I. REVIEWING WHAT YOU LEARNED
1. Explain the difference between an assignment and a delegation.
The difference between assignment and delegation is that an assignment can't increase another party's obligations. Delegation, on the other hand, is a method of using a contract to transfer one party's obligations to another party. Assigning rights is usually easier than delegating, and fewer restrictions are in place.
2. List the five ways that contractual obligations may come to an end.
Performance, agreement, impossibility, operation of law, breach of contract.
3. If the time for performance is not mentioned in a contract, when must the contract be performed?
It must be performance within a reasonable time. This time, left to the discretion of the judge or jury, may be fairly allowed depending on the circumstances.
4. What is necessary for a person to be in a position to bring suit against another for a breach of contract?
To be in a position to bring suit against another for a breach of contract, it is necessary for a party to make tender.
5. Explain the difference between accord and satisfaction.
The accord is the agreement on the new terms of the contract, and the satisfaction is the performance of those terms according to the agreement.
6. List three legal reasons for discharging a contract for impossibility.
- Death of a person who was to perform personal services.
- Destruction of the exact subject matter of the contract.
- Subsequent illegality of that particular performance.
7. Describe two situations that toll the statute of limitations.
They do not run while a plaintiff is under a disability such as infancy or mental illness. Similarly, they do not run while a defendant is out of the state and not under the jurisdiction of the court.
8. How do nominal damages, punitive damages, liquidated damages, incidental damages, and consequential damages differ from one another?
In the situation where there has been a breach but the non-breaching party has really suffered no loss or cannot prove what his loss is, he is entitled to nominal damages. Punitive damages are considered punishment and are typically awarded at the court's discretion when the defendant's behavior is found to be especially harmful. Liquidated damages are damages that are agreed upon (pre-determined) by the parties at the time of the execution of the contract in the event of a subsequent breach. Incidental damages may be awarded to the injured party to cover reasonable expenses that indirectly result from a breach of contract. Consequential damages are losses (such as lost profits) that flow not directly from the breach, but from the consequences of it.
9. Under what circumstances may the court order specific performance of a contract?
When the subject matter of the contract is either unