Breach of Contract and Remedies

Definition of a Breach

Failure to act or perform in the manner called for by the contract

Anticipatory Breach…

Occurs when a party declares performance will not be made as required

Anticipatory Repudiation

when a party expressly declares that performance will not be made when required

Anticipatory Repudiation by Conduct

action that makes it impossible for the repudiating party to perform

Cure of Breach by Waiver

When there has been a waiver the party waiving the breach cannot take action; it erases the breach

Existence of Waiver

a party may declare a waiver or express it by allowing the other party to continue performance

Scope of Waiver

extends only to the matter waived

Antimodification Clause

modern contracts often specify that breach waivers do not modify the contract

Reservation of Rights

Party may be willing to accept defective performance but not waive the right to pursue damages

A reservation of rights allows…

tendered performance to be accepted while still reserving the right to damages

Measure of damages is based on the ________________ of services

reasonable value

Courts provide ______________________ when a contract is

unenforceable

quasi-contractual remedies

Injured party will be given __________________ by the court

the benefit of the bargain

Compensatory Damages

compensation for damages incurred due to the breach

Nominal Damages

small sums that establish the violation of legal rights

Punitive Damages

… Exceed the actual loss and are imposed to punish the defendant

Punitive damages are rarely awarded in ____________ .

contract actions

Direct Damages

naturally flow from the breach and include incidental damages

Consequential Damages

occur as a result of the breach

Mitigation of Damages

injured party has a duty to limit damages to the extent possible

Rescission

Injured party may rescind upon a material breach, value of services rendered may be recovered

Action for an Injunction

Court order to refrain from or to do a specified act

Reformation of Contract by a Court

An equitable remedy where a court rewrites a written contract to reflect the parties' true, intended agreement, typically due to mutual mistake, fraud, or a scrivener’s error.

Does reformation of contract by a court void the contract?

No, instead it modifies specific terms to align with the actual "meeting of the minds"

Remedies Upon Anticipatory Repudiation

Several options available:

 State that performance at the proper time is required

 Regard the contract as broken and bring a lawsuit without waiting for performance

 Regard as an offer to cancel the contract which can be accepted or rejected

Contract Provisions Affecting Remedies and Damages

Limitation of Remedies, Liquidated Damages, Attorneys’ Fees, Limitation of Liability Clauses

Limitation of Remedies

The contract may limit remedies available

Liquidated Damages Validity

must be for a situation where it is difficult to determine damages, and the amount must not be excessive

Liquidated Damages Effect

injured party cannot collect more than the amount specified which the defending party is bound to pay

Liquidated Damages Invalid Clauses

when the sum is unreasonable, the clause is voided

Attorneys’ Fees

“American Rule” states each party responsible for own fees, but court has discretion to award them

Limitation of Liability Clauses

Content and Construction, Validity, Releases

Content and Construction

limits do not apply to grossly negligent, willful or

wanton conduct

Validity

provisions that exonerate gross negligence or intentional acts are

rarely enforced

Releases

Generally binding