Chapter 10 CONTRACT PERFORMANCE BREACH AND REMEDIES I VOLUNTARY CONSENT a Parties must GENUINELY AGREE to a contract s terms in order for the contract to be enforceable b Voluntary consent negated by i Mistakes 1 Mistake of material fact makes a contract voidable 2 Unilateral mistake by only one party generally does NOT render a contract unenforceable 3 Bilateral mutual mistake by both parties makes a contract voidable 4 Mistakes of value contract is normally enforceable ii Fraudulent Misrepresentation 1 A misrepresentation of a material fact 2 Intent to deceive 3 Justifiable reliance on the misrepresentation by the innocent party 4 Harm must occur iii Undue Influence negates the free will of one contracting party iv Duress forcing someone to enter a contract via a wrongful or illegal act II PERFORMANCE AND DISCHARGE a Most contracts are discharged through performance fulfilling the terms of the contract b Conditions of Performance performance may be contingent on the occurrence or nonoccurrence of a certain event c Discharge by Performance i Complete Performance when a party performs exactly as agreed ii Substantial Performance performance of substantially all contractual terms can render a contract enforceable if 1 The party performed in good faith 2 The performance mostly conforms to that which the contract promised 3 Performance must create substantially the same benefits as those promised in the contract 4 See Jacob and Youngs v Kent 5 Damages measured by the cost to bring the object of the contract into compliance with its terms iii Material Breach of Contract the material nonperformance of a contractual duty 1 Material breach if performance is not at least substantial 2 Minor breach Not material once breach has been cured the nonbreaching party must resume performance of his her contractual obligations iv Anticipatory Repudiation occurs when one party to the contract reuses to carry out his her obligations before either party has a duty to perform treated as a material breach v Time for performance contract must be performed within a stated time or if no time is stated a reasonable time d The parties can agree to discharge i Mutual rescission parties agree to cancel contract and are returned to the positions they occupied before contract existed to be effective rescission also requires offer acceptance and consideration ii Discharge by Novation when both parties agree to substitute a third party for one of the original parties novation requires 1 A previous valid obligation 2 An agreement by all parties to a new contract 3 The extinguishing of the old obligation 4 A new contract that is valid iii Discharge by Settlement Agreement a compromise that arises out of a genuine dispute over obligations under an existing contract iv Discharge by Accord and Satisfaction parties agree to accept performance that is different from the performance originally promised e Discharge by Operation of Law i Material alteration of a written contract without consent ii Statute of Limitations iii Bankruptcy iv Impossibility or impracticability of performance v Frustration of purpose III DAMAGES FOR BREACH OF CONTRACT a Types of Damages i Compensatory covers direct losses and costs ii Consequential Special covers indirect and foreseeable losses iii Punitive intended to punish and deter wrongdoing iv Nominal intended to recognize wrongdoing when no monetary loss is shown b Mitigation the injured party likely has a duty to mitigate lessen the damages owed him c Liquidated Damages specifies an amount of damages if contract is breached usually enforceable IV EQUITABLE REMEDIES a Equitable remedies come into play when monetary damages are inappropriate b Types of equitable remedies i Rescission and Restitution 1 Rescission an action to terminate the contract in order to return the parties to the positions they occupied prior to the transaction 2 Restitution the return of property goods or funds in order to return the parties to the positions they occupied prior to the transaction 3 Rescission and restitution work in concert ii Specific Performance a judicial order to perform the act promised in the contract will only be granted as a remedy if monetary damages will not suffice 1 Contracts for the Sale of Land every parcel of land is considered unique so specific performance is a common remedy for a breach of contract for the sale of land 2 Contracts for Personal Services specific performance is an inappropriate remedy iii Reformation used if parties have imperfectly expressed their agreement in writing allows a court to rewrite the contract to correctly reflect the parties intentions appropriate in situations of 1 Fraud or mutual mistake 2 An incorrect written statement of an oral agreement 3 Covenants not to compete V WAIVER OF BREACH a A nonbreaching party may accept defective performance under a contract thereby waiving their legal rights to seek redress for the breach i Waiving party cannot later take legal action as waiver effectively erases the past breach ii Waiver does not extend to subsequent additional or future breaches of contract except 1 Pattern of Conduct Exception a waiver can extend to subsequent breaches if a reasonable person would conclude that similar defective performance in the future would also be acceptable VI CONTRACTUAL LIMITATIONS ON DAMAGES a A contractual provision attempting to limit or eliminate damages is unenforceable if it excludes liability for fraud intentional injury or acts contrary to public policy