Contract law. Учебное пособие

Therearetimeswhenthelawallowsforsubstantialperformance to discharge a contract. This means most of the promises have been met with only a slight change or variance from the original terms.

Suppose the painter promised to complete the deck stain by July 15, but it rained for an entire week, making it impossible to complete the work until the following week.The court would look at this as substantial performance because although the painter was unable to complete the job on time due to the weather conditions, he was able to complete the task in a reasonable timeframe. It’s that simple. But not every contract ends in two satisfied parties going their separate ways.

A breach of contract happens when one party fails to adhere to the terms of the contract without a legal reason to do so. This is the most popular type of case in civil courts. A breach that affects the entire agreement is a material breach and involves changes in details of the contract that change the main agreements in the contract. Had the painter never showed up to stain the deck or showed up and started the work but never completed it, it would represent a material breach because it had a serious impact on the promise.

Sometimes,thebreachisnotthatcomplicated.Intheseinstances, it’s called a non-material breach and only involves smaller details of the contract that do not affect the overall contract between the parties. Generally, a court will force performance on the breaching party.

Say the painter fell on a banana peel the night before starting the job. If he asks his nephew, also a professional, to step in and stain the deck, the contract promises remain intact. The only change is the painter.

Itisimportanttoknowthatwhenthereisabreachofcontract,the courts have a right to require a specific performance by the breaching party. This means the breaching party will be legally forced to keep up his end of the promises in the contract exactly as stated in the original agreement. This is a way to make a non-breaching party whole again without forcing compensation for the loss.

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Vocabulary

duties — обязанности rights — права

delegation of duties — передача договорных обязательств termination — аннулирование

discharge of contract — прекращение договорных обязательств rescind — отменять

substitute — заменять

accord — согласие изменить обязательства

satisfaction of duties — исполнение новых обязательств по контракту

unforeseen events — непредвиденные обстоятельства subject matter — предмет обсуждения

disabled — беспомощный

escape clause — пункты договора, предусматривающие отказ от взятого обязательства

enforceable rights — права, имеющие исковую силу breach of contract — нарушение контракта

accord — соглашение

novation — замена существующего контракта

Exercises

1.What makes a contract legally binding? a) offeror and offeree,

b) consideration,

c) capacity, mutuality and legal object, d) all choices are necessary.

2.Jack hired Matt to shovel snow from his driveway. Once Matt completed the work and is paid by Jack, what happens to the contract?

a) complete performance discharges the contract, b) specific performance is ordered,

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c)a breach of contract occurred,

d)agreement to discharge occurred,

e)substantial performance occurred.

3.Burt hired Jackson to remodel his bathroom. Jackson showed up for the first two days and he never saw him again. Unfortunately, Burt had already paid Jackson for the job.What will a court most likely do?

a) order specific performance of the promises in the contract, b) force the parties to agree to discharge,

c) rule that substantial performance occurred, d) put Jackson in jail,

e) rule in favor of Jackson because he was unable to complete the work.

4.Billy and Marvin entered into a contract for the sale of Marvin’s car. Billy signed on the dotted line and drove away. Marvin’s mother called Billy the very next day to demand the return of the vehicle. She stated that Marvin was only 16 years old and had no legal right to sell the car. What type of discharge will occur?

a) rescission, b) accord, c) novation,

d) breach of contract, e) dispute of terms.

5.Marcia bought a new sports car. Her monthly payments are $550,00 per month. When Marcia signed the contract, she had a good job and was able to make her payments. A few months later, she was terminated and could no longer satisfy the car loan. She talked to her sister, Patricia, who agreed to assume the payments. Both ladies went to the car dealer to change the terms. What type of discharge is this?

a) novation,

b) breach of contract,

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VI. TYPES OF REMEDIES

Read and translate the text

When a party breaches a contract, a court will usually award money damages to the innocent party. But there are other types of remedies. Equitable remedies are different than monetary damages. This passage explains specific performance and injunctions and equitable remedies.

EQUITABLE DAMAGES

A breach of contract is a common type of civil claims. When a court considers a breach of contract case, the court will almost always award money damages to the innocent party.This means that the breaching party is ordered to pay money to the innocent party to make up for the innocent party’s losses caused by the breach.

