Contract Law - Performance, Breach, and Discharge
Core Concepts:
Contract Interpretation: The process of determining the meaning of contract terms (both express and implied) using established rules and contextual evidence.
Conditions and Performance: Understanding how conditions influence contractual duties, differentiating conditions from promises, and applying the substantial performance doctrine.
Breach and Remedies: Categorizing breaches as material or minor, exploring available remedies (e.g., damages, specific performance, rescission), and understanding the implications of anticipatory repudiation.
I. Contract Terms and Interpretation:
Express Terms: Explicitly stated in the contract (written or verbal). Example: "Contractor will complete renovation by June 30th."
Implied Terms: Not explicitly stated but assumed by law.
Implied in Fact: Based on parties' conduct or circumstances. Example: Plumber using reasonable care and materials.
Implied in Law: Inserted by courts to ensure fairness or fill gaps. Example: Employer providing a safe working environment.
Rules of Contract Interpretation:
Plain Meaning Rule: Clear wording is interpreted based on its ordinary meaning.
Contra Proferentem: Ambiguity is interpreted against the drafting party.
Specific Terms vs. General Terms: Specific terms prevail over general terms in case of conflict.
Usage of Trade, Course of Dealing, and Course of Performance: Contextual evidence used to clarify unclear terms.
II. Conditions and Performance Obligations:
Conditions: Events that must occur for a party's performance to become due.
Conditions Precedent: Events that must happen before an obligation arises. Example: Buyer securing financing before the seller transfers ownership.
Conditions Subsequent: Events that terminate an existing obligation. Example: Contract termination if new legislation renders its purpose illegal.
Concurrent Conditions: Both parties perform simultaneously. Example: Seller delivers goods while buyer makes payment.
Conditions vs. Promises:
Conditions: Non-fulfillment relieves the obligated party from performing.
Promises: Covenants that must be performed regardless of conditions. Failure may lead to damages.
Substantial Performance Doctrine: Allows a party who has largely completed their obligations to enforce the contract, even with minor incompletions.
III. Breach of Contract and Anticipatory Repudiation:
Types of Breach:
Material Breach: Significant failure that undermines the contract's essence. Non-breaching party can terminate and seek damages. Example: Supplier fails to deliver a critical component for production.
Minor Breach: Less serious breach that does not substantially affect the contract's value. Non-breaching party must still perform but may seek damages. Example: Contractor installs a different but equally good countertop.
Remedies for Breach:
Damages:
Compensatory: Cover direct losses.
Consequential: Cover foreseeable losses caused by the breach.
Nominal: Small damages awarded when no significant loss is proven.
Liquidated: Pre-agreed amounts for specific breaches.
Specific Performance: Court orders breaching party to perform obligations (usually for unique goods or real estate).
Rescission and Restitution: Contract cancellation and return to pre-contract positions (often in cases of voidable contracts).
Anticipatory Repudiation:
One party indicates in advance they will not perform their obligations.
Non-breaching party can treat this as an immediate breach or wait for performance.
Key Takeaways:
Accurate interpretation of contract provisions is essential, applying established rules and using contextual evidence.
Understanding the distinction between conditions and promises is crucial, as it directly affects available remedies.
A material breach significantly undermines the contract, allowing the non-breaching party to terminate and seek damages.
Anticipatory repudiation occurs when a party indicates in advance their intention not to perform.
