978-1259638855 Chapter 18

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Chapter 18 – Performance and Remedies

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CHAPTER 18

PERFORMANCE AND REMEDIES

I. OBJECTIVES

able to:

A. Explain the effect of conditions on the duty to perform a contract and identify contract

language that is likely to be considered an express condition.

B. Distinguish the strict performance and substantial performance standards and determine

which is likely to be applied to a given contract duty.

under which each remedy is appropriate.

II. ANSWER TO INTRODUCTORY PROBLEM

contract.

B. The Warrens can collect damages for Denison’s breach of contract but cannot withhold the

entire remainder of their performance.

C. Compensatory damages would be appropriate. In the real case, the court deducted from the

balance due to Denison the amount that would be necessary to repair the defects caused by

III. SUGGESTIONS FOR LECTURE PREPARATION

A. Introduction

1. Note that the problems you’ll be discussing are common problems that arise after the

what should happen if he fails to perform or does so in an unsatisfactory way.

2. Explain the concept of discharge and show how discharge, whether by performance,

material breach, excuse, or some other reason, is the ultimate end point of a contract.

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B. Conditions

1. Define conditions and give a few examples of conditions, showing how they affect the

duty to perform. Give examples of contract language that typically creates a condition as

opposed to a promise to perform.

would forfeit the incentive payment and were responsible for paying the costs of

returning to their home locations. The employees were terminated after the eight-week

required two year employment to receive the payment. In determining whether

employment for two year was a condition precedent, the court focused on the fact that the

make any sense to interpret the contract in that manner? The plaintiffs also brought a

claim for promissory estoppel. Would they have had any more luck with that theory than

contract.

Additional Example: Problem Case #6.

a. Explain and contrast conditions subsequent, conditions precedent, and concurrent

conditions.

2. Discuss conditions requiring satisfaction of a third person or personal satisfaction of a

3. Discuss the various ways in which a condition may be excused, and the consequences of

excuse of a condition. You can tie this in to the discussion of conditions requiring

LLC (“GRH”) following the sale of their recycling business. The employment

agreements included bonus provisions based on both two- and five-year milestones.

breach of contract.

Points for Discussion: Highlight for students the procedural setting of the case and

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

With regard to the two-year milestone dealing with single stream recycling, given that the

condition precedent was clearly not achieved (i.e., the MCRC never had single stream

recycling installed), why was the claim not dismissed? As for the five-year tonnage

bonus, explain why did the defendants ask the court to dismiss it without prejudice? (The

date upon which the bonus was payable had not yet arrived.) Why did the court not

Additional Example: Problem Case #2.

C. Performance and Breach

1. Note that any unexcused failure to fulfill a contractual obligation—no matter how minute-

applied and on the seriousness of the breach.

Example: Problem Case #9.

2. Explain the difference between a strict performance standard and a substantial

Example: Problem Case #5 and introductory Problem.

3. Discuss the duty of good faith. Give some examples of how it has been extended to

insurance and employment contracts.

Example: Reference Stanton v. Greenstar Recycled Holdings, LLC, discussed above.

4. Explain the concept of material breach and discuss how a court determines whether a

breach is material. Describe the consequences of material breach.

a. Discuss the standards used to determine the time for performance and explain the

consequences of late performance. Indicate when late performance is a material

canceled the contract and hired a replacement contractor to fix the problems and

complete the renovation. The Harrisons then sued FHB for breach of contract, and

FHB moved for summary judgment, which the trial court granted. On appeal, the

court affirmed the summary judgment to the extent that the claims was based on

and substantial performance are opposing concepts. If no time frame was specified

in the contract and there was no explicit statement that time was of the essence, why

would it be possible that the ongoing work by FHB was not enough to defeat the

“failure to complete the work” claim? Why did the Harrisons lose on the claim that

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

that FHB didn’t follow the decorator’s and architect’s drawings, plans, and

Additional Example: Problem Cases # 3 and 5.

b. Define and give an example of anticipatory repudiation. Discuss alternatives open to

an injured party when anticipatory repudiation occurs.

c. Discuss the breaching party’s possible rights of recovery.

Ethics in Action (p. 510): Even though a breaching party violated a legal obligation,

reap an unbargained-for gain that would amount to unjust enrichment.

5. Discuss excuses for nonperformance. Explain the significance of excused performance.

Define “impossibility.” Discuss the traditional impossibility excuses (death/insanity,

East Capitol View Community Development Corporation v. Robinson (p. 510): East

Capitol hired Robinson on a one-year contract that stated that her continued employment

because the action of employing Robinson was not objectively impossible and the

contract did not reallocate the risk of lost funding to Robinson.

itself?

Examples: Problem Case # 4.

D. Discharge

are discharged.

3. Discuss the practical significance of the statute of limitations; give examples of typical

statutes of limitations in contracts cases or specific statutes from your jurisdiction.

