Chapter 10: Contract Performance,
Breach, and Remedies
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Voluntary Consent
 A contract may be unenforceable if
the parties have not genuinely
assented to its terms by:
• Mistake. 
• Misrepresentation. 
• Undue Influence. 
• Duress. 
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Voluntary Consent
 Mistakes.
• Mistakes of Fact vs Mistakes of Value
(or Quality).
• Only a mistake of fact allows a contract to
be voided. 
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Voluntary Consent
 Mistakes.
• Bilateral (Mutual) Mistakes: concerns
the same material fact, and can be
rescinded by either party.
• CASE 10.1 L&H CONSTRUCTION CO V. CIRCLE
REDMONT, INC. (2011). Do you agree the
parties made a mutual mistake?
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Voluntary Consent
 Mistakes.
• Unilateral Mistakes of fact cannot be
canceled unless:
• Other party to the contract knows or
should have known, OR
• Mistake was due to an inadvertent
mathematical mistake and was not gross
negligence.
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Ex. 10-1 Mistake of Fact
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Voluntary Consent
 Fraudulent Misrepresentation.
• Contract is Voidable by Innocent Party.
• Consists of the following Elements:
• Misrepresentation of Material Fact.
• Intent to Deceive.
• Reliance on Misrepresentation.
• Injury to the Innocent Party.
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Voluntary Consent
 Undue Influence.
• Contract lacks voluntary consent and is
voidable.
• Confidentiality, Fiduciary, or Relationship
of Dependence.
• Undue Influence or Persuasion is
presumed if a weaker party talked into
doing something not beneficial to him or
herself.
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Voluntary Consent
 Duress.
• Forcing a party to enter into a contract
under fear or threat makes the
contract voidable.
• Threatened act must be wrongful or
illegal and render person incapable of
exercising free will.
• Threat of civil suit is not duress.
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Statute of Frauds:
Writing Requirement
 Some contracts must be in writing to
be enforceable:
• Contracts with an Interest in Land.
• Contracts involving “One-Year Rule.”
• Collateral or Secondary Contracts.
• Promises made in consideration of
marriage.
• Contracts For Sales of Goods over
$500.
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Third Party Rights
 Privity of Contract: only original
parties to a contract have rights and
liabilities under the contract.
• Exceptions: Assignments, Delegations,
and Third party Beneficiary Contracts.

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Third Party Rights
 Assignments: Terminology.
• Assignor: party assigning rights to third
party.
• Assignee: party receiving rights.
• Obligee: person to whom a duty or
obligation is owed.
• Obligor: person who is obligated to
perform the duty.
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Third Party Rights
 Assignments.
• Effect of An Assignment: when rights of
assignor are unconditionally assigned,
her rights are extinguished.
• The third party (assignee) has right to
demand performance from original
party to contract.
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Assignment Relationships
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Third Party Rights
 Assignments: Rights That Cannot be
Assigned.
• (i) when a statute expressly prohibits
assignment,
• (ii) when a contract is personal in nature,
• (iii) when the assignment materially changes
rights or duties of obligor, or
• (iv) when an assignment will significantly
change the risk or duties of the obligor.
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Third Party Rights
 Assignments: Exceptions to
Contractual Prohibition.
• Cannot prevent right to receive money.
• Cannot prevent rights in land.
• Negotiable instruments.
• Damages in sales of goods.
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Third Party Rights
 Delegations.
• Contractual duties in a bilateral
contract that are delegated to a third
party.
• Terminology:
• Delegator: party making the delegation of
duty.
• Delegatee: party to whom the duty is
owed.
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Delegation Relationships
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Third Party Rights
 Delegations are Prohibited:
• When the Duties are Personal in
Nature (special trust).
• When Performance by a Third Party
Will Vary Materially From that
Expected by the Obligee.
• When the Contract Prohibits
Delegation.
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Third Party Rights
 Delegations.
• Delegator remains liable, even after
delegation.
• Delegatee is liable if delegation
contract creates a third party
beneficiary relationship in the obligee.
