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********Study Guide/Outline 2017 Part Two

 
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PostPosted: Sat Aug 20, 2016 4:08 pm    Post subject: ********Study Guide/Outline 2017 Part Two Reply with quote

EDUCATIONAL LOAN AGREEMENTS, are never subject to being disaffirmed.

PARENTS' LIABILITY FOR THEIR CHILDREN'S CONTRACTS

Generally, parents owe legal duty to provide food, clothing, shelter, and other necessaries of life. They are liable for their childr

MENTALLY INCOMPETENT PERSONS

Two situations:

1. Person adjudicated incompetent (insane) by proper court/administrative agency. Any Contract they enter into is considered VOID. They lack standing to enter into a contract and they have a guardian appointed by the Court who acts on their behalf.

INCOMPETENT/INSANE, BUT NOT ADJUDGED INSANE:

Contracts entered into by such persons are voidable by the insane person.

However, if such person has some alternating periods of sanity and insanity. Contracts during lucid interval = enforceable. If the contract is made while not legally sane can be disaffirmed.

One who deals with such an insane/incompetent person must place that insane person in status quo if the contract either void/voided by the insane person.

Insane persons are liable in quasi-contract to pay the reasonable value for necessaries of life they receive.

INTOXICATED PERSONS

By: Alcohol or drugs. Contracts entered into are voidable by that person. Not voidable by other party if had contractual capacity.

Amount of alcohol or drugs necessary to be consumed by a person to be considered legally intoxicated to disaffirm contracts varies from case to case.

Person who disaffirms generally must be returned to the status quo. In turn, the intoxicated person generally must return the consideration received and make restitution that returns the other party to status quo. After becoming sober: can ratify the contracts he or she entered into while intoxicated.

Intoxicated persons are liable in quasi-contract to pay the reasonable value for necessaries they receive.


ILLEGALITY�CONTRACTS CONTRARY TO STATUTES


STATUTES

Federal and state

Prohibit certain types of conduct. E.G.: penal codes make certain activities crimes.

Contracts to perform activity prohibited by statute are illegal contracts.

USURY LAW

Upper limit on interest rate charged on certain types of loans. Lenders who charge a higher rate guilty of usury. Ca.: Other states prohibit lenders from collecting any interest on such loans. Usury laws exempt certain types of lenders and loan transactions involving legitimate business transactions from the reach of the law. Often, these exemptions include loans made by banks and other financial institutions.

Ca.: If usurious amount charged: Only requirement is to pay back principal.

GAMBLING STATUTES

REGULATORY STATUTES: TWO PURPOSES:

1. REVENUE-RAISING STATUTE
2. PROTECTION OF THE PUBLIC Initially: Exam Continuing: Continuing Education

Primary purpose of raising revenue for the government.
The modern trend is that if this is the only characteristic of the statute it can�t be enforced because the statute merely gathers revenue AND protection of the public is not a factor.


ILLEGALITY�CONTRACTS CONTRARY TO PUBLIC POLICY

Negative impact on society or interfere with the public's safety and welfare. CONTRACTS ARE: VOID.

Public policy eludes a precise definition, the courts have held contracts to be contrary to public policy if they have a negative impact on society or interfere with the public's safety and welfare.

IMMORAL CONTRACTS

Objective is commission of an act that is considered immoral by society, may be found to be against public policy. E.G.: Contract that is based on sexual favors.
Prostitute suing for her fee.

Judges: not free to define morality based on individual views. Must look to the practices and beliefs of the community standard when defining immoral conduct.

ILLEGALITY�CONTRACTS CONTRARY TO PUBLIC POLICY

Negative impact on society or interfere with the public's safety and welfare. CONTRACTS ARE: VOID.

Public policy eludes a precise definition, the courts have held contracts to be contrary to public policy if they have a negative impact on society or interfere with the public's safety and welfare.

IMMORAL CONTRACTS

Objective is commission of an act that is considered immoral by society, may be found to be against public policy. E.G.: Contract that is based on sexual favors.
Prostitute suing for her fee.

Judges: not free to define morality based on individual views. Must look to the practices and beliefs of the community standard when defining immoral conduct.


