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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Types of Performance
Complete Performance
Substantial Performance
Inferior Performance
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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 The non-breaching party may either:
(material breach) (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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Types of Monetary Damages
Compensatory Consequential
Damages Damages
Nominal 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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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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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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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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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
Writ of Attachment
Attachment Writ
Writ of
of Garnishment
Garnishment
Orders the sheriff to Orders
Orders the sheriff to
Orders that
that
Seize property
Seize property in
in the
the Wages, bank
Wages, bank
possession of
possession of the
the accounts,
accounts, or or other
other
breaching party
breaching party that
that property
property of of the
the
he or
he or she
she owns,
owns, andand breaching
breaching party
party that
that isis
To sell
To sell the
the property
property atat in
in the
the hands
hands of of third
third
auction to
auction to satisfy
satisfy the
the parties
parties bebe paid
paid over
over toto
judgment.
judgment. the
the non-breaching
non-breaching
party
party toto satisfy
satisfy the
the
judgment.
judgment.
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Rescission and Restitution
Rescission
Rescission Restitution
Restitution
An action to undo the Returning
An action to undo the
Returning of of goods
goods oror
contract.
contract. property
property received
received from
from
Available if there has
Available if there has the
the other
other party
party to
to
been:
been: rescind
rescind aa contract.
contract.
A material
A material breach
breach of
of If
If the
the actual
actual goods
goods or or
contract
contract property
property is is not
not
Fraud
Fraud available,
available, aa cash
cash
Undue influence
Undue influence equivalent
equivalent mustmust bebe
made.
made.
Mistake
Mistake
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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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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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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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