Contract Law Lecture Two (of 3): Performance, Breach, and Remedies

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Prevents unjust enrichment; may apply when a contract is rescinded or unenforceable.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.