CONTRACTS IN RESTRAINT OF TRADE

Trade secrets.

COVENANTS NOT TO COMPETE

Sale of a business often includes its "goodwill" or reputation. To protect buyer after the sale. Seller cannot engage in a similar business or occupation within a specified geographical area for a specified period of time following the sale.

These contracts are considered lawful IF they are reasonable in three aspects:

The line of business protected;

The geographical area protected; and

The duration of the restriction.

Reasonableness is examined on case-by-case basis. Courts usually refuse to enforce it if it is unreasonable.

EXCULPATORY CLAUSES

Relieves one (or both) parties to the contract from tort liability. A potential defendant can be relieved for ordinary negligence. They cannot be used in situations involving willful conduct, intentional torts, fraud, recklessness, or gross negligence. Generally Courts do not favor exculpatory clauses unless both parties have equal bargaining power.
Courts, however, are willing to permit competent parties of equal bargaining power to establish which of them bears the risk.

CAPACITY AND LEGALITY OF EXCULPATORY CLAUSES

If the clause affects public interest or results from a superior bargaining power the clause is usually found to be void as against public policy. The reasonable person standard is, once again, applied.


EFFECT OF ILLEGALITY IN A CONTRACT

Illegal contracts are void therefore parties cannot sue for nonperformance. Further, if an illegal contract is executed, the court will generally leave the parties where it finds them.


UNCONSCIONABLE CONTRACTS/CONTRACT OF ADHESION

The general rule of freedom of contract: holds if (1) the object of a contract is lawful and (2) the other elements for the formation of a contract are met, the courts will then enforce a contract according to its terms. It is generally presumed that parties capable of protecting their own interests when contracting, it is a fact of life that dominant parties sometimes take advantage of weaker parties. Therefore some lawful contracts are so oppressive or manifestly unfair that they are unjust. TO PREVENT the enforcement of such unconscionable contracts, the courts developed the equitable doctrine of unconscionability, which is based on public policy.

Unconscionability is extremely subjective. Just because the result seems unfair does not mean that it is unconscionable.

Courts given substantial discretion in determining. No single definition. May not be used merely to save a contracting party from a bad bargain.

ELEMENTS OF AN UNCONSCIONABLE CONTRACT; MUST BE SHOWN:

1. Severely unequal bargaining power.
2. The Dominant party unreasonably used its unequal bargaining power to obtain oppressive or manifestly unfair contract terms.
3. The Adhering party had no reasonable alternative.

THE REMEDIES FOR UNCONSCIONABILITY

The Court May

a. Refuse to enforce the contract; or
b. Refuse to enforce the unconscionable clause but enforce the remainder



DEFENSES TO THE ENFORCEMENT OF CONTRACTS

Circumstances do exist where even if all required elements of a contract are present the contract may not be enforced even if all of the required legal elements of a legal contract are met certain defenses exist which will make contract non-enforceable.

DEFENSES

ASSENT OF ONE/BOTH OF PARTIES WAS NOT GENUINE OR REAL.

Genuine assent may be missing because a party entered into a contract based on mistake, fraudulent misrepresentation, duress, or undue influence.

MISTAKE: EITHER UNILATERAL OR MUTUAL.

One or both of parties have erroneous belief about the subject matter, value, or some other aspect of the contract.

Law permits rescission of some contracts made in mistake.

UNILATERAL MISTAKES

Only one party is mistaken about a material fact re: the subject matter of the contract.

Usually NOT a defense unless:

a. Mistake in spelling of a name.

b. mathematical computation error.

MUTUAL MISTAKE OF AN EXISTING MATERIAL FACT

Either party may rescind.

MATERIAL FACT Important to the subject matter of the contract.

Ambiguity may constitute a mutual mistake of a material fact. Occurs where a word/term is susceptible to more than one logical interpretation. If mutual mistake, the contract may be rescinded on the ground that no contract formed because NO "meeting of the minds"

THE �GOOD SHIP PEERLESS� case.
**************
COURTS MUST DISTINGUISH BETWEEN MUTUAL MISTAKES OF FACT AND MUTUAL MISTAKES OF VALUE.

FRAUDULENT MISREPRESENTATION

DEFINITION: Assertion not in accord with the facts.

