Contracts MEE

What law governs a contract that includes both goods and services?

If a contract includes both goods and services, courts apply the predominant purpose test to determine whether to apply common law (services) or UCC Article 2 (goods).

Under common law, when can a party recover under a contract despite not fully performing?

A party may recover under the contract if they have substantially performed, which means the breach is minor and the non-breaching party has received the substantial benefit of the bargain.

What is the effect of a material breach under the common law?

A material breach occurs when the non-breaching party does not receive the substantial benefit of the bargain. It excuses the non-breaching party’s performance and bars the breaching party from recovering under the contract.

Can a breaching party who materially breached recover in restitution?

A breaching party may recover in restitution only if the breach was not willful. Courts generally deny restitution for intentional or willful breaches.

What is the general measure of damages for defective or unfinished construction?

The measure is the cost of completion or repair, plus any damages for delay or defects, minus any payments already made to the breaching party.

When can a materially breaching party recover in restitution?

A materially breaching party may recover in restitution only if the breach was not willful. Courts usually deny restitution for intentional or willful breaches.

When will a court decline to award cost of repair damages?

If the cost to repair would cause economic waste—i.e., it is grossly disproportionate to the benefit gained—the court may instead award diminution in market value damages.

What is economic waste in the context of construction damages?

When the cost to correct a defect is disproportionate to its value, making it unreasonable to award cost of repair.

What is the rule for recovering lost profits (consequential damages) in a breach of contract action under common law?

To recover lost profits, the party must show that the profits were: (1) foreseeable, (2) caused by the breach, and (3) provable with reasonable certainty—often shown through a history of profitability.

When are consequential damages not recoverable in a contract action?

Consequential damages are not recoverable if they were not reasonably foreseeable to the breaching party at the time of contracting.

What is the duty to mitigate damages in contract law?

The non-breaching party has a duty to take reasonable steps to mitigate damages caused by the breach. Failure to mitigate will reduce the recoverable damages by the amount that could have been avoided through reasonable efforts.

How are damages adjusted if the non-breaching party fails to mitigate?

If the non-breaching party fails to mitigate, the amount they could have reasonably avoided is subtracted from the damages they would otherwise recover.

What is anticipatory repudiation in contract law?

Anticipatory repudiation occurs when a party unequivocally communicates, by words or conduct, that they will not perform their obligations under the contract when performance is due.

What remedies are available to the non-breaching party after anticipatory repudiation?

Upon anticipatory repudiation, the non-breaching party may:

(1) treat the repudiation as a breach and sue immediately;

(2) suspend their own performance; or

(3) wait for the repudiating party to perform

What are expectation damages in a contract breach?

Expectation damages seek to put the non-breaching party in the position they would have been in had the contract been fully performed, by awarding the benefit of the bargain.

What is the difference between general and consequential damages in a contract action?

General damages are those that arise naturally and directly from the breach (e.g., cost of cover), while consequential damages are losses that result from special circumstances beyond the contract and require that the breaching party had reason to know of them at the time of contracting.