Contract Law: Performance, Breach, and Third-Party Rights

Parol Evidence Rule

Bars oral evidence that contradicts a final written contract, with limited exceptions.

Discharge

Release from further responsibility once contractual duties are performed.

Duty of Performance

The obligation to carry out a promise under the contract.

Condition Precedent

An event that must occur before a duty to perform arises.

Condition Subsequent

A later event that terminates an existing duty to perform.

Concurrent Condition

When both parties' duties are triggered and performed simultaneously.

Express Conditions

Conditions explicitly stated in the contract.

Implied Conditions

Conditions not written but read into the contract by courts (often concurrent).

Delivery

Legal transfer of goods from seller to buyer.

Tender of Performance

A valid offer to perform contractual obligations.

Complete Performance

Full satisfaction of all contractual duties.

Substantial Performance

Performance that is less than complete but sufficient to avoid material breach.

Material Breach

A failure so significant that it excuses the other party's performance.

Force Majeure Clause

Contract provision excusing performance during extreme, unforeseeable events (e.g., disaster, war, pandemic).

Impossibility of Performance

Objective impossibility—no one could perform (e.g., subject matter destroyed).

Frustration of Purpose

Performance possible but the purpose of the contract is destroyed.

Commercial Impracticability

Under UCC §2-615, performance excused if extremely difficult or costly due to unforeseen event.

Waiver

Voluntary relinquishment of the right to enforce a contract after breach.

Release

Agreement excusing future performance before it is due.

Compensatory Damages

Money to place the nonbreaching party in the position as if the contract were performed.

Consequential Damages

Foreseeable secondary losses from breach.

Punitive Damages

Damages meant to punish, not compensate—rare in contract law.

Liquidated Damages

Pre-agreed damages, enforceable if reasonable and not punitive.

Mitigate

Duty of nonbreaching party to reduce damages where possible.

Equitable Remedy

Nonmonetary remedy when damages are inadequate.

Specific Performance

Court order requiring actual performance, usually for unique goods or land.

Injunction

Court order to do or stop doing something.

Rescission

Cancels the contract and returns both parties to pre-contract status.

Restitution

Payment or return of benefits when rescission occurs.

Quasi-Contract

Equitable remedy preventing unjust enrichment.

Third-Party Beneficiary

Person who, though not a party, gains enforceable rights from a contract.

Assignment

Transfer of contractual rights from assignor to assignee.

Assignor

Original holder of the contractual right.

Assignee

Party receiving the contractual right.

Delegate

Person transferring a duty to another.

Delegatee

Person receiving the delegated duty.

Delegator

Party originally responsible for the duty.

Anti-Assignment Clause

Provision preventing transfer of contractual rights or duties.

Novation

New contract substituting parties and releasing the original obligor from liability.

Divisibility of Employment Contract

An employment contract is considered divisible because each pay period represents a separate exchange of work for wages.

Divisibility of Construction Contract

A construction contract is usually considered entire and not divisible, as the whole project is the bargained-for exchange.

Examples of Real Impossibility

1. The subject matter is destroyed. 2. The performer dies or becomes incapacitated. 3. A change in law makes the performance illegal.

Damages

Monetary awards intended to make the injured party whole.

Equitable Remedies

Non-monetary remedies such as specific performance, injunction, and rescission used when monetary damages are inadequate.

Measure of Damages

Laura's damages from David's breach equals the difference between the contract price and resale price.

Duty to Mitigate Damages

The non-breaching party must take reasonable steps to reduce losses.

Efficient Breach Theory

Legally, a breaching party may act rationally if they fully compensate the other party, though moral opinions vary.

Intended Beneficiary

An intended beneficiary is explicitly meant to benefit from the contract and has rights to enforce it.

Incidental Beneficiary

An incidental beneficiary benefits from the contract only by coincidence and has no enforceable rights.

Delegation

The transfer of duties under a contract to another party.

Enforceable Contract

A handshake agreement on essential terms can create an enforceable contract.

Unilateral Mistake

A unilateral mistake in pricing does not void the contract unless the other party knew or should have known of the error.

Renegotiation

Parties may informally renegotiate terms to preserve the business relationship after a mistake.