ES 2 UNDERSTAND CONTRACT LAWObj. 2.02 Understand terminating, transferring, and breaching a contract.

Terminating a contract

A contract is terminated or discharged when it comes to an end.

Terminating a Contract

Contracts can be discharged voluntarily in 2 ways..

Discharge by performance Discharge by agreement Some are discharged involuntarily…… Discharge by impossibility of

performance Discharge by operation of law

Discharge by Performance Complete

All terms have been carried out properly and completely.

Time (time for completing performance) Court will honor time request, if it is deemed “of the

essence.” If not mentioned in contract, then a reasonable time

will be assumed. A reasonable time for selling tomatoes is not the same

as a reasonable time for selling a house.

Satisfactory Law requires that services be completed in a

satisfactory manner. Reasonable person test

Would a reasonable consider the work to done in satisfactory manner?

Substantial Slightly less than full performance

Must meet the following rules: Acted in Good Faith Completed Major Components of Contract Only Minor Details Incomplete.

Discharge by performance

Tender of Performance Tender – Offer to Perform (tender- attempt) Must make tender even if you know the other

party will not perform their part of the contact.

Discharge by performance

Discharge By Agreement

This means that people can end a contract my mutual agreement.

Mutual Release (Rescission) Each side releases the other side from the contract.

Accord and Satisfaction Substitute one contract for another.

Discharge By Impossibility of Performance (Involuntary)

Death or Disability Only allowed in Personal service contracts. Only if

the personal services of that person are required to fulfill that contract.

What is personal service? Photographer Artist

Any other contract must be completed.

Destruction of subject matter ( If the subject matter that is needed to perform the contract is destroyed through no fault of either party, the contract is destroyed) If the subject matter is essential to the contract then it

will be discharged.

Performance becomes illegal Any illegal contract is void.

Discharge By Impossibility of Performance (Involuntary)

Discharge by Operation of Law

Wrongful Alteration Any altering or changing of a contract will discharge

parties to the agreement. Statute of Limitations

Individual states have a time limit on lawsuits to be filed.

What is the only crime/tort that doesn’t have a time limit?

Discharge by Operation of Law

Bankruptcy Debtors can be discharged from contracts after filing

for bankruptcy. These obligations still exist but the debtor can not be imprisoned for failure to pay.

Debts for taxes, alimony, child support, and maintenance are not affected by a general discharge of debts in bankruptcy.

Transferring a Contract

Assignment Delegation Novation

Assignment

Legally transferring your RIGHTS in a contract.(unless the contract says you can not) Assignor – party who transfers the right. Assignee – party to whom the right is transferred.

No consideration needed. Best if put it writting Must not change the obligations in the contract. Must be a RIGHT not a DUTY. Assignor is responsible for contract fulfillment.

Delegation

Transfer a duty. Delegating party is still responsible for the

contract being fulfilled. Contracts that CANNOT be delegated:

Promise to perform service personally. Exercise of personal skill or judgment. Contract prohibiting delegation.

Novation

Replacing a party to a contract with a new one. The other terms to the contract remain the same.

Breaching a Contract

Wrongful failure to perform one or more promises in a contract.

Anticipatory Breach Notified that a party to the contract will not fulfill

their part of the contract prior to the required time of fulfillment.

Lawsuit may be filed early in this case. Exception to the rules: Refusal to pay money owed at a future date.

Remedies for Breach

Acceptance of Breach Accept the breach of contract and discharge the

other party without asking for damages. Rescission and Restitution

Canceling the contract and returning anything that has been received

Money Damages Actual – Damages DIRECTLY related to breach. Compensatory – Award only for injuries suffered nothing more. Consequential – Damages that DO NOT flow directly from breach. Incidental – Reasonable expenses that INDIRECTLY from breach of

contract. Liquidated – Anticipated damages agreed prior to contract being

signed. Nominal – Award to proved legal injury but no actual damages

caused. Punitive – Damages in excess of losses suffered in order to punish

party for breach. Speculative – Damages awarded not on fact but on expectations

from contract fulfillment.

Remedies for Breach

Specific Performance Ask court to order the other party to do what they

agreed to do. Only done when money damages are not sufficient to give relief.

Subject matter must be unique in nature. Which of the following is unique?

Real Estate Stocks of General Electric ’65 Ford Mustang with 44,000 miles A brand new Ford F-150 Dozen Eggs

Remedies for Breach

Injunction

Court order that prevents a party from performing an act.

Temporary or permanent. Any Violators of an injunction are in contempt of

court.