Business Law Ch 16

Breach of Contract & Remedies

breach of contract

one or both parties do not perform the duties as specified in the contract

tender of performance

unconditional and absolute offer by contracting parties to perform their obligations under a contract

minor breach of contract

when a party renders substantial performance, but not complete performance, of contractual duties

material breach

when a contracting party renders inferior performance of contractual duties

anticipatory breach

when a contracting party informs the other party in advance that it will not perform the contractual duties when due

Complete performance is also known as ________ performance.

strict

monetary damages

when there has been a breach of contract, dollar damages

When there has been a breach of contract, what are the most common types of monetary damages that could be awarded?

Compensatory, consequential, liquidated, and nominal damages

Monetary damages are available whether the breach was ____________.

minor or material

compensatory damages

intended to compensate a nonbreaching party for the loss of the bargain

place nonbreaching party in same position if contract had been fully performed

__________ damages place the nonbreaching party in the same position as if the contract had been fully performed by restoring the "benefit of the bargain."

compensatory

consequential damages

special/foreseeable damages that arise from circumstances outside a contract. Breaching party must know or have reason to know that the breach will cause special damages to the other party

disclaimer of contractual damages

contract provision that states that a breaching party is not responsible to pay consequential damages

If a student purchases software for $50 and the license agreement indicates that the software company is not liable for consequential damages, how much can the student recover if the software is defective and results in the loss of the $1,000 computer?

$50, because only compensatory damages for the amount paid for the defective software are recoverable.

A nonbreaching party can sometimes recover ________ damages, or special damages, from the breaching party. Consequential damages are ________ damages that arise from circumstances outside a contract.

consequential; foreseeable

nominal damages

damages awarded when the nonbreaching party sues the breaching party even though no financial loss has resulted from the breach. usually $1 or less

mitigation of damages

nonbreaching party’s legal duty to avoid or reduce damages caused by a breach of contract

If an employer breaches an employment contract, the employee owes a duty to ________ damages by trying to find substitute employment. The employee is required to accept ________ employment.

mitigate; comparable

liquidated damages

damages that parties to a contract agree in advance should be paid if the contract is breached

liquidated damages clause

clause in a contract that provides that agreed-upon liquidated damages will be paid upon the breach of the contract

penalty

fine that is imposed if liquidated damages are excessive or unconscionable or if actual damages are clearly determinable in advance and make the liquidated damage clause unenforceable

Under certain circumstances, the parties to a contract may agree in advance to the amount of damages payable on a breach of contract. These damages are called ________ damages. To be lawful, the actual damages must be ________ to determine, and the liquidated amount must be reasonable in the circumstances.

liquidated; difficult or impracticable

rescission

act to undo a contract

restitution

the return of goods or property received from the other part to rescind a contract

equitable remedies

remedy available if there has been a breach of contract that cannot be adequately compensated through a legal remedy or to prevent unjust enrichment

specific performance

orders breaching party to perform the acts promised in a contract

reformation

equitable doctrine that permits the court to rewrite a contract to express the parties true intentions

injunction

court order that prohibits a person from doing a certain act

arbitration

nonjudicial, private resolution of a contract dispute

Most arbitration agreements stipulate ________ arbitration, that is, the arbitrator's decision ________.

binding; cannot be appealed to the courts

intentional interference with contractual relations

when a 3rd party induces a contracting party to breach a contract with another party

implied covenant of good faith and fair dealing

parties to a contract required to act in good faith and deal fairly in all respects in obtaining the objective of the contract

Generally, to ________ a contract, the parties must make restitution of the consideration they received under the contract.

rescind

________ damages are awarded when the non-breaching party sues the breaching party even though no financial loss has resulted from the breach.

Nominal

________ performance of personal service contracts is not granted because the courts would find it difficult or impracticable to supervise or monitor the performance of such a contract.

Specific

The anticipatory breach of a contract is also called anticipatory __________.

repudiation

Breach of the covenant of good faith and fair dealing is sometimes referred to as the tort of ________

bad faith

Generally, ________ damages are not recoverable for breach of contract.

punitive

when a party commits an anticipatory breach, the nonbreaching party ______

is immediately discharged from his own duties

when does a minor breach occur?

when a party renders substantial performance of his contractual duties

which of the following constitutes a material breach of contract?

an inferior performance