Lecture 2
I. Performance and Breach
Welcome back! Our second lecture will focus on how contracts are carried out, what constitutes breach, and how courts determine whether a party’s performance is adequate.
A. Performance Standards
Parol Evidence Rule
When a written contract is intended as a final expression, prior or contemporaneous statements that contradict the writing are generally inadmissible.
Exceptions: Clarifying ambiguities, showing fraud or duress, or establishing a separate oral agreement.
Conditions
Express Conditions: Must be strictly performed (e.g., “payment upon receipt of goods”).
Implied/Constructive Conditions: Courts may excuse minor deviations if there is substantial performance.
B. Performance under Common Law vs. UCC
Common Law
Substantial Performance: Minor deviations do not necessarily excuse the other party’s performance, but may allow for damages.
UCC Perfect Tender Rule
Under UCC Article 2, sellers must deliver goods exactly as specified; any deviation can be rejected (unless seller has time to cure).
II. Breach of Contract
Material vs. Minor Breach
Material Breach: Excuses the non-breaching party from performance and may allow them to sue for total breach.
Minor Breach: Non-breaching party must still perform but can seek damages for the shortfall.
Anticipatory Repudiation
When a party indicates they will not perform before performance is due, the other party may treat it as a breach or wait for performance.
III. Remedies
A. Damages
Expectation Damages
The usual measure, placing the injured party in the position they would have been in had the contract been performed.
Consequential (Special) Damages
Foreseeable losses beyond direct expectation damages (lost profits, etc.). Must be known or reasonably foreseeable to the breaching party.
Reliance Damages
Reimburses the non-breaching party for expenses incurred in reliance on the contract when expectation damages are too uncertain.
Restitution
Prevents unjust enrichment; may apply when a contract is rescinded or unenforceable.
B. Equitable Remedies
Specific Performance
Court orders actual performance (often for unique goods or real estate).
Injunction
Prohibits a party from doing something in breach. Commonly used with non-compete clauses if reasonable in scope.
Rescission and Reformation
Rescission: Voids the contract, returning parties to their pre-contract positions.
Reformation: Corrects a written instrument to reflect the true agreement when there is a mutual mistake.
