Performance, Discharge, and,
Remedies
“If you can’t give me your word
of honor, will you give me
your promise?”
Samuel Goldwyn,
Hollywood producer
“Everyone complains of his memory, none of
his judgment.”
Francois, duc de la Rochefoucauld,
French writer
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Discharge: Party is discharged when it has no
more duties under a contract
Most contracts are discharged by full
performance
Sometimes the parties discharge a contract
by agreement
Rescind: Terminate contract by mutual
agreement
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Strict performance: Requires one party to
perform its obligations precisely, with no
deviation from the contract terms
Substantial performance: Occurs when one
party fulfills enough of its contract
obligations to warrant payment
◦ A party that fails to perform substantially:
 Receives nothing on the contract and will only recover
the value of the work, if any
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Parties to a contract must carry out their
obligations in good faith
The difficulty is applying this general rule to:
◦ Wide variety of problems that may arise
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Generally make contract dates strictly
enforceable
Merely including a date for performance does
not make time of the essence
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When one party breaches a contract, the
other party is discharged
Material breach
◦ Generally courts will discharge only if a party
committed a material breach
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Statute of limitations: Will limit the time
within which the injured party may file suit
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True impossibility
◦ Something has happened making it utterly
impossible to fulfill the promise
 Generally limited to:
 Destruction of the subject matter
 Death of the promisor in a personal service contract
 Illegality of the contract
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Commercial impracticability
◦ Some event has occurred that neither party
anticipated, making the contract extra-ordinarily
difficult and unfair to one party
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Frustration of purpose
◦ Some event has occurred that neither party
anticipated and the contract now has no value for
one party
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A remedy is the method a court uses to
compensate an injured party
Interest: A legal right in something
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Expectation interest
◦ Designed to put the injured party in the position
she would have been in had both sides fully
performed their obligations
 Direct damages: Flow directly from the contract
 Consequential damages: Resulting from the unique
circumstances of this injured party
 Incidental damages: Minor costs that the injured party
suffers when responding to the breach
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Reliance interest
◦ Puts the injured party in the position he would have
been in had the parties never entered into a
contract
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Restitution interest
◦ Designed to return to the injured party a benefit
that he has conferred on the other party
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Equitable interest
◦ When money is not sufficient to help the injured
party:
 Court may order a transfer of property or may issue an
injunction to prevent a particular action from
continuing
◦ Specific performance: Forces both parties to
complete the deal
◦ Injunction: Court order that requires someone to do
something or to refrain from doing something
 Preliminary injunction
 Permanent injunction
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Mitigation of damages
◦ A party may not recover for damages that could be
avoided with reasonable efforts
 Mitigate: To keep damages as low as possible
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Liquidated damages: Clause stating in
advance how much a party must pay it if it
breaches
◦ A court will generally enforce a liquidated damages
clause if :
 At the time of creating the contract it was very difficult
to estimate actual damages
 Liquidated amount is reasonable