Ch. 6 How Contracts Come to an End

6-1 Transferring and Ending Contracts

Ending a Contract

1. By Performance (most common) 2. By Agreement (mutual agreement)

Ending by Performance

• If all terms of the contract are met the contract is discharged (ended).

• Different Types: • Time for Performance • Satisfactory Performance • Tender of Payment

Discharge by Performance Types

• Time for Performance • done within the stated time • if not mentioned done within a reasonable time.

Discharge by Performance Types

Satisfactory Performance • Job has to be done to both parties satisfaction.

• If taken to court, court will use reasonable person test.

• If job(duties) are not completely done, you usually can’t win money owed.

• Exception: Substantial Performance (complete major requirements but left minor details unfinished.

• Court’s decision - award money owed minus the cost of completing the work.

Example

Imagine the Green Landscaping Co. was contracted to lay sod and install shrubbery for a golf course. The contract stipulates completion of the job before the next pro tournament. The landscaper completes 95% of the shrubbery by the tournament date. Can the golf course withhold payment for the job?

Discharge by Performance Types

• Tender of Performance - fulfill the terms of a contract by an act or paying money • Tender - an offer to do what you have agreed to do under a contract regardless of whether or not the other party plans on doing their part.

• If there is no tender, there is no contract

Involuntary Discharge

• Ending a contract involuntarily despite what the parties intend to do.

• 2 ways: 1. Impossibility of Performance 2. Operation of Law

Impossibility of Performance

• Contracts that become legally impossible to perform.

• Allowed in cases of death, illness (if a personal service) • Destruction of the Exact Subject Matter.

Operation of Law

• Keeping the interests of society in mind • Wrongful Alteration to the contract • Statute of Limitations

Examples

• Will hires Travis to repair a leak in his upstairs bathroom. Travis agrees but discovers that it cannot be fixed without hours of work that he had not anticipated and says that the contract must be discharged due to impossibility of performance. • Do you think Travis will be held to complete the job?

Breach of Contract

• If a party does not fulfill their part of the contract.

• Injured party can file a lawsuit to recover damages.

Transfer of Rights/Duties

• Transferring (moving) your rights/duties to another person. ACCEPTABLE!

• Assignment - transfer of rights someone else gets the benefit.

• Delegation - transfer of duties someone else gets the detriment.

• Read examples on page 137 and 138.

Times you can’t delegate

1. If you agree to do the service personally 2. If the contract calls for the exercise of personal skill and judgment.

3. If the contract itself prohibits delegation.

Assignment

Complete Section 6-1 Assessment 1) #1-3 under Self Check 2) Academic Connection Mathematics 3) Critical Thinking

Section 6-2

Voidable Contracts and Remedies

Recall

What are the 6 steps that make contracts valid?

Offer Acceptance Agreement Consideration Capacity Legality ?If all these seem like they are present then what could make a contract not go through?

Defective Agreements

1. Fraud 2. Innocent Misrepresentation 3. Mistake 4. Duress 5. Undue Influence

Fraud

Deliberately lying To win, 5 things must be present: 1. Must be a false representation of fact 2. The person who lied knew it was a lie 3. The lie must be made with the intent that it will be relied upon.

4. The innocent party must reasonably rely on the lie 5. The innocent party must experience a loss

Innocent Misrepresentation

The person says something they believe to be true and it turns out to be false.

Mistakes

Unilateral Mistake Error on part of one of the parties.

Usually you can’t get out of a contract because of a mistake Mistakes as to the nature of the agreement Mistakes as to the value Bilateral Mistake Error made by both parties Read the 2 paragraphs on page 144 for further explanation.

Duress

Using force or threat of force or bodily harm to make someone enter into a contract.

Physical Duress actual physical force is used - contract is void Threat of physical force is used - contract is voidable Economic Duress An act that threatens your income or business which causes you to enter into a contract without real consent.

Undue Influence

One person taking advantage of their position of power over another person The contract favors the person with all the power.

Remedies

Remedy - legal means of enforcing a right or correcting a wrong.

3 Options: 1. Accept the Breach 2. Sue for Money Damages 3. Ask court for Equitable Remedy

Money Damages

Payment is recovered in court.

Punitive Damages - an extra amount of money paid in excess of what was owed (punishment)

Equitable Remedy

When recovered money is not enough to repay the breach.

2 types: Specific Performance - the court orders the party to complete what they agreed to in the contract.

Injunction - court order that prevents a party from performing a certain act. (restraining orders)

Assignment

Complete Section 6-2 Assessment 1) #1-3 under Self Check 2) Academic Connection Mathematics 3) Critical Thinking

HOMEWORK

Page 149 - Key Points Review Page 150 - Apply and Debate