Unformatted text preview: Week Three - addendum
Chapter 4 – Breach of Contract and the
*When one party to a contract fails to perform their contractual obligation, that is a breach of contract.
*A breach of contract can either be material or nonmaterial.
*A material breach is one that goes to the heart of the agreement.
*Example: Three months of not paying the rent for a lease.
*A material breach by one party to a contract may allow the nonbreaching party to treat the contract as terminated and act accordingly.
*The nonbreaching party can also recover damages.
*A nonmaterial breach is less serious.
*Example: A few days late on a lease payment, but it is still paid in full.
*A nonmaterial breach may only allow the nonbreaching party to recover damages, but the contract will stay in effect.
*Breach of contract damages are generally compensatory.
*Awards of punitive damages are rare.
*To recover compensatory damages, plaintiff must:
*Prove the damages with reasonable certainty; and
*Prove that they were foreseeable (knew or should have known they would occur) to a reasonable defendant.
*Compensatory damages in a breach of contract action usually include actual financial losses, such as:
*A difference in a contract price that must be paid due to the breach; *Loss of a business deal; *Loss of profits; or
*Loss of good will, including loss of future profits or customers.
*Compensatory damages in a breach of contract action usually do not include:
*Physical pain and suffering.
*Exception: Pain and suffering may be recoverable in a “breach of warranty” lawsuit, which is a kind of breach of contract – discussed later in Week Nine. *Plaintiff has a duty to Mitigate their damages.
*Plaintiff must attempt to reduce their damages, if reasonably possible.
*Example: If the breach was a vendor’s failure to deliver meat for a restaurant, the restaurant/plaintiff can’t close, and sue for the loss of business. The restaurant could, and should, have bought the meat from another vendor, so the only damage would have been the difference in the cost of obtaining the meat due to the breach.
*If mitigation is not reasonably possible, the plaintiff might not have to attempt it.
*If a guest reserves a room at a hotel and cancels 3 months in advance, the hotel would not be entitled to the rental payment unless they first try to rerent the room.
*If a guest cancels their reservation less than 24 hours before checkin, it might not be reasonable to force the hotel to find a replacement for the guest – the hotel would get the full price of the room rental. *If compensatory damages do not make the plaintiff whole, plaintiff can also seek an equitable remedy – something other than money damages.
*An injunction can be used to force the defendant to stop their ongoing conduct that violates plaintiff’s rights.
*Injunctions can be awarded in a tort or breach of contract case.
* Specific performance forces the defendant to fulfill their contractual obligation.
*Specific performance is only available where there is a breach of contract by a seller of unique goods or land.
*If plaintiff can’t get the goods elsewhere, only defendant’s goods will make plaintiff whole.
*Every piece of land is unique and other land will not serve as a replacement.
*Specific performance cannot be used against a provider of unique personal services as it would be against public policy to force someone to work against their will (involuntary servitude) – even a breaching defendant.
Breaches of Contract in the Hospitality
*A contract for a hotel room can be formed when an advance reservation is made by a guest and accepted by the hotel.
*If the hotel overbooks and a room is not available for the guest, then the hotel has breached the contract.
*Potential damages include: the cost of finding another or even the cost of the whole trip (airfare, meals, etc.), if there are no other rooms.
*Many hotels avoid the problem by “walking” the guest to another comparable hotel so the guest to another comparable hotel so
that there will be no damages and, therefore, no liability.
*Loss of good will can also be an issue for a breach due to overbooking, assuming the loss is provable and foreseeable.
*A guest can breach by not showing up for a reservation.
*The hotel already has the guest’s credit card information and can easily charge them for the room.
*The real issue is whether the hotel has the right to charge for the room, or must they try to mitigate their damages first by attempting to rerent the room.
Intentional Interference with Contractual
*This a an intentional tort and not a breach of contract lawsuit.
*The elements of proof for this action are:
*A valid contract exists between two parties;
*A third party, the defendant, is aware of the contract; and
*The third party commits some intentional act to induce one of the contracting parties to breach.
*The defendant usually acted to obtain some commercial gain, i.e. they are in competition with the contracting party that is harmed by the breach – the plaintiff.
*The defendant’s action must be something more than simply advertising in competition with the plaintiff.
*After the breach, the plaintiff can sue the breaching party for breach of contract and the third party for the intentional tort.
*Catering and convention contracts.
*Every bit as important as any other hospitality contract.
*So important, in fact, that no one should base their contract on the terms or language contained in a college textbook.
*A business’s contracts must be specifically drafted to meet the needs of that business.
*Contract forms can be obtained form a trade organization, someone else experienced in a particular kind of business, or hire an attorney with specialized knowledge in the hospitality industry. ...
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- Fall '11
- Law, three months, attorney, 3 months, 24 hours