Unformatted text preview: Chapter 20
BREACH OF CONTRACT AND REMEDIES Breach of Contract
Breach is a failure to act or perform in
the manner called for by the contract. Anticipatory Breach: When a party makes it clear that she does not intend to fulfill the contract. Repudiation by Conduct: When this party
clearly states that the performance will not happen.
2 Waiver of Breach The effect of a breach is nullified if the aggrieved
person by word or conduct waives the right to object to the breach. Conversely, an aggrieved party may accept a defective performance without thereby waiving a claim for breach if the party makes a reservation of rights. A reservation of rights can be made by stating that the
defective performance is accepted "without prejudice," "under protest," or "with reservation of rights." 3 Remedies For Breach
The aggrieved person may usually sue for
damages caused by the breach if the breach is not waived. When an anticipatory repudiation occurs, the aggrieved party may either wait until the time of performance or may proceed immediately with an action for damages. 4 What Follows the Breach?
Waiver of Breach Defective Performance Accepted with Reservation of Right to Damages Contractual Limitations of Remedy or Provision for Liquidated Damages
Contract Continues as Though There Were No Breach Contract Continues as Modified Contract Performed but at Reduced Price or, in Suit for Full Price, Counterclaim for Damages Remedy Specified in Contract Action for Damages Action for Recession Action for Specific Performance Action for Injunction Breach of Contract 5 Measure of Damages
What may be recovered is either direct or
consequential damages. Direct damages are those caused directly by the
breach. Consequential damages are extra expenditures made by the injured party to rectify the breach. 6 Damages and Remedies
Nominal Damages Compensatory Damages Punitive Damages Consequential Damages Possible remedies for breach of contract
Injunction Incidental Damages Rescission Specific Performance 7 Damages and Remedies Contract provisions which may limit remedies or damages Limitation of Remedies
Exculpatory Clauses (Limitation of Liability) } Subject to Judicial Review 8 Rescission The aggrieved person also has the option of rescinding
the contract if: (1) the breach has been made concerning a material term and (2) the aggrieved party returns everything to the way it was
before the contract was made. Rescission and recovery of money damages are
mutually exclusive remedies except when the contract relates to the sale of goods, in which case, the aggrieved party may both rescind and obtain money damages.
9 Specific Performance
When an aggrieved party compels the other
party to perform the acts called for by the contract. Specific performance is always obtainable for the breach of a contract to sell land or real estate on the theory that such property has a unique value. Conversely, a court may place an injunction on
the breaching party; this is an order to refrain from doing some act that was prohibited by the broken contract. 10 Reformation
Written contract that does not clearly state the
agreement of the parties. Court will reform or correct the writing to reflect the original intentions of the parties. Assumes parties want to continue to do business. 11 Limits on Remedies and Damages
The aggrieved person has a duty to mitigate
or reduce damages by reasonable means. Liquidated Damages may be limited to a specific amount. Limitation of Liability (Exculpatory) clauses. Private agreement is permissible. Invalid when public interest is involved and
there is willful conduct or gross negligence. 12 ...
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