Methods to Methods to Terminate a ContractTerminate a Contract

Discharge by PerformanceDischarge by Performance

Contract Completion Contract Completion – All terms of the contract have been carried out All terms of the contract have been carried out

properly and completely.properly and completely.

TimeTime– The terms of the contract are discharged if the The terms of the contract are discharged if the

contract is not complete within a reasonable amount contract is not complete within a reasonable amount of time.of time.

– Court will honor time request, if it is deemed “of the Court will honor time request, if it is deemed “of the essence.” essence.”

– If not mentioned in contract, then a reasonable time If not mentioned in contract, then a reasonable time will be assumed.will be assumed.

Satisfactory CompletionSatisfactory Completion– Law requires that services be completed in a Law requires that services be completed in a

satisfactory manner.satisfactory manner.– Reasonable person testReasonable person test

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

Substantial CompletionSubstantial Completion– Slightly less than full performanceSlightly less than full performance

Must meet the following rules:Must meet the following rules:– Acted in Good FaithActed in Good Faith

– Completed Major Components of ContractCompleted Major Components of Contract

– Only Minor Details Incomplete.Only Minor Details Incomplete.

Discharge by PerformanceDischarge by Performance

Tender of PerformanceTender of Performance– Tender: Offer to PerformTender: Offer to Perform– Must make tender even if you know the Must make tender even if you know the

other party will not perform their part of the other party will not perform their part of the contact.contact.

Discharge by PerformanceDischarge by Performance

Discharge By AgreementDischarge By Agreement

Mutual ReleaseMutual Release– Each side releases the other side from the contract.Each side releases the other side from the contract.– Example: Jack and Jill both agree to end their Example: Jack and Jill both agree to end their

agreement.agreement.

Accord and SatisfactionAccord and Satisfaction– Substitute one contract for another.Substitute one contract for another.– Example: Agreeing to settle a dispute for a lesser Example: Agreeing to settle a dispute for a lesser

amount that the original contract suggests.amount that the original contract suggests.

Discharge By Discharge By Impossibility of PerformanceImpossibility of Performance

Death or Illness in a Personal Service Death or Illness in a Personal Service ContractContract– Only allowed in Only allowed in PersonalPersonal service contracts. service contracts.– What is personal service?What is personal service?

PhotographerPhotographerArtistArtist

– Any other contract must be completed.Any other contract must be completed.

Example: Picasso dies before completed a Example: Picasso dies before completed a portrait of Galeo.portrait of Galeo.

Destruction of the Exact Subject MatterDestruction of the Exact Subject Matter– If the subject matter is essential to the If the subject matter is essential to the

contract then it will be discharged.contract then it will be discharged.– Example: Gina drops the birthday cake as Example: Gina drops the birthday cake as

she walks it out to her customer.she walks it out to her customer.

IllegalityIllegality– Any illegal contract is void.Any illegal contract is void.– Example: Gambling debtsExample: Gambling debts

Discharge By Discharge By Impossibility of PerformanceImpossibility of Performance

Discharge by Operation of LawDischarge by Operation of Law

Wrongful AlterationWrongful Alteration– Any altering or changing of a contract will discharge Any altering or changing of a contract will discharge

parties to the agreement.parties to the agreement.– Example: Changing the terms of an agreement Example: Changing the terms of an agreement

without getting prior approval from all parties.without getting prior approval from all parties.

Statute of LimitationsStatute of Limitations– Individual states have a time limit on lawsuits to be Individual states have a time limit on lawsuits to be

filed.filed.– What is the only crime/tort that doesn’t have a time What is the only crime/tort that doesn’t have a time

limit?limit? Murder

Bankruptcy Bankruptcy – Debtors can be discharged from contracts Debtors can be discharged from contracts

after filing for bankruptcy.after filing for bankruptcy.– Example: After filing for bankruptcy, Example: After filing for bankruptcy,

Pedro no longer had to pay his car loan.Pedro no longer had to pay his car loan.

Discharge by Operation of LawDischarge by Operation of Law

Transferring or Transferring or Breaching Contracts Breaching Contracts

and Remediesand Remedies

AssignmentAssignment

Legally transferring your RIGHTS in a contract.Legally transferring your RIGHTS in a contract.– Assignor: party who transfers the right.Assignor: party who transfers the right.– Assignee: party to whom the right is transferred.Assignee: party to whom the right is transferred.