Money damages are a legal remedy.Aremedy is any court order that imposes a penalty or enforces a right. Though not common, there are remedies other than legal remedies available for breach of contract.

Equitable remedies are those that are based on what is fair, or seems right, in a particular situation. These remedies were historically designed so that they don’t have to follow precedent, or established common laws. Instead, they are purposely intended to be a more flexible option that is used to ensure justice in particular situations.

It’s helpful to note that equitable remedies are rarely used.These options are only used in cases where money damages are either too difficult to calculate or are inadequate to remedy the harm done to the innocent party. Let’s take a closer look at the two main equitable remedies available for breach of contract.

SPECIFIC PERFORMANCE

In a breach of contract case, the court can consider ordering specific performance as long as the innocent party asks for that remedy.

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This equitable remedy orders the breaching party to comply with the terms of the contract.This means that the breaching party will be required to do whatever the party originally promised to do.

The court will consider this option when money damages won’t provide the innocent party with adequate compensation for the breach. Specific performance is most common in sales contracts. This remedy is sometimes used when a sales contract involves something unique, such as a particular tract of land, a rare heirloom or a priceless art piece.

Specific performance is best understood by considering an example. Let’s say that Arty is an art dealer. He acquires a rare, ancientEgyptianstatuethatisthoughttohavebelongedtoCleopatra. Andrea collects Egyptian art and makes a sizable offer to buy the piece.Arty agrees, and the two make a valid legal contract.

Arty then decides that he’d rather keep the piece for now. He breaches his contract with Andrea. Andrea sues Arty for breach of contract. The court decides that the piece is truly priceless, and Andrea can’t acquire another comparable piece no matter how much money the court awards her. Instead, the court decides that Arty should comply with the terms of the contract, and sell the piece to Andrea for the price she already agreed to pay. This is specific performance.

INJUNCTION

Another equitable remedy is an injunction, which is a remedy that prohibits a party from a particular act. Note that specific performance and injunction remedies are similar, but the key difference is this: specific performance orders a party to do something, and an injunction orders a party not to do something.

Injunctions can be issued as a remedy at the conclusion of a lawsuit, such as a breach of contract claim.This type of injunction is a permanent injunction. Permanent injunctions are issued by a court after hearing a matter, and as a part of the judgment order.Arequest for injunction can also be filed as its own separate lawsuit. Some-

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times a party will file a court request for injunctive relief while the rest of the lawsuit is pending.When the court orders an injunction in this situation, the remedy won’t be permanent.

Temporary injunctions are usually enforceable immediately, butlastforonlyashortperiodoftime.Atemporaryrestrainingorder, or TRO, is a common type of temporary injunction. This remedy is used when a party wishes to halt a particular act for a short period of time, usually while the party prepares a more formal lawsuit. These orders typically last a week or ten days.

A preliminary injunction is a remedy that is also temporary. These injunctions are usually enforceable immediately, but last only until the court can fully hear a matter and make a more permanent decision on the matter. A preliminary injunction lasts longer than a temporary injunction, and is meant to ensure that a party doesn’t act on a matter until a court makes a final decision on the issue. Therefore, preliminary injunctions typically only last the duration of a trial or a hearing. Injunctions aren’t common, but are used mostly in breach of contract cases.

Like specific performance, the court will consider this option when money damages won’t provide the innocent party with adequate compensation for the breach, and the innocent party requests that remedy. Injunctions are used when the object of the contract might be lost, destroyed or otherwise made unavailable to the innocent party.

RELIANCE DAMAGES

Remember that reliance damages are money damages that are awarded to an innocent party for the losses suffered due to reasonable reliance on a promise. Let’s take a look at Stacy’s reliance damages.

In our scenario, Sam breached the contract and Stacy is the innocent party. Stacy spent $10,000 after she reasonably relied on Sam’s promise. Stacy believed that she would complete the house for Sam, and that Sam would pay her in full. Stacy didn’t have any

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reason to believe that Sam wouldn’t fulfill his duties under the contract. By the time she realized Sam wouldn’t comply, she’d already spent $10,000.

