BUSINESSLAW CHAPTER 20 - Business Law

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FEBRUARY 2009 BUSINESS LAW CHAPTER 20 DEBRA BARONE 1. Textor may defend against the district's counterclaim by asserting that the school district waived its right to assess the liquidated damages clause in the contract. The statement by Mr. Hamilton not to be concerned about the liquidated damages clause of $250 per day in the context of the delays attributable to the school district was sufficient evidence to find that the district waived the right to liquidated damages for failure to complete the project on time. Textor had a valid claim to pursue in the courts for payment for the grading work on the softball field. When the school district's attorney reviewed the case, the possibility of an apparently viable counterclaim became evident. It is likely that the validity of contractor's waiver defense was not apparent to the school district until witnesses testified at the trial. Thus, the counterclaim was not frivolous or filed in a retaliation against the contractor for its lawsuit. The counterclaim was not unethical. 2. Yes, she can recover the $5,000. The value of a work of art cannot be determined exactly. Moreover, a work of art cannot be resold immediately when the buyer breaks the contract. A substantial period of time could elapse before the seller could make a resale. If a year would go by, the seller would have lost the use of $100,000 by that delay. At only 5 percent interest, that would mean the seller lost $5,000. In addition, certainty in the calculation of damages was made impossible by the fact that it could not be foreseen whether the painting would appreciate or depreciate between the breach and resale or whether there would be a change in tax law that would benefit or hurt the seller. Because of all these uncertainties, the liquidated damages clause was a reasonable attempt made to determine or fix the damages, and it was therefore valid. 3. Basis for rescission. No. A contract will not be rescinded for a minor breach. The insignificance of the breach was indicated by the amount involved ($863) compared with the amount that could be due under the contract if it ran for its term of 96 years. Additionally, it does not appear that the breach was intentional, as Salisbury offered to pay the underpaid amount as soon as the mistake was discovered. 4. Damages recovered for breach of contract. The owner could recover $1,000 on the basis that much money would have to be spent in order to achieve the same position had there been no breach of contract. The owner is not entitled to recover for mental or emotional pain and suffering.
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Authors' Comment: When money recovered as damages can place the plaintiff in the same position as though the defendant had not committed any breach, it is said that the injuries sustained by the plaintiff are compensable. While mental
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