E. Contract Remedies

substitutes for what was promised—the court tries to calculate a substitute for

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

performance that will place the injured party as nearly as possible in the position he

would have been in if the contract had been performed.

3. Discuss the basic limitations on recovery of damages in contracts cases: reasonable

certainty, foreseeability, and mitigation.

Example: Problem Case #8.

4. Discuss and give examples of the items included in compensatory damages.

Example: Problem Case #7.

party that the breaching party was aware of at the time of contracting. This reflects

the basic idea that contracting parties should not be responsible for risks that they did

building a road. A wetlands permit required a bridge to be installed by July 2002. The

parties had a dispute about the bridge and AL Hoyt refused to build the bridge. The

developer sued AL Hoyt for breach of contract, seeking consequential damages. A

jury awarded the developer $500,000. On appeal, the court found that AL Hoyt could

Points for Discussion: What facts indicated that AL Hoyt knew that profits would be

lost if the bridge was not built?

appropriate—e.g., reliance damages.

5. Explain nominal damages.

6. Discuss liquidated damages. Show how they can be useful in business situations. Explain

the standards used to determine if a liquidated damages clause will be enforced.

pictures were removed but the case description was not edited to remove the reference to

the pictures.) The purchase order did not match the product that was ultimately delivered

parties filed a series of claims and counterclaims against each other. The court ultimately

found that the chargeback provisions were unenforceable penalties rather than lawful

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

liquidated damages clauses, because they were unreasonably large in comparison to

actual damages suffered (in this case, none).

Points for Discussion: Why is the ex ante versus ex post determination of the penalty test

important? Why would the parties have agreed in the first place to what turned out to be

damages clauses are enforceable?

7. Define punitive damages and discuss the circumstances under which they are recoverable

in a contract case. Make it clear that the general rule is that punitive damages are not

organizations that would not be likely to be deterred by the threat of a contract remedy.

The cases against lenders, employers, insurance companies, and recently, against

8. Discuss equitable remedies. Note that they are only awarded when the damages at law

would be inadequate. Point out that specific performance is a mandatory injunction.

Discuss the circumstances under which specific performance and injunction are available.

Houseman v. Dare (p. 519): Doreen and Eric were engaged and owned a house together.

They bought a pedigreed dog which was registered in both of their names. Several years

later, Eric broke off the relationship. He wanted to stay in the house, so Doreen signed a

damages do not provide an adequate remedy. There was sufficient evidence of the special

subjective value of the dog to Doreen to justify specific performance.

Points for Discussion: What is the relevance of the fact that Eric gave Doreen less than

half the equity in the house? Does the trial court’s decision seem reasonable to your

students?

Example: Problem Case #1.

8. Discuss restitution and give examples of situations in which restitution is used.

IV. RECOMMENDED REFERENCES

V. ANSWERS TO PROBLEMS AND PROBLEM CASES

1. No. The Reservation Agreement was not a contract for a specific plane, but rather a contract to

maintain a place in line to buy a plane if and when it became available. In addition, the parties

had agreed to limit the remedies available for breach of contract to forfeiture of the deposit. In

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on the attorney’s discretion. Therefore, the Grondas did not frustrate the condition precedent

App. 2007).

3. Yes. The court engaged in a two-step analysis to determine if Ocean Atlantic’s breach should

allow the plaintiffs to terminate the contract: 1) whether the parties intended the time

provision to be material and 2) whether equitable factors make it unconscionable to enforce

693 (7th Cir. 2002).

4. Yes. When a contract becomes illegal because of a change in the law, performance is excused

because it would be against public policy. Here, the contract became illegal and impossible to

perform. Even after the law was changed, the contract was not revived. White v. J.M. Brown

on another real estate purchase later that day. Thus, Miceli and Slonim’s failure to close at

that time combined with its failure to inform Dierberg of the delay was a breach of contract.

F.J. Miceli and Slonim Development Corp. v. Dierberg, 773 S.W.2d 154 (Mo. Ct. App.

1989).

7. No. The person who is the victim of a breach of contract must be given the benefit of his

bargain. Replacement cost was the proper measure of damages for the consumer in this case.

Ct. 2004).

8. No. The court stated that “[w]here ‘means of performance’ have been nullified, making

conditions. Bush should be allowed at trial to prove that it was impossible to give notice

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9. Yes. It is generally held that the basic legal relationship between a student and a private

university or college is contractual in nature. The catalogs, bulletins, circulars, and

did not deliver, or promised a course of instruction that would qualify the student as a

journeyman and did not present the fundamentals necessary, a breach of contract suit would

whether Creighton provide deficient services, but whether it failed to provide any real access

to its academic curriculum at all. Ross can sue for breach of contract. Ross v. Creighton

University, 957 F.2d 410 (7th Cir. 1992).

financing, which fell through. Notably, the letter Carter submitted indicated that the

financing was contingent on no material changes to his financial situation. Thus, the Cline’s