INTENTIONAL MISREPRESENTATION

DEFINITION: Person consciously decides to induce another to rely and act on a misrepresentation, commonly referred to as fraudulent misrepresentation, or fraud.

Innocent party's assent not genuine and contract is voidable by innocent.

Innocent either rescind and obtain restitution or enforce and sue for contract damages.


ELEMENTS OF FRAUD

TO PROVE MUST SHOW:

MATERIAL MISREPRESENTATION OF FACT.

Can occur by words (oral or written) or conduct. Misrepresentation must be of past or existing material fact.

A. Must have been a significant factor in inducing the innocent to contract. Does NOT have to be the sole factor.

c.f..: Statements of opinion or predictions about the future generally do not form the basis of fraud.

B. INTENT TO DECEIVE. Either had knowledge was false or made it without sufficient knowledge of the truth. Called scienter ("guilty mind"). Can be inferred from the
circumstances.

C. JUSTIFIABLE RELIANCE ON THE MISREPRESENTATION.

Generally found unless innocent party knew was false or so extravagant as to be obviously false and therefore would not be justified.

D. INJURY TO INNOCENT

To recover damages, must prove fraud caused economic injury.

MEASURE OF DAMAGES:

Difference between value of the property as represented and the actual value. Gives the innocent"benefit of the bargain." In the alternative, the buyer can rescind the contract and recover the purchase price.

FRAUD BY CONCEALMENT

Party takes specific action to conceal a material fact.

SILENCE AS MISREPRESENTATION

Generally, neither owes duty to disclose all facts to the other. Ordinarily such silence not a misrepresentation UNLESS

Nondisclosure would cause bodily injury or death;

OR:

There's a fiduciary relationship (i.e., a relationship of trust and confidence) between the parties.

MISREPRESENTATION OF LAW

Usually not actionable as fraud. Innocent cannot generally rescind. Because each party assumed to know the law that applies either through his or her own investigation or by hiring a lawyer.

ONE MAJOR EXCEPTION

Allowed as a ground for rescission if one party to a contract is a professional who should know what the law is and intentionally misrepresents the law to a less sophisticated contracting party.

INNOCENT MISREPRESENTATION

Person makes statement of fact s/he or she honestly and reasonably believes true, even though it is not.

NOT FRAUD.

UNDUE INFLUENCE

Dominant party takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person (the servient party) to enter into a contract.

Persuasion by wrongdoer must overcome the free will of innocent. Voidable by the innocent.

Wills often are challenged as having been made under undue influence.

ELEMENTS:

Fiduciary or confidential relationship existed.

Dominant must have unduly used his/her influence to persuade servient party

If confidential relationship between a lawyer and his/her client any contract made by the servient party (client) that benefits the dominant party (attorney) is presumed to be entered into under undue influence. This is a rebuttable presumption that can be overcome by proper evidence. To rebut must show that the attorney:

Advised the client to seek independent legal advice before completing the transaction.

Made a full and frank disclosure of all relevant information.

And that adequate consideration was given.

DURESS

Threatens wrongful act unless enters contract.

If forced assent not voluntary. Not enforceable against innocent party. Threat to commit physical harm or extortion constitutes duress

STATUTE OF FRAUDS

WRITING REQUIREMENT

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HISTORICAL PERSPECTIVES:

English Parliament enacted statute called "An Act for the Prevention of Frauds and Perjuries." Required certain types of contracts had to be in writing and signed by the party against whom enforcement was sought.

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STATUTE OF FRAUDS (SOF) (VARY SLIGHTLY FROM STATE TO STATE) I FEEL IT SHOULD BE CALLED STATUTE OF PROOF

Certain types of contracts to be in writing to ensure terms of important contracts are not forgotten, misunderstood, or fabricated.

