Ch. 13 Contract Performance, Breach, and Remedies

Anticipatory repudiation

an assertion or action by a party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time

Bilateral mistake

a mistake that occurs when both parties to a contract are mistaken about the same material fact

Breach of contract

the failure, without legal excuse, of a promisor to perform the obligations of a contract

Commercial impractability

a doctrine under which a seller may be excused from performing a contract when 1) a contingency occurs, 2) the contingency’s occurrence makes performance impracticable, and 3) the nonoccurrence of the contingency was a basic assumption on which the contract was made

Condition

a possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract

Consequential damages

special damages that compensate for a loss that is not direct or immediate (e.g. lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them

Discharge

1) the termination of an obligation, such as occurs when the parties to a contract have fully performed their contractual obligations. 2) the termination of a bankruptcy debtor's obligation to pay debts

Discharge in bankruptcy

the release of a debtor from all debts that are provable, except those specifically excepted from discharge by statute

Duress

unlawful pressure brought to bear on a person, causing the person to perform an act that he or she would not otherwise perform (or refrain from doing something that he or she would otherwise do)

Frustration of purpose

a court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party’s control)

Impossibility of performance

a doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party)

Incidental damages

damages that compensate for expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source

Liquidated damages

an amount, stipulated in the contract, that the parties to a contract believe to be reasonable estimation of the damages that will occur in the event of a breach

Mutual rescission

an agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed

Nominal damages

a small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered or when the plaintiff is unable to show such loss with sufficient certainty

Novation

the substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. Typically, there is a substitution of a new party who is responsible for the contract and the removal of an original party’s right and duties under the contract

Penalty

a sum inserted into a contract not as a measure of compensation for its breach, but rather as punishment for a default. The agreement as to the amount will not be enforced, and recovery will be limited to actual damages

Performance

in contract law, the fulfillment of one’s duties arising under a contract; the normal way of discharging one’s contractual obligations

Reformation:

Restitution

an equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred

Specific performance

an equitable remedy requiring the breaching party to perform as promised under the contract; usually only granted when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property)

Tender

an unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

Undue influence

persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party

Unilateral mistake

a mistake that occurs when one party to a contract is mistaken as to a material fact

Voluntary consent

knowing and voluntary agreement to the terms of a contract. If voluntary consent is lacking, the contract will be voidable