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BUT FIRST

SOME ADDITIONAL BUT IMPORTANT

DEFINITIONS AND LEGAL CONCEPTS

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CONTRACTS THAT VIOLATE A STATUTE

ARE ILLEGAL

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WHERE A LICENSE IS REQUIRED, NORMALLY, A CONTRACT MADE BY AN UNLICENSED PERSON IS

ILLEGAL

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CONTRACTS THAT VIOLATE PUBLIC POLICY ARE

PROHIBITED

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AN EXCULPATORY CLAUSE IS GENERALLY

UNENFORCEABLE WHEN IT ATTEMPTS TO EXCLUDE AN

INTENTIONAL TORT OR GROSS NEGLIGENCE

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AN EXCULPATORY CLAUSE IS GENERALLY

UNENFORCEABLE WHEN THE AFFECTED ACTIVITY IS

IN THE PUBLIC INTEREST

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AN UNCONSCIONABLE CONTRACT IS ONE THAT THE COURT WILL NOT ENFORCE BECAUSE OF FUNDAMENTAL

FAIRNESS

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A CONTRACT SIGNED BY A MINOR IS VOIDABLE BY THE

MINOR

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CONTRACTS ENTERED INTO BY MENTALLY IMPAIRED PARTIES ARE VOIDABLE

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A CONTRACT ENTERED INTO UNDER DURESS IS

VOIDABLE

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CONTRACTS WHICH MUST BE IN WRITING

• Interest in real estate

• Agreements that can not be performed within one year

• Promise to pay the debt of another

• Promise made by executor of an estate

• Promise made in consideration of marriage

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WHEN CONTRACTS MAY NOT BE ASSIGNED

• When assignment substantially effects obligor’s rights or duties

• If forbidden by law

• Is precluded by the contract

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CONTRACTUAL DUTIES WHICH MAY NOT BE ASSIGNED

• Delegation would violate public policy

• The contract prohibits delegation

• The obligee has a substantial interest in personal performance by the obligor

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PERFORMANCE

• Strict performance

• Substantial performance

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GOOD FAITH

Every contract imposes upon each party a duty of good faith

and fair dealing in its performance and enforcement.

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BREACHING THE CONTRACT

• Someone breaches a contract when he fails to perform a duty without a valid excuse.

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BREACH

When one party breaches a contract, the other party does

not have to perform and is discharged from their

obligations.

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“The flexible powers of a court should enable it to craft a just remedy for almost any breach of

contract.”

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REMEDY

A remedy is the method a court uses to compensate an injured

party when a contract is breached.

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INTEREST

A legal right in something.

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IDENTIFYING THE “INTEREST”

• Expectation Interest

• Reliance Interest

• Restitution Interest

• Equitable Interest

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COMPENSATORY DAMAGES

Compensatory damages are to compensate for the breach of

the contract.

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CONSEQUENTIAL DAMAGES

Consequential damages are those resulting from the

unique circumstances of this injured party.

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INCIDENTAL DAMAGES

Incidental damages are the relatively minor costs incurred

when the injured party responds to the breach

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PUNITIVE DAMAGES

Punitive damages are designed to punish someone for reprehensible behavior in breaching a contract.

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LIQUIDATED DAMAGES

A liquidated damages clause, is a provision stating in

advance how much a party must pay it if it breaches.

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ENFORCEMENT

A court will generally enforce a liquidated damages clause if :

(1) at the time of creating the contract it was very difficult to estimate actual damages, and

(2) the liquidated amount is reasonable.

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SELLER’S REMEDIES

When the buyer breaches, if the seller acts in good faith, she will

be awarded the difference between the original contract

price and the price she was able to obtain in the open market.

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BUYER’S REMEDIES

When the seller breaches, the buyer will be awarded the

difference between the original contract and her cover

(replacement) price

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OTHER EQUITABLE INTERESTS

• Specific Performance

• Injunction

• Reformation

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SPECIAL ISSUES OF DAMAGES

• Mitigation of Damages

• Nominal Damages