Contracts II - CONTRACTS II With Prof. Kniffin Course...

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CONTRACTS II With Prof. Kniffin Course Outline By Benjamin Neidl Spring, 1998 ______________________________________ Part One: Remedies for Breach………….2 Part Two: Contract Interpretation…………14 Part Three: Performance and Breach……… . 22 Part Four: Excuse from Performance……… . .33 Part Five: Third Party Beneficiaries………….40 Part Six: Assignment and Delegation……… . .45 ______________________________________ PART ONE: REMEDIES FOR BREACH MEASURING EXPECTATION Substitutional Relief Overview A party mitigates damages by seeking substitutional relief, or substitute performance. What is substitute performance? When after learning of a breach or repudiation, the party suffering the breach turns to an alternative source to satisfy its needs. For instance, if a seller of products breaches his contract with a buyer, the buyer may seek to buy the goods elsewhere. This is a mitigation of damages by substitute performance/relief. In most situations, a party suffering breach is expected to mitigate damages. If he does not mitigate damages, he will be treated as though he had, most of the time. Failure to mitigate will not generally prevent him from getting an award of some kind. These rules have commonlaw origins, and have been codified in the Uniform Commercial Code (UCC) for goods transactions. The General Formula for Damages Outside the UCC Generally, damages equal the difference between the contract price and the substitute price, plus any foreseeable consequential damages that emerge from the breach. (Damages = contract price + consequential damages - substitute price; or, for the other side, Damages = substitute price + consequential damages - contract price). Example. I hire a clown to perform at my son’s birthday party. The price for his show is $150. Furthermore, the clown tells me that if I buy $50 worth of balloons, he’ll make balloon animals during the show. I buy the balloons. He doesn’t show up. At the last minute, I am forced to get another entertainer. I hire a magician, who costs $200 per show. Formula: Damages = substitute price + consequential damages - contract price Substitute Price = $200, what I paid the magician. Consequential Damages = $50, what I paid for the now useless balloons. Contract Price = $150 Therefore, Damages = $200 + $50 - $150. Damages = $100. Note how this approach gives me the benefit of my bargain. I get entertainment for my
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son’s birthday party for $150, just as I bargained for under the contract. Substitute Performance Under the UCC The UCC applies basically the same type of formula with some greater specificity. This is discussed below. The UCC applies to all goods transactions. The parties do not have to be merchants.
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Contracts II - CONTRACTS II With Prof. Kniffin Course...

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