Chapter 20
BREACH OF CONTRACT
AND REMEDIES
Breach of Contract
Breach is a failure to act or perform in
the manner called for by the contract.
Anticipatory Breach: When a party
makes it clear that she does not intend
to fulfill the contract.
 Repudiation by Conduct: When this party
clearly states that the performance will not
happen.
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Waiver of Breach
 The effect of a breach is nullified if the aggrieved
person by word or conduct waives the right to object to
the breach.
 Conversely, an aggrieved party may accept a defective
performance without thereby waiving a claim for
breach if the party makes a reservation of rights.
 A reservation of rights can be made by stating that the
defective performance is accepted “without prejudice,”
“under protest,” or “with reservation of rights.”
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Remedies For Breach
The aggrieved person may usually sue for
damages caused by the breach if the breach is
not waived.
When an anticipatory repudiation occurs, the
aggrieved party may either wait until the time
of performance or may proceed immediately
with an action for damages.
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What Follows the Breach?
Waiver of Breach
Defective Performance
Accepted with Reservation
of Right to Damages
Breach of
Contract
Contractual Limitations of
Remedy or Provision for
Liquidated Damages
Contract Continues
as Though There Were No Breach
Contract Continues as Modified
Contract Performed but at Reduced
Price or, in Suit for Full Price,
Counterclaim for Damages
Remedy Specified in Contract
Action for Damages
Action for Recession
Action for Specific Performance
Action for Injunction
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Measure of Damages
What may be recovered is either direct or
consequential damages.
 Direct damages are those caused directly by the
breach.
 Consequential damages are extra expenditures made
by the injured party to rectify the breach.
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Damages and Remedies
Nominal Damages
Compensatory Damages
Punitive Damages
Consequential Damages
Possible
remedies
for breach
of contract
Incidental Damages
Rescission
Specific Performance
Injunction
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Damages and Remedies
Contract
provisions
which may
limit
remedies or
damages
Limitation of
Remedies
Liquidated
Damages
}
Subject to
Judicial
Review
Exculpatory Clauses
(Limitation of Liability)
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Rescission
 The aggrieved person also has the option of rescinding
the contract if:
 (1) the breach has been made concerning a material term and
 (2) the aggrieved party returns everything to the way it was
before the contract was made.
 Rescission and recovery of money damages are
mutually exclusive remedies except when the contract
relates to the sale of goods, in which case, the
aggrieved party may both rescind and obtain money
damages.
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Specific Performance
When an aggrieved party compels the other
party to perform the acts called for by the
contract.
 Specific performance is always obtainable for the
breach of a contract to sell land or real estate on the
theory that such property has a unique value.
Conversely, a court may place an injunction on
the breaching party; this is an order to refrain
from doing some act that was prohibited by the
broken contract.
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Reformation
Written contract that does not clearly state the
agreement of the parties.
Court will reform or correct the writing to
reflect the original intentions of the parties.
Assumes parties want to continue to do
business.
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Limits on Remedies and Damages
The aggrieved person has a duty to mitigate
or reduce damages by reasonable means.
Liquidated Damages may be limited to a
specific amount.
Limitation of Liability (Exculpatory)
clauses.
 Private agreement is permissible.
 Invalid when public interest is involved and
there is willful conduct or gross negligence.
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