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Discharge by Operation of Law
Material alteration of the contract
Statutes of Limitations
Impossibility or impracticability
Alteration of the Contract
To discourage parties from altering written contracts, the law operates to allow an innocent party to be discharged when the other party has materially altered a written contract without consent
Statues of Limitations
Restricts the period during which a party can sue on a particular cause of action
Impossibility of Performance
After a contract has been made, supervening events may make performance impossible in an objective sense and can discharge a contract
Discharge of Contractual Obligations based on Impossibility of Performance
When one of the parties to a personal contract dies or becomes incapacitated prior to performance
When the specific subject matter of the contract is destroyed
When a change in law renders performance illegal
An occurrence or event that makes performance temporarily impossible operates to suspend performance until the impossibility ceases
When a supervening event does not render performance objectively impossible but does make it much more difficult or expensive to perform than the parties originally contemplated
The anticipated performance must become extremely difficult or costly
The added burden of performance not only must be extreme but also must not have been known by the parties when the contract was made
Frustration of Purpose
A contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract
Involves an event that decreases the value of what a party receives under the contract
Categories of Damages
Compensatory (to cover direct losses and costs)
Consequential (to cover indirect and foreseeable losses)
Punitive (to punish and deter wrongdoing)
Nominal (to recognize wrongdoing when no monetary loss is shown)
Damages that compensate the nonbreaching party for the loss of the bargin
Measure is the difference between the value of the breaching party's promised performance under the contract and the value of his or her actual performance
Sale of Goods
In a contract for the sale of goods, the usual measure of compensatory damages is an amount equal to the difference between the contract price and the market price
Sale of Land
Remedy for a seller's breach of a contract for a sale of real estate is specific performance
Construction Contracts: Owner Breaches
If the owner breaches before performance has begun, the contractor can recover only the profits that would have been made on the contract
If the owner breaches during performance, the contractor can recover the profits plus the costs incurred in partially constructing the building
If the owner breaches after the construction has been completed the contractor can recover the entire contract price, plus interest
Construction Contracts: Contractor Breaches
Breaches the contract either by failing to undertake construction or by stopping work partway through the project - the measure of damages is the cost of completion
If the contractor finishes late, the measure of damages is the loss of use
Are not recoverable and are designed to punish a wrongdoer and set an example to deter similar conduct in the future
When no actual damage or financial loss results from a breach of contract and only a technical injury is involved
Rewards are often small
Mitigation of Damages
When a breach of contract occurs, the innocent injured party is held to a duty to mitigate, or reduce, the damages that he or she suffers
The duty owed depends on the nature of the contract
A wrongfully terminated employee has a duty to take a similar job if one is available
Liquidated Damages Provision
Specifies that a certain dollar amount is to be paid in the event of a future default or breach of contract
Specifies a certain amount to be paid in the event of a default or breach of contract and is designed to penalize the breaching party
Are not enforceable
When the contract was entered into, was it apparent that damages would be difficult to estimate in the event of a breach?
Was the amount set as damages a reasonable estimate and not excessive?
If yes - liquidated
If no - penalty
Is essentially an action to undo, or terminate, a contract - to return the contracting parties to the positions they occupied prior to the transaction
Involves the plaintiff's recapture of a benefit conferred on the defendant that has unjustly enriched him or her
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