Transcript PowerPoint Slides to Accompany BUSINESS LAW E-Commerce and Digital Law International Law and Ethics 5th Edition by Henry R.

PowerPoint Slides to Accompany
BUSINESS LAW
E-Commerce and Digital Law
International Law and Ethics
5th Edition
by Henry R. Cheeseman
Chapter 16
Remedies for Breach of
Traditional and Online
Contracts
Slides developed by
Les Wiletzky
Wiletzky and Associates, Puyallup, WA
Copyright © 2004 by Prentice-Hall. All rights reserved.
Performance and Breach

If a contractual duty has not been discharged
or excused, the contracting party owes an
absolute duty (covenant) to perform the duty.

Breach of contract – If a contracting party
fails to perform an absolute duty owed under
a contract.
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16 - 2
Types of Performance
Complete
Performance
Substantial
Performance
Inferior Performance
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16 - 3
Summary: Types of Performance
Type of Performance
Legal Consequence
Complete Performance
The contract is discharged.
Substantial Performance The non-breaching party may recover damages caused by
(minor breach)
the breach.
Inferior Performance
(material breach)
The non-breaching party may either:
(1) Rescind the contract and recover restitution, or
(2) Affirm the contract and recover damages.
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Anticipatory Breach

A breach that occurs when one contracting
party informs the other that he or she will not
perform his or her contractual duties when
due.
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Monetary Damages

A non-breaching party may recover
monetary damages from a breaching party.

Monetary damages are available whether the
breach was minor or material.
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16 - 6
Types of Monetary Damages
Compensatory
Damages
Nominal
Damages
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Consequential
Damages
Liquidated
Damages
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Compensatory Damages
Award of money intended to compensate a
non-breaching party for the loss of the
bargain.
 They place the non-breaching party in the
same position as if the contract had been
fully performed by restoring the “benefit of
the bargain.”

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Compensatory Damages (continued)

The amount of that will be awarded for
breach of contract depends on:
The type of contract involved, and
 Which party breached the contract.


Special types of contracts:
Sale of Goods
 Construction Contracts
 Employment contracts

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16 - 9
Consequential Damages
Foreseeable damages that arise from
circumstances outside the contract.
 To be liable for these damages,


The breaching party must know or have
reason to know that the breach will cause
special damages to the other party.
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Liquidated Damages
Damages to which parties to a contract
agree in advance if the contract is breached.
 To be lawful,

The actual damages must be difficult or
impracticable to determine, and
 The liquidated amount must be reasonable in
the circumstances.

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16 - 11
Liquidated Damages (continued)

Many businesses include liquidated
damages in their commercial contracts,
which help to:
Provide certainty,
 Avoid lawsuits, and
 Provide an incentive to enter into contracts.

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16 - 12
Nominal Damages
Damages awarded when the non-breaching
party sues the breaching party even though
no financial loss has resulted from the
breach.
 Usually awarded in a small amount such as
$1.
 Cases involving nominal damages are
usually brought on “principle.”

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16 - 13
Mitigation of Damages

A non-breaching party is under a legal duty
to avoid or reduce damages caused by a
breach of contract.

The extent of mitigation depends on the type
contract involved.
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Enforcement of Remedies

If the breaching party refuses to pay the
court ordered judgment, the court may issue:

Writ of Attachment

Writ of Garnishment
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Enforcement of Remedies (continued)

Writ of Attachment
Orders the sheriff to


Seize property in the
possession of the
breaching party that
he or she owns, and
To sell the property at
auction to satisfy the
judgment.

Writ of Garnishment
Orders that

Wages, bank
accounts, or other
property of the
breaching party that is
in the hands of third
parties be paid over to
the non-breaching
party to satisfy the
judgment.
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16 - 16
Rescission and Restitution
Rescission
 An action to undo the
contract.
 Available if there has
been:




A material breach of
contract
Fraud
Undue influence
Mistake
Restitution
 Returning of goods or
property received from
the other party to
rescind a contract.
 If the actual goods or
property is not
available, a cash
equivalent must be
made.
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16 - 17
Equitable Remedies

Equitable remedies are available if there has
been a breach of contract that cannot be
adequately compensated by a legal remedy.

They are also available to prevent unjust
enrichment.
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Types of Equitable Remedies (1 of 2)
Type of Equitable Remedy Description
Specific Performance
Court orders the breaching party to perform the
acts promised in the contract.
The subject matter of the contract must be
unique.
Reformation
Court rewrites a contract to express the parties’
true intentions.
Usually used to correct clerical errors.
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16 - 19
Types of Equitable Remedies (2 of 2)
Type of Equitable Remedy Description
Quasi Contract
Permits the recovery of damages for breach of an
implied-in-law contract where no actual contract
exists between the parties.
Only the reasonable value of the services or
materials may be recovered.
Injunction
Court order that prohibits a party from doing a
certain act.
Available in contract actions only in limited
circumstances.
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16 - 20
Torts Associated With Contracts

Intentional Interference with Contractual
Relations

Breach of the Implied Covenant of Good
Faith and Fair Dealing
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Intentional Interference with Contractual
Relations
A tort that arises when a third party induces a
contracting party to breach the contract with
another party.
 The following elements must be shown:

A valid, enforceable contract between the contracting
parties.
 Third-party knowledge of this contract.
 Third-party inducement to breach the contract.

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Breach of the Implied Covenant of Good
Faith and Fair Dealing

Under this covenant:
The parties to a contract are held to the
express terms of the contract, and
 They are also required to act in good faith
and deal fairly in all respects in obtaining the
contract.


A breach of this implied covenant is a tort for
which tort damages are recoverable.
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Punitive Damages

Damages that are awarded to:
Punish the defendant
 Deter the defendant from similar conduct in
the future
 Set an example for others


Generally, punitive damages are not
recoverable for breach of contract.
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