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Third Party Rights
 Third Party Beneficiaries.
• 2nd Exception to Privity of Contract.
• Original parties to the contract intend
at the time of contracting to directly
benefit a third person.
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Third Party Rights
 Third Party Beneficiaries.
• Intended Beneficiary: contract is made
for the express purpose of promisor
giving a gift to a third party (donee),
the donee can sue the promisor directly
if the promisor breaches the contract.
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Third Party Rights
 Third Party Beneficiaries.
• Incidental : a third party beneficiary’s
benefit from contract between two
parties is unintentional.
• Incidental beneficiary cannot sue to
enforce the contract.
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Third Party Beneficiaries
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Performance and Discharge
 A party may be discharged from a
valid contract by:
• A condition occurring -- or not
occurring.
• Full performance or material breach
by the other party.
• Agreement of the parties.
• Operation of law.
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Performance and Discharge
 Conditions of Performance.
• A possible future event, the
occurrence or nonoccurrence of which
will trigger the performance of a legal
obligation or terminate an existing
obligation under a contract.
• CASE 10.2 PACK 2000, INC. V. CUSHMAN
(2011). What should Pack have done
differently?
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Performance and Discharge
 Discharge by Performance.
• Tender: ready, willing, and able.
• Complete Performance.
• Parties perform exactly as agreed, or
‘perfect.’
• All conditions satisfied.
• Substantial Performance.
• party in good faith performs substantially
all of the terms, can enforce the contract.

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Performance and Discharge
 Discharge by Performance.
• Substantial Performance.
• Confers Most of the Benefits Promised:
performance must not vary greatly from
what was promised.
• But damages can be awarded.
• Entitles the Other Party to Damages.
• Measure of damages is cost to bring
object of contract into compliance.
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Performance and Discharge
 Discharge by Performance.
• Performance to Satisfaction of Another.
• Material Breach of Contract.
• A material breach occurs when
performance is not substantial, and
nonbreaching party is excused from
performance and entitled to damages. 
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Performance and Discharge
 Discharge by Performance.
• Material Breach of Contract.
• In a minor (non-material) breach, the
duty to perform is not excused and the
non-breaching party must resume
performance of the contractual
obligations undertaken.
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Performance and Discharge
 Discharge by Performance.
• Anticipatory Repudiation. Occurs when
one party refuses to perform his
contractual obligation, before
performance is due.
• Treated as a material breach, and
nonbreaching party may sue for damages
immediately, even though performance is
not due.
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Performance and Discharge
 Discharge by Performance.
• Anticipatory Repudiation.
• Notice by repudiating party may restore
parties to original obligations.
• Rational for Treating Repudiation as
Breach.
• Anticipatory Repudiation and Market
Prices.
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Performance and Discharge
 Discharge by Agreement.
• Discharge by Rescission.
• Mutual Rescission: for executory contract,
parties must make a new contract, oral or
written. Under UCC, contracts must be in
writing.
• If one party has performed, agreement to
rescind must have additional
consideration.
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Performance and Discharge
 Discharge by Agreement.
• Discharge by Novation: parties agree
to substitute a third party for an
original party.
• Requirements: previous valid obligation,
agreement by all parties, extinguishment
of all old obligations, and new valid
contract.
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Performance and Discharge
 Discharge by Agreement.
• Discharge by Settlement Agreement.
• Discharge by Accord and Satisfaction.
• Accord: contract to perform existing
contractual duty not yet discharged.
• Satisfaction: performance of the accord.
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Performance and Discharge
 Discharge by Operation of Law.
• Alteration of The Contract: innocent
party is discharged after material
alteration.
• Statutes of Limitations.
• Bankruptcy: generally bars
enforcement of non-exempt
transactions.
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Performance and Discharge
 Discharge by Operation of Law.
• Objective Impossibility: the
supervening event was not
foreseeable:
• Death or incapacitation in personal
contract prior to performance,
• Destruction of the subject matter; or
• Change in law renders performance
Illegal.
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Performance and Discharge
 Discharge by Operation of Law.
• Temporary Impossibility.