No consideration is needed to assign someone No consideration is needed to assign someone the rights to a contract.the rights to a contract.

Must not change the obligations in the contract.Must not change the obligations in the contract.

Must be a RIGHT not a DUTY.Must be a RIGHT not a DUTY.

Assignor is responsible for contract fulfillment.Assignor is responsible for contract fulfillment.

DelegationDelegation

Transfer a duty.Transfer a duty.

Delegating party is still responsible for Delegating party is still responsible for the contract being fulfilled.the contract being fulfilled.

Contracts that Contracts that CANNOTCANNOT be delegated: be delegated:– Promise to perform service personally.Promise to perform service personally.– Exercise of personal skill or judgment.Exercise of personal skill or judgment.– Contract prohibiting delegation.Contract prohibiting delegation.

NovationNovation

Replacing a party to a contract Replacing a party to a contract with a new one.with a new one.

The other terms to the contract The other terms to the contract remain the same.remain the same.

Third PartiesThird Parties

Privity of ContractPrivity of Contract– Determines who can sue who over a breach Determines who can sue who over a breach

of contract.of contract.

Third-Party BeneficiaryThird-Party Beneficiary– A person who is not a party to a contract but A person who is not a party to a contract but

benefits from it.benefits from it.– Has the right to sue over breach of contract.Has the right to sue over breach of contract.

Breach of ContractBreach of Contract

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

Anticipatory BreachAnticipatory Breach– Notified that a party to the contract will not Notified that a party to the contract will not

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

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

Contract Remedies & DamagesContract Remedies & Damages

Acceptance of BreachAcceptance of Breach– Accept the breach of contract and discharge Accept the breach of contract and discharge

the other party without asking for damages.the other party without asking for damages.Why willingly accept a breach of contract?Why willingly accept a breach of contract?

– Must show damages in order to win monetary damages.Must show damages in order to win monetary damages.– Not worth the party’s time to file lawsuit.Not worth the party’s time to file lawsuit.

Actual:Actual: Damages Damages DIRECTLY DIRECTLY related to breach.related to breach.

Incidental:Incidental: Reasonable expenses that Reasonable expenses that INDIRECTLYINDIRECTLY from breach of contract. from breach of contract.

Compensatory:Compensatory: Award only for injuries suffered Award only for injuries suffered nothing more.nothing more.

Consequential:Consequential: Damages that Damages that DO NOTDO NOT flow flow directly from breach.directly from breach.

Money DamagesMoney Damages

Money DamagesMoney Damages

Speculative:Speculative: Damages awarded not on fact but Damages awarded not on fact but on expectations from contract fulfillment.on expectations from contract fulfillment.

Liquidated:Liquidated: Anticipated damages agreed prior Anticipated damages agreed prior to contract being signed.to contract being signed.

Nominal:Nominal: Award to proved legal injury but no Award to proved legal injury but no actual damages caused.actual damages caused.

Punitive:Punitive: Damages in excess of losses suffered Damages in excess of losses suffered in order to punish party for breach.in order to punish party for breach.

Ask court to order the other party to do what Ask court to order the other party to do what they agreed to do.they agreed to do.– Subject matter must be unique in nature.Subject matter must be unique in nature.– Which of the following is unique?Which of the following is unique?

Real EstateReal Estate

Stocks of General ElectricStocks of General Electric

’’65 Ford Mustang with 44,000 miles65 Ford Mustang with 44,000 miles

A brand new Ford F-150A brand new Ford F-150

Dozen EggsDozen Eggs

Answers: Real Estate and Mustang are unique.

Specific DamagesSpecific Damages

InjunctionInjunction

Court order that prevents a party from Court order that prevents a party from performing an act.performing an act.

Temporary or Permanent.Temporary or Permanent.

Violators are in contempt of court.Violators are in contempt of court.

Minimizing DamagesMinimizing Damages

Injured party must try to reduce the damages by Injured party must try to reduce the damages by all means possible (mitigation of damages).all means possible (mitigation of damages).

What could you do to mitigate damages if a What could you do to mitigate damages if a tenant breaks the lease and moves out early?tenant breaks the lease and moves out early?

Possible answers:Advertise for rent sign in yard, put sign up at local university,and place an advertisement in the local newspaper.

The EndThe End