Reliance damages are meant to restore the innocent party. The court calculates these damages by determining what amount of money it would take to re-establish the innocent party’s economic position. This means that Stacy will be awarded damages in order to place her back in the economic position she held before she reasonably relied on Sam’s promise. Before that time, Stacy had $10,000 that she no longer has.

WHEN RELIANCE WILL BE USED

Usually, when a court rules that a breach of contract occurred, it will award expectation damages to the innocent party. These are damages awarded to compensate the loss of future income caused by a breach of contract.

Read and translate the text

LIQUIDATED DAMAGES

Liquidated damages are a predetermined form of money damage award. This lesson explains the use of liquidated damages.

I got a new job! Unfortunately, it’s in another state and I start next week. So, I make you a sweet deal on my house, and you agree to buy it from me.We make a contract that says you’ll pay $100,000, and we’ll close this deal at the end of the month. You make a down payment of $10,000. Our contract says that I can keep your $10,000 if you don’t end up closing the deal and buying my house. However, if I prevent the purchase, then you get your $10,000 back.

When a party breaches a contract, money damages are usually awarded to the innocent party. But, there are actually several different types of money damage awards. There’s even a type that can be decided when the contract is made, and before the contract is ever

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breached. Liquidated damages are a predetermined form of money award. This means that the parties already agreed on the amount of money that would be awarded should one of the parties breach the contract. Liquidated damages are an amount estimated to equal, or best approximate, the amount of loss an innocent party will incur if the contract is breached.

For example, if you breach the contract then I’ll have to put my house back on the market. I’ll incur expenses in this process. I may have more mortgage payments due while I try to sell my house. There will also be costs to clean and maintain my house while I’m showing it, like mowing my yard or shoveling snow from the sidewalk. Rather than calculating these expenses exactly and suing you for those damages later, our liquidated damages clause is an attempt to approximate my anticipated loss now.

This determination is set out as a term of the contract, and included in the contract when the parties execute the contract. That contract term is called a liquidated damages clause. In our contract, we have a liquidated damages clause for $10,000. It’s helpful to note that 10 % is a fairly standard and typically enforceable formula for liquidated damages in a real estate contract. Our liquidated damages clause is for the standard 10 % of the entire contract amount.

LIQUIDATED DAMAGES CLAUSE

A liquidated damages clause isn’t a good fit for all contracts. These clauses are most often included in contracts that involve the exchange of money, an agreement to perform a particular act, or the sale of real estate. Our contract is a real estate contract, since it involves the sale of my house. All liquidated damages clauses must meet certain requirements. A court won’t enforce a liquidated damages clause unless:

1)the loss to the innocent party will be either too uncertain or too difficult to calculate;

2)the specified damages amount is reasonable, considering the innocent party’s actual and anticipated loss, the party’s difficulty of

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proving the exact amount of loss, and the court’s difficulty of applying another, adequate remedy;

3) the damages are intended to function as compensation to the innocent party, rather than as a penalty to the breaching party.

Let’stakeanotherlookatourcontract.Let’ssaythatweestimate the costs for cleaning and maintaining my house while it’s potentially back on the market, and add a few months of mortgage payments. This amount is $5,000. Since this is only half the amount of our liquidated damages clause, our clause likely won’t be enforced. Instead, under this particular scenario, the court will pick a more appropriate money damages award. Keep in mind that a court will never enforce a liquidated damages clause that isn’t part of a valid, legal contract. If the contract is unenforceable for any reason, the clause will fail. Our contract appears to be a valid, legal contract that is typical of other real estate contracts.

EMOTIONAL DISTRESS

Note that there are many different types of special damages. Emotional distress is one type of claim that is often included in a request for special damages. This is a claim for any mental anguish, emotional suffering or psychological trauma caused by the breach of contract. Normally, a court won’t allow money damages for emotional distress due to a breach of contract. There are, however, a few special circumstances in which the court will consider these damages:

•the breach of contract involved a promise to marry;

•the breach of contract involved a failure to properly deliver an urgent message regarding death or serious illness;

•the breach of contract involved the loss of a treasured and unique item.

Vocabulary

to award — присуждать

legal injury — гражданский вред

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