Most states require following types:

1. Interests in land

2. By own terms cannot possibly be performed within one year.

3. Collateral contracts person promises to answer for the debt or duty of another

4. In consideration of marriage

5. Sale of goods for more than $500

6. Real estate agents' contracts

7. Agents' contracts where underlying contract must be in writing.

Generally, an executory contract that is not in writing even though the Statute of Frauds requires it to be is unenforceable by either party. (If the contract is valid in all other respects, however, it may be voluntarily performed by the parties.) REMEMBER IT�S A DEFENSE


CONTRACTS INVOLVING INTERESTS IN LAND

Any transfers ownership interest in real property must be in writing SOF to be enforceable. Real property includes the land itself, buildings, trees, soil, minerals, timber, plants, crops, fixtures, and things permanently affixed to the land or buildings.

Certain personal property permanently affixed to real property Example: built-in cabinets in a house�are fixtures that become part of the real property.

Other contracts that transfer ownership interest in land must be in writing SOF. Include the following:

MORTGAGES: Borrowers often give a lender an interest in real property as security for the repayment of a loan. Needs written mortgage or deed of trust.

LEASES: Transfer of right to use real property for specified period of time. Most SOF require leases for a term over one year to be in writing.

EQUITABLE DOCTRINE OF PART PERFORMANCE:

An ORAL contract for the sale of land or transfer of another interest in real property may not be possible to return the parties to the status quo. Allows Court to enforce the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice. To apply most states require purchaser either having paid part of the purchase price and take possession of land or having made valuable improvements on the land.
'
CONTRACTS THAT CANNOT BE PERFORMED IN A ONE YEAR PERIOD (REQUIRE LONGER THAN A YEAR TO BE COMPLETED)


Extension of oral contract might cause the contract to violate the SOF.

COLLATERAL PROMISES OR GUARANTY CONTRACT

Person agrees to answer for debts or duties of another.

THE "MAIN PURPOSE" EXCEPTION/LEADING OBJECT EXCEPTION

IF THE GUARANTOR MAKES THE CONTRACT FOR HIS/HER OWN BENEFIT THE CONTRACT DOES NOT FALL UNDER THE SOF

PROMISES MADE IN CONSIDERATION OF MARRIAGE

Unilateral promise to pay money or property in consideration for promise to marry SOF. EXAMPLE: Prenuptial agreement, contract prior to marriage defines ownership rights in each other's property.

CONTRACTS FOR THE SALE OF GOODS SECTION 201 OF THE UNIFORM COMMERCIAL CODE (UCC)

Sales contracts. Sale of goods $500+. If price of original sales contract less than $500 not have to be in writing, but a modification increases the sales price to $500+, modification must be in writing to be enforceable.

AGENT'S CONTRACTS

To sell property. Called EQUAL DIGNITY RULE.

SUFFICIENCY OF THE WRITING

DOES NOT have to appear in a formally drafted document. Writing on napkin, scrap of paper, tie, etc., sufficient.

Only the signature of the party against whom enforcement is sought needs to be on the written contract.

Law only requires a writing containing the essential terms. Any writing�including letters, telegrams, invoices, sales receipts, checks, handwritten agreements written on scraps of paper, and such�can be an enforceable contract. (SALE OF CLIPPERS CASE)

REQUIRED SIGNATURE

SOF and UCC require signed by the party against whom enforcement is sought. Signature anywhere on the writing. Does not have to be full legal name: last name, first name, nickname, initials, seal, stamp, engraving, or other symbol or mark that indicates intent binding. Signature may be by authorized agent.

INTEGRATION OF SEVERAL WRITINGS

Several writings integrated to form a single written contract. Doesn't have to be one document to be enforceable. Integration may be by express reference in one document refers to and incorporates another document within it. This is called incorporation by reference. What may often look like a simple one page document may be hundred of pages long. For example, credit cards refer to such as master document between the Issuer and issuer. Subsequent amendments, etc.

IMPLIED INTEGRATION

Several documents may be integrated to form a single written contract if somehow physically attached to each other to indicate parties intent to show integration. For example stapling paper clips, etc. Placing several documents in same container (e.g. envelope) may also indicate integration.

THE PAROL EVIDENCE RULE

By the time a contract is reduced to writing parties usually engaged in prior or contemporaneous discussions and negotiations or exchanged prior writings.


The Parol Evidence Rule

By the time contract reduced to writing, parties usually have engaged in prior/contemporaneous discussions/negotiations/exchanged prior writings. Any oral/written words outside of four corners of written contract call into play the parol evidence rule.

