Study Notes on Contract Performance, Breach, and Remedies

Relevant Text: Cross/Miller, The Legal Environment of Business: Text and Cases, Eleventh Edition (2021).
Copyright Notice: © 2021 Cengage. All Rights Reserved.
Content Overview: This chapter discusses the essential aspects of contract performance, conditions of breach, types of remedies available, and the implications of voluntary consent.

Definition: Voluntary consent refers to the agreement of both parties to enter into a contract without coercion or undue pressure.
Lacking Voluntary Consent: A valid contract may become unenforceable if voluntary consent is absent. Reasons for lacking voluntary consent include:
- Mistake
- Misrepresentation
- Undue Influence
- Duress

Mistakes Defined: In the context of contracts, mistakes refer to incorrect beliefs shared by parties concerning a significant fact.
- Mistake of Fact: These are mistakes that can make a contract voidable. Examples include both unilateral and bilateral mistakes.
- Unilateral Mistakes: These occur when one party is mistaken about a foundational fact, which generally does not justify rescinding a contract.
- Bilateral Mistakes: When both parties are mistaken, either can rescind the contract.
- Mistake of Quality or Value: Mistakes about the quality or value of a subject matter normally do not make a contract voidable, as they do not impact the enforceability of agreements.

Question #1: Misrepresentation but not mistakes can lead to a lack of voluntary consent.
Question #2: Scenario with Nora and Oceanic Transport:
- Situation: Oceanic makes an error in calculating shipping costs, resulting in a contract price that is $1,000 less than actual costs.
- Outcomes: Generally, a court would allow the parties to rescind the contract.
Question #3: Byron sells a parcel land believed to be worthless, which actually contains gold:
- Potential Actions: Byron cannot rescind the contract and cannot claim fraud/mistake. This highlights the significance of understanding contractual obligations despite personal beliefs about value.
Question #4: Duress can be a defense against contract enforcement but is not grounds for rescission.

Duress Definition: Involves pressure exerted on a party to secure their agreement to a contract against their will.
- Key Elements:
- The party must prove that they entered into a contract under fear or threat.
- The act that caused the threat must be wrongful or illegal.
  - This renders the party incapable of exercising free will in making the agreement.
- Proof of such threat must indicate it concerns something the threatening party has no right to enforce.

Compensatory Damages: Damages designed to compensate the injured party for losses directly caused by the breach.
Objective: Courts aim to restore the injured party to the position they would have been in had the contract been fully performed: “make the person whole.”
Types of Damages:
- Compensatory Damages: Specific monetary compensation to cover losses.
- Consequential Damages: Additional losses incurred as a result of the breach, considering special circumstances.
- Punitive Damages: Designed to punish the breaching party and deter similar conduct in the future.
- Nominal Damages: A small sum awarded when a breach has occurred without substantial loss.
Compensatory Damages Elaboration:
- They compensate only for actual damages sustained as a direct result of the breach, demonstrating a critical aspect of contract law: parties are entitled to expect to receive what they bargained for.
Consequential (Special) Damages Elaboration:
- Foreseeable damages that arise from special circumstances beyond the immediate terms of the contract.
- These damages must be within the reasonable contemplation of the parties at the time the contract was made, making them pivotal in determining overall contract enforceability and liability.