Accounting Law - Week 3 (end of contracts)

Monetary damages

Aka Compensatory Damages: a remedy intended to compensate a non-breaching party for the loss of the bargain. They place the non-breaching party in the same position as if the contract had been fully performed by restoring the benefits of the bargain.

Consequential Damages

Foreseeable damages that arise from circumstances outside the contract. To be liable. the breaching party must know or have reason to know that the breach will cause special damages to the other party

Nominal Damages

Trifling amount: Just to establish that the defendant acted wrongly but the nonbreaching party didn’t really suffer from any monetary loss. kind of a symbolic damage/reparation.

Liquidated Damages

Damages that are specified in the contract rather than determined by the court. they are damages that parties contract for in advance.

You do not need to prove how much the damages are. You already decided what damages would be in the case of non-breach.

However, this can only be used if the actual damages would be difficult or impracticable to determine. The amount in the contract must be reasonable, not punitive.

Punitive Damages

Damages that are awarded to punish the defendant, to defer the defendant from similar conduct in the future and set an example to others.

• not recoverable for breach of contract

  • They are for tortious conduct such as fraud or intentional act.

Incidental Damages

Expenses directly caused by breach such as those to obtain performance from another source (storage, shipping, lawyer fees, etc)

Mitigation of Damage

If there is a breach, the law places a duty on the innocent non-breaching party to take reasonable efforts to mitigate (avoid and reduce) the resulting damages

Rescission and Restitution

Rescission is an action to undo the contract. It is available if there has been a material breach of contract, fraud, duress, undue influence, or mistake.

You return the goods/property received. If thats unavailble, you give cash equivalent.

The point is to put people in the position they were in prior to the contract being entered.

Specific Performance

A remedy that orders the breaching party to perform the acts promised in the contract. Usually awarded in cases where the subject matter is unique, such as contracts involving land, heirlooms, paintings, stamps, rare coins, etc.

• not used for personal services because its impractical for a court to monitor that type of performance.

Reformation

An equitable doctrine that permits the court to rewrite a contract to express the parties’ true intentions. example: clerical error dispute.

Quasi-contract (Implied in Law)

An equitable doctine that permits the recovery of compensation even though no enforceable contract exists between the parties.

• to prevent unjust enrichment

  • recover reasonable value of the services/materials provided

Injunction

A court order that prohibits a person from doing a certain act. The requesting party must show that they will suffer irreparable injury unless the injunction is issued.

What are the two exceptions that grant a third party rights under other people’s contracts?

1. Assignees to whom rights are subsequently transferred

2. Intended third-party beneficiaries. to whom the contracting parties intended to give rights under the contract at the time of contracting.

Assignment

A transfer of contractual rights to another

Obligor

Owes duty of performance

Obligee

Owed the right under the contract

Assignor

The obligee who transfers the rights

Assignee

The party to whom the right has been transferred

Types of rights that are not assignable

1. If it materially increases the duty, risk, or burden upon the obligor.

2. Transfers highly personal contract rights

3. are expressly prohibited by the contract

4. are prohibited by law

Obligations of the Assignee

• the assignee must notify obligor of the assignment

• If no notice is given, the obligor can discharge his obligation by performances to the assignor

  • However, once notice is given, then only performance to the assignee can discharge the obligor’s obligations

Delegation of duties

The transfer of contractual duties to another

Delegator

Party making the delegation

Delegatee

Party to whom duty has been delegated

Duties that cannot be delegated

• Duties which are personal in nature

• Duties to provide professional services

• Duties to manufacture a distinct class of high-quality goods

• If contract prohibits delegation

• If performance by delegatee would vary materially from that of the delagator

Intended Beneficiaries

A third party who is not in privity of contract BUT who has rights under the contract and can enforce the contract against the obligor.

Creditor Beneficiary

A third party who benefits from a contract in which the promisor promises the promisee to pay a debt that the promisee owes to the third party.

Donee Beneficiary

Contract made for the purpose of giving a gift to third party, the donee beneficiary.

Incidental Beneficiary

A party who is unintentionally benefitted by other peoples contract. No legal right to enforce the contract.