PAROL MEANS "WORD."

If written contract is complete and final statement of parties' agreement (i.e., a complete integration), any prior or contemporaneous oral or written statements that alter, contradict/or addition to the terms is inadmissible in any court proceeding concerning the contract.

Completely integrated contract viewed as best evidence of terms of the parties' agreement.

MERGER OR INTEGRATION CLAUSE (Expressly reiterates Rule)

Parties may include clause stipulating contract is a complete integration and exclusive expression of agreement and parol evidence may not be introduced to explain, alter, contradict, or add to the terms of the contract. It may be good practice to include a merger clause in written contracts to avoid allegations of promises outside the contract, but it�s not necessary.


EXCEPTIONS TO THE PAROL EVIDENCE RULE

Shows contract void or voidable (e.g., evidence that the contract was induced by fraud, misrepresentation, duress, undue influence, or mistake)

Explains ambiguous language


Corrects an obvious clerical or typographical error. The court can reform to reflect correction.


**********************
STANDARDS OF INTERPRETATION FOR CONTRACTS

If preprinted forms are used, typed words prevail over preprinted words.

Handwritten words prevail over both preprinted and typed words.

If there is any ambiguity it is resolved against the party who drafted the contract.


Privity: Original parties to a contract.

Each party in a contract has both rights and duties.

The person who owes the duty is called the obligor.

Assignment of rights/Delegations of duties: The original parties can assign their rights to third parties and/or delegate their duties to third parties. The original parties are still liable if their assignees/delegatees do not perform.

An assignee stands in the shoes of his assignor; takes no more/no less than his assignor has.

If an assignment only concerns money the assignee is called a factor.



Certain duties cannot be assigned or delegated if they require special expertise. Also called a personal service contract.

If an assignment would materially alter the duties of the obligor (the person who owes the duty to perform) then the Court would NOT enforce the assignment. Therrefore, employment contracts may be assigned as long as they do not materially alter the duty of the obligor.

There can be subsequent assignments of the same rights.

NOTICE OF ASSIGNMENT

Assignor makes assignment of right under a contract ASSIGNEE under a duty to notify the obligor that an Assignment has been made; and that performance must be rendered to assignee, if not obligor may continue to render performance to the assignor, who no longer has a right to it.


Assignee cannot sue obligor to recover payment because the obligor has performed according to the original contract. Assignee's only course of action is to sue the assignor for damages.

By contract you may prohibit assignment of rights. May be used if the obligor does not want to deal with or render performance to unknown third party.

Approval clause. Require obligor to approve any assignment. But the law does prohibit the obligor from unreasonably withholding approval.

WHICH PARTY PREVAILS WHEN THERE HAVE BEEN SUCCESSIVE ASSIGNMENTS OF THE SAME RIGHT?

THE AMERICAN RULE (OR NEW YORK RULE): First assignment in time prevails, regardless of notice. Most states follow this rule.

ENGLISH RULE first assignee to give notice to the obligor prevails. CALIFORNIA FOLLOWS THIS RULE

*********************************

THIRD-PARTY BENEFICIARIES

Third parties sometimes claim rights under others' contracts. They are classified either as intended or incidental beneficiaries.

INTENDED BENEFICIARIES

If the original contracting parties agree performance should be rendered to or directly benefit a third party. The Third-party beneficiary can enforce against the party who promised to render performance. I.E.:
They are NOT in privity of contract but have rights under the contract and can enforce the contract against the obligor.

INTENDED THIRD-PARTY BENEFICIARIES

They are further classified as either donee or creditor.

They are called: Third party (either donee or creditor) intended beneficiaries

INCIDENTAL BENEFICIARIES

Many instances parties unintentionally benefit third party when contract performed. Basically they are in the right place at the right time.
They have No rights to enforce or sue under other people's contracts.

They are called: Third party incidental beneficiaries

************************************
PERFORMANCE

Absolute promises to perform are called covenants. They are unconditional promises to perform. Non-performance is considered a breach of contract. The non-breaching party then has a right to sue.

CONDITIONS

Are qualified promises. Promisor's duty to perform or not perform, arises ONLY if condition does/does not occur.

