
Compensatory damages are to
compensate for the breach of
the contract.
23
CONSEQUENTIAL DAMAGES
Consequential damages are
those resulting from the
unique circumstances of this
injured party.
24
INCIDENTAL DAMAGES
Incidental damages are the
relatively minor costs incurred
when the injured party
responds to the breach
25
PUNITIVE DAMAGES
Punitive damages are designed to
punish someone for reprehensible
behavior in breaching a contract.
26
LIQUIDATED DAMAGES
A liquidated damages clause,
is a provision stating in
advance how much a party
must pay it if it breaches.
27
ENFORCEMENT
A court will generally enforce a
liquidated damages clause if :
(1) at the time of creating the
contract it was very difficult to
estimate actual damages, and
(2) the liquidated amount is
reasonable.
28
SELLER’S REMEDIES
When the buyer breaches, if the
seller acts in good faith, she will
be awarded the difference
between the original contract
price and the price she was able
to obtain in the open market.
29
BUYER’S REMEDIES
When the seller breaches, the
buyer will be awarded the
difference between the original
contract and her cover
(replacement) price
30
OTHER EQUITABLE
INTERESTS
• Specific Performance
• Injunction
• Reformation
31
SPECIAL ISSUES OF DAMAGES
• Mitigation of Damages
• Nominal Damages
32