• Commercial Impracticability.
• Performance becomes extremely difficult
or costly, and must not have been known
by parties when contract made. 
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Performance and Discharge
 Discharge by Operation of Law.
• Frustration of Purpose.
• Supervening event make it impossible to
attain purpose both parties had in mind.
• Event must not have been reasonably
foreseeable, and decreases value of what
a party receives under contract.
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Exhibit 10-2 Contract Discharge
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Damages for Breach of Contract
 Four broad categories of damages:
• Compensatory. 
• Consequential. 
• Punitive. 
• Nominal. 
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Damages for Breach of Contract
 Compensatory Damages.
• Compensates nonbreaching party for
loss of the bargain.
• Out-of-pocket costs directly arising
from breach.
• Standard Measure: difference between
value of promised performance and
value of actual performance. 
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Damages for Breach of Contract
 Compensatory Damages.
• Measurement of Damages:
• Sale of Goods: difference between contract
and market price.
• Sale of Land: specific performance.
• Construction Contracts.
– CASE 10.3 JAMISON WELL DRILLING, INC. V.
PFEIFER (2011). Why did Pfeifer have to pay
for the storage container?
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Damages for Breach of Contract
 Consequential Damages.
• Consequential (Special) Damages—
foreseeable losses.
• Breaching party is aware or should be
aware, cause the injury party additional
loss.
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Damages for Breach of Contract
 Mitigation of Damages.
• When breach of contract occurs, the
innocent injured party is held to a duty
to reduce the damages that he or she
suffered.
• Duty owed depends on the nature of
the contract.
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Damages for Breach of Contract
 Liquidated Damages vs. Penalties.
• Liquidated Damages: specific amount
agreed to be paid as damages in the
event of future breach.
• Penalties: designed to penalize,
generally unenforceable.
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Damages for Breach of Contract
 Liquidated Damages vs. Penalties.
• Enforceability. Court asks two
questions:
• When contract was entered into, was it
apparent damages would be difficult to
estimate in the event of a breach?
• Was the amount set as damages a
reasonable estimate and not excessive?
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Equitable Remedies
 Sometimes damages are inadequate
remedy.
 Court can create equitable
remedies: Rescission and Restitution

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Equitable Remedies
 Rescission.
• Remedy whereby a contract is
canceled and the parties are restored
to the original positions that they
occupied prior to the transactions. 
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Equitable Remedies
 Restitution: both parties must
return goods, property, or money
previously conveyed.
• Note: Rescission does not always call
for restitution. Restitution is called for
in some cases not involving rescission.
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Equitable Remedies
 Specific Performance.
• Equitable remedy calling for the
performance of the act promised in the
contract.
• Provides remedy in cases involving
unique subject matter:
• Sale of Land.
• Contracts for Personal Services.
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Equitable Remedies
 Reformation.
Equitable remedy allowing a contract
to be reformed, or rewritten to reflect
the parties true intentions.
Available when an agreement is
imperfectly expressed in writing.
Used when fraud or mutual mistake
occurs.
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Equitable Remedies
 Recovery Based on Quasi-Contract.
• No actual contract exists, court will
create one in the interests of fairness
and justice.
• Usually granted when one party has
performed in good faith and the other
has been unjustly enriched. 
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Equitable Remedies
 Recovery Based on Quasi-Contract.
• To recover, party seeking recovery
must show:
• Party conferred benefit on other party.
• Party conferred the benefit with
reasonable expectation of payment.
• Party did not volunteer in performing.
• Party receiving benefit would be unjustly
enriched by retaining benefit without
payment.
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Election of Remedies
 Purpose of the Doctrine: to prevent
double recovery. Nonbreaching party
chooses which remedy to pursue.
 UCC Rejects Election of Remedies.
 Pleading in the Alternative.
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Contract Provisions
Limiting Remedies
 Exculpatory and Limitation of Liability
clauses.
 UCC Allows Sales Contracts to Limit
Remedies.
 Enforceability of Limitation-ofLiability Clauses: depends on type of
breach excused by provision.
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