General Language showing conditional: IF, On condition that; provided that; when; after, as soon as, etc. One contract can contain numerous conditions that trigger or excuse performance.

TYPES OF CONDITIONS:

PRECEDENT

Contract requires the occurrence (or nonocurrence) of event before party obligated to perform contractual duty. Happening (or nonhappening) of event triggers contract or duty of performance.

SUBSEQUENT

Occurrence or nonoccurrence of specific event automatically
excuses the performance of an existing duty to perform.

CONCURRENT

When parties to contract must render performance simultaneously; each party's absolute duty to perform conditioned on other party's absolute duty to perform.

EXPRESS

All conditions are stated in contract.


IMPLIED

Condition that can be implied from the circumstances surrounding a contract.

EXAMPLE: Soda Pop has �fizz� in it; not flat.

CONDITIONS BASED ON SATISFACTION

Reserve righs to party to pay for services provided only if services meet first party's "satisfaction." Courts developed two tests to examine whether special form of condition precedent met.

(A)PERSONAL SATISFACTION TEST

Subjective test applies if performance involves personal taste and specialized workmanship. Person given the right to reject the contract. even though a reasonable person would think it�s just fine.

(B) REASONABLE PERSON TEST

Objective test used to judge contracts involving non specialized items. Test: is just to meet the reasonable person standard.

TIME OF PERFORMANCE:

�Magic� words: TIME IS OF THE ESSENCE

DISCHARGE OF PERFORMANCE

EASIEST WAY: MEET ALL CONTRACTUAL OBLIGATIONS.

MUTUAL RESCISSION

Executory on both sides parties can agree to rescind (i.e., cancel). Requires parties enter into second agreement expressly terminates the first.

NOVATION

Substitutes third party for one of original contracting parties. New substituted party obligated to perform the contract. All three parties must agree to substitution. Exiting party relieved of liability on contract.

ACCORD AND SATISFACTION

Parties may agree to settle dispute. Agree to accept something different in satisfaction of original contract called ACCORD.

Performance of accord called SATISFACTION.

DISCHARGE BY IMPOSSIBILITY

Certain circumstances nonperformance excused-discharged�because of impossibility of performance. It cannot be done. NOT subjective impossibility: "I cannot do it.

EXAMPLES:

DEATH OR INCAPACITY of the promisor prior to the performance of a personal service contract.

DESTRUCTION OF SUBJECT MATTER of contract prior to performance.

SUPERVENING ILLEGALITY makes performance of the contract illegal.



****************************

FRUSTRATION OF PURPOSE

Excuses performance of contractual obligations if

(1) Object or benefit of the contract is made worthless to a promisor
(2) Both parties knew what the purpose was

(3) Act that frustrated the purpose was reasonably unforeseeable.

*************************************
DISCHARGE BY OPERATION OF LAW

STATUTE OF LIMITATIONS

For contracts made in California: 2 YEARS ORAL/4 YEARS WRITTEN


THERE ARE 3 LEVELS OF PERFORMANCE

COMPLETE, SUBSTANTIAL, AND INFERIOR

***
COMPLETE/STRICT) PERFORMANCE: Discharges party's duties.
Most contracts discharged by complete or strict performance.

***

SUBSTANTIAL PERFORMANCE Constitutes Minor breach.

The breaching party to a contract renders performance that deviates only slightly from complete performance.

Remedies: Nonbreaching party either: Convince breaching party to elevate performance to complete performance OR Hire another person to complete the job and deduct the cost to repair the defect from the original contract price.

***
INFERIOR PERFORMANCE Constitutes Material breach: Impairs or destroys essence of the contract.

Remedies: Nonbreaching party has two choices:
A. Rescind contract
(1) seek restitution of any compensation paid; and
(2) be discharged from further performance under the contract. /OR

B. Treat the contract as being in effect and sue the breaching party to recover damages.

THERE IS NOT NECESSARILY A CLEAR LINE OF DISTINCTION BETWEEN A MAJOR/MINOR BREACH, THE RESONABLE PERSON STANDARD WILL DECIDE





VARIOUS REMEDIES AVAILABLE

If a contracting party fails to perform absolute duty owed.

