Chapter 12: Contract Breach

Chapter 12: Contract Performance, Breach, & Remedies

1. Vices of Consent

  • A contract may be voidable if parties did not voluntarily consent to its terms.

  • Four Vices of Consent:

    • Mistake

    • Fraud

    • Undue Influence

    • Duress

2. Mistakes

2.1 Types of Mistakes

  • Mistake of Value:

    • Contract is enforceable under this mistake.

  • Unilateral Mistake (of Fact):

    • A party can only cancel the contract if:

      1. The non-mistaken party knew or should have known about the mistake.

      2. There is a clerical error.

  • Bilateral (Mutual) Mistakes:

    • If both parties are mistaken, either can rescind (cancel) the contract.

    • Materially different meanings attributed to the same word may result in rescission.

2.2 Voluntary Consent

  • Contracts can be rescinded by either party in case of a bilateral mistake.

  • Unilateral Mistake:

    • Enforceable unless the other party knew or should have known about the mistake; significant mathematical errors made inadvertently and without gross negligence can also be a ground for rescission.

3. Fraud

  • A contract is voidable by the innocent party if:

    • There is misrepresentation of a material fact (not opinion).

    • Intent to deceive is present.

    • The innocent party justifiably relied on the misrepresentation.

4. Undue Influence & Duress

  • Undue Influence:

    • Arises from a special relationship of trust where a stronger party influences the weaker party's free will psychologically.

  • Duress:

    • Involves threats of physical force or extortion, which can be grounds for rescission.

    • Economic need alone does not constitute duress.

5. Statute of Frauds - Writing Requirements

  • Certain contracts must be in writing and signed to be enforceable, including:

    • Interest in Land:

      • Contracts involving land interests must be in writing (includes sales, fixtures, leases, mortgages, easements).

      • NOTE: In Louisiana, contracts for the sale of immovable property do not have to be in writing but should be.

    • Other Examples:

      • Matrimonial agreements (e.g., prenups).

6. Discharge & Performance

  • Contracts can be discharged (terminated) through:

    • Performance: Fulfilling contractual duties.

    • Agreement of the Parties.

    • Operation of Law:

      • Events such as bankruptcy, prescription, or impossibility/illegality.

7. Discharge by Performance

  • Complete Performance: Full fulfillment of contract obligations.

  • Substantial Performance: Minor breach; if in good faith, non-breaching party remains liable to pay.

  • Satisfaction Contract: Performance is contingent on reasonable satisfaction of a party.

8. Breach of Contract

  • Breach: Failure without legal excuse by a promisor to perform contractual obligations.

  • Material Breach of Contract:

    • When performance is not substantial; the innocent party is excused from performance and can sue for damages.

  • A minor breach may be cured.

9. Damages for Breach of Contract

  • Compensatory Damages: Covers direct losses and costs.

  • Consequential Damages: Covers indirect and foreseeable losses.

  • Punitive Damages: Meant to punish and deter wrongdoing; not allowed in Louisiana.

10. Mitigation of Damages

  • The injured party has a legal duty to mitigate (reduce) damages.

  • For example, a terminated employee must take a similar job if available.

11. Liquidated Damages vs. Penalties

  • Liquidated Damages: A fixed amount agreed upon by parties for breach; generally enforceable.

  • Penalties: Aimed at punishing a party for breach; generally unenforceable, and courts award damages for actual losses instead.

12. Equitable Remedies

  • Rescission: Cancelling a contract; available for fraud, mistake, duress, and failure of consideration.

  • Specific Performance: Non-monetary relief granted where legal remedy is inadequate, particularly for unique subject matters (e.g., land, original art).

  • Contracts for Personal Services: Courts usually deny granting specific performance to avoid involuntary servitude.


Here's a definition for each of the requested terms:

  • Voluntary Consent: The agreement of parties to enter into a contract based on their free will and understanding of the terms. It is essential for a contract to be enforceable.

  • Unilateral Mistake: A mistake made by one party about a material fact of the contract, which generally does not void the contract unless the other party knew or should have known about the mistake.

  • Bilateral Mistake: A mutual misunderstanding where both parties have incorrect assumptions about a material fact, allowing either party to rescind the contract.

  • Fraud: Misrepresentation of a material fact made with the intent to deceive, leading to reliance by the innocent party, who may void the contract.

  • Undue Influence: A situation where one party uses their position of power over another party to induce them to enter into a contract, compromising the free will of the influenced party.

  • Duress: Coercion through threats of physical harm or extortion that forces an individual to enter into a contract against their will, allowing for rescission of the contract.

  • Statute of Frauds: A legal doctrine requiring certain types of contracts to be in writing and signed in order to be enforceable, such as contracts involving land interests.

  • Discharge: The termination of a party's contractual obligations, which can occur through performance, mutual agreement, or operation of law.

  • Breach of Contract: The failure of one party to fulfill their contractual obligations without legal excuse, which may allow the other party to seek remedies.

  • Performance: The fulfillment of contractual duties as specified in the contract terms.

  • Impossibility of Performance: A legal doctrine concluding that a party cannot perform their contractual obligations due to unforeseen events, which may discharge the contract.

  • Penalty: A punitive measure imposed in a contract to penalize a party for breaching the contract, which is usually unenforceable. Courts typically award actual damages instead.

  • Specific Performance: An equitable remedy where the court orders the breaching party to perform their contractual obligations, particularly in cases involving unique subject matter, rather than providing monetary damages.

  • Rescission: The cancellation of a contract, returning parties to their pre-contractual positions, which can occur due to fraud, mistake, or duress.

  • Mitigation: The obligation of the injured party to minimize their losses after a breach of contract, demonstrating reasonable efforts to reduce damages.

  • Consequential Damages: Indirect damages that occur as a consequence of a breach and are not confined to direct losses, provided they were foreseeable at the time the contract was formed.

  • Compensatory Damages: Damages awarded to cover direct losses and costs incurred due to a breach of contract, aiming to restore the injured party to the position they would have been in had the contract been performed.

  • Liquidated Damages: Pre-determined damages agreed upon by the parties in the event of a breach, which are generally enforceable as long as they are a reasonable estimate of anticipated harm.