Contract 2

• Discharge or Termination of Contract


  The usual and normal method by which parties discharge their contractual obligations is through performance of the contractual terms
• Discharge or Termination of Contract

  When unexpected events arise, outside the control of the contracting parties, make a contract 'impossible' or 'impracticable' to be performed, they entitle the frustrated party to rescind the contract without paying damages
• Types of impossibility of performance that discharge the duty of performance under a contract

  • Subjective impossibility
  • Objective impossibility
• Subjective impossibility


  Due to the inability of the individual promisor to perform, such as by illness or death
• Objective impossibility


  The performance cannot be rendered by anyone. The destruction of the subject matter of the contract, the frustration of its purpose, or supervening impossibility after the contract is formed are types of objective impossibility
• Doctrine of impracticability


  Excuses performance of a duty, where that duty has become unfeasibly difficult or expensive for the party who was to perform
• Doctrine of impracticability


  • Something unexpected must have occurred
  • The risk of the occurrence must not be assigned by the contract or by custom
  • The unexpected occurrence must have rendered performance commercially impracticable
• Hardship clause


  A clause in a contract that is intended to cover cases in which unforeseen events occur that fundamentally alter the equilibrium of a contract resulting in an excessive burden being placed on one of the parties involved
• Hardship clause


  Recognizes that parties must perform their contractual obligations, even if events have rendered performance more onerous than would reasonably have been anticipated at the time of the conclusion of the contract
• Hardship clause


  Where continued performance has become excessively burdensome, due to an event beyond a party's reasonable control, that it could not reasonably have been expected to have taken into account, the clause can obligate the parties to negotiate alternative contractual terms which reasonably allow for the consequences of the event
• Hardship clause


  Sometimes used in relation to force majeure, as they share similar features and cater to situations of changed circumstances
• Difference between hardship and force majeure

  Hardship is where the performance of the disadvantaged party has become much more burdensome, but not impossible, while force majeure refers to a party's contractual requirements that have become impossible, at least temporarily
• Hardship


  Constitutes a reason for a change in the contractual program of the parties. The aim of the parties remains to implement the contract
• Force majeure


  Situated in the context of non-performance, and deals with the suspension or termination of the contract
• Breach of Contract


  An unjustifiable failure to perform all or some part of a contractual duty
• Types of breach of contract

  • Total, major, material, or substantial breach
  • Partial or minor breach
• Total, major, material, or substantial breach of contract


  A failure to perform properly a material part of the contract
• Partial or minor breach of contract

  Merely a slight deviation from the bargained-for performance
• Anticipatory repudiation


  The promisor, without justification and before committing a breach, makes an affirmative statement to the promisee indicating that he or she will not or cannot perform the contractual duties
• Damages


  A sum of money awarded by the court as a monetary compensation remedy for an injury caused by a breach of contract
• Measure of damages


  The amount necessary to recompense the injured party for the losses incurred
• Injured party


  Should be placed in the exact same financial position he or she would have occupied if the contract had been performed, that is to receive the "benefit of the bargain", the net gain that would have accrued under the contract
• The injured party is not to be put in a better position than he or she would have occupied had performance taken place
• Compensatory damages


  Damages that flow directly from the wrongful conduct of the breaching party
• Usual measure of compensatory damages

  The amount of money necessary to compensate the non-breaching party for the breach
• The plaintiff must be able to prove the amount of damages with reasonable certainty
• Categories of compensatory damages

  • General damages
  • Special damages
• General damages


  Arise naturally and logically from a defendant's conduct or breach of contract. They are the immediate, direct, and proximate result of an injury or breach of contract. They must be established with reasonable certainty. They only have to be merely proven at trial
• Special damages


  Foreseeable damages that result from a party's breach. They are limited to those losses which were foreseeable, that is in contemplation by the parties at the time the contract was entered into. They are recoverable when special circumstances exist which cause some unusual injury to the plaintiff. The plaintiff can only recover special damages if the defendant knew or should have known of the special circumstances at the time he or she entered into the contract
• Nominal damages


  Awarded when a plaintiff has suffered an injury caused by defendant's wrongful conduct, but the plaintiff is unable to establish proof of a compensable loss. This is typically a very small sum such as a dollar or a pound, and is meant to be symbolic
• Punitive damages


  Non-compensatory and are used to punish a defendant who has acted in a willful, malicious, abusive or other outrageous manner. Punitive damages are also known as exemplary damages because they make an example of the defendant in order to deter others. Punitive damages are never mandatory and are only awarded in addition to an award for compensatory damages. Punitive damages are rarely permitted in breach of contract cases
• Liquidated damages clause


  A contract provision by which the parties agree in advance to the damages to be paid in the event of breach. The purpose is to ensure that a reasonable estimate of probable damages is available in case of breach
• Elements of a valid liquidated damages clause

  • The clause must reasonably forecast the probable loss due to breach
  • The loss anticipated by the breach is difficult to calculate
  • The clause must not be intended as a penalty
• When the parties have included a liquidated damage clause in a contract, it will generally be enforced. Additional damages usually cannot be claimed
• Duty to mitigate damages


  The injured party is required to take reasonable steps to mitigate (reduce or lessen) the damages that he or she may sustain. The injured party may not recover damages for loss that could have been avoided
• What the non-breaching party must do to mitigate damages


  • Refrain from increasing the amount of losses after notice of breach
  • Not incur further costs or expenditures
  • Make reasonable efforts to reduce his or her losses by obtaining a substitute at a reasonable price
• Partial performance


  When the defendant has failed to complete performance of an agreement according to its terms, the plaintiff can recover such damages as will compensate him or her to the same extent had the contract been completely performed. The customary measure of damages is the reasonable expense of completion
• Defective performance


  Damages are measured by calculating the difference in value between what is actually tendered and what is required as performance under the agreement. If the performance tendered is either of no value or unsuitable for the purpose that the contract contemplated, the proper measure of damages is the sum necessary to repair the defect
• Delay in performance


  The loss precipitated by the wrongful delay of the performance of a contract is calculated by fixing the rental or use of the property or interest as a result of the loss incurred through increased material and labor expenses, as opposed to what the value would have been, had the contract been performed on time
• Reformation


  An equitable remedy that is applied when the written agreement does not correspond to the contract actually formed by the parties, as a result of fraud or mutual mistake in drafting the original document