MOST COMMON REMEDY: award monetary damages, Often called the "law remedy."

HOWEVER, if monetary award not provide adequate relief, Court may order any of several equitable remedies: E.G.:
Based on the concept of fairness.

SPECIFIC PERFORMANCE,
INJUNCTION.

*************************

ANTICIPATORY BREACH (OR ANTICIPATORY REPUDIATION.)

Party informs other in advance that they will not perform contractual duties when due. Can be expressly stated or implied from the conduct of the repudiator. Nonbreaching party's obligations are discharged immediately and also has right to sue when the anticipatory breach occurs; there is no need to wait until performance is due. Can find a replacement immediately.

**********************

MONETARY DAMAGES

COMPENSATORY DAMAGES

Intended to compensate for loss of the bargain. Place nonbreaching party in the same position as if the contract had been fully performed. (c.f. MITIGATION OF DAMAGES)

CONSEQUENTIAL DAMAGES

In addition to compensatory nonbreaching party sometimes can recover special or consequential damages

The doctrine operates when there are foreseeable damages: Arise from circumstances outside the contract, to be liable Breaching party must know or have reason to know that breach will cause special damages.

NOMINAL DAMAGES

Nonbreachmg party sues breaching party though no financial loss resulted from the breach. In California minimum amount is $300.00.

LIQUIDATED DAMAGES

Damages agreed in advance. To be lawful, actual damages must be difficult or impracticable to determine, and the liquidated amount must be reasonable in the circumstances.
An Enforceable liquidated damage clause is the exclusive remedy even if actual damages later determined to be different. But the Courts won�t enforce theses if the damages are considered a penalty, if actual damages are clearly determinable in advance, or liquidated damages are excessive or unconscionable. If a liquidated damage clause is found to be a penalty = unenforceable. Non-breaching party may then recover actual damages.


MITIGATION (I.E., AVOID AND REDUCE)

A Non-breaching party is under a legal duty to avoid or reduce their own damages caused by breach. Reasonable efforts required; one is only required to accept comparable employment. The courts consider such factors as compensation, rank, status, job description, and geographical location in determining the comparability of jobs.

RESCISSION

Action to undo the contract. Available when material breach of contract, fraud, duress, undue influence, or mistake.

To rescind parties must make restitution of the consideration received, i.e.: Returning goods, property, money, or other consideration.

*********************************
EQUITABLE REMEDIES

Available if a breach cannot be adequately compensated by the legal remedies. Also available to prevent unjust enrichment.

SPECIFIC PERFORMANCE

Orders breaching party to perform the acts promised.

COURTS DISCRETION TO AWARD IF SUBJECT MATTER IS UNIQUE:

Available to enforce land contracts because every piece of real property is considered to be unique.

Works of art, antiques, items of sentimental value, rare coins, stamps, heirlooms, and such also fit the requirement for uniqueness. Most other personal property does not.

Specific performance of personal service contracts not granted because the Courts would find it difficult or impracticable to supervise or monitor performance of the contract.

*********************************

INJUNCTION

Court order prohibits person from doing certain act.

CONTRACTS THAT INVOLVE TORST ALLOWING FOR PUNITIVE DAMAGES

INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS

Tort arises when third party induces contracting party to breach the contract with another party.

Recovery for breach of contract usually limited to contract damages. However: If Party proves a contract-related tort may also recover tort damages: include compensation for personal injury, pain and suffering, emotional distress, and possibly punitive damages.

Party to contract may sue any third person who intentionally interferes with the contract and causes that party injury. Third party does not have to have acted with malice or bad faith. Usually arises when third party induces a contracting party to breach the contract with another party.

Elements must be shown:

1. Valid, enforceable contract between the contracting parties. 2. Third-party knowledge of this contract
3. Third-party inducement to breach the contract.

IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING BY INSURANCE COMPANIES TOWARD THEIR OWN INSURED

Parties not only held to express terms but also required to act in "good faith" and deal fairly in all respects in obtaining objective of contract. A breach of this implied covenant is a tort for which tort damages are recoverable. This tort, which is sometimes referred to as the tort of "bad faith," is an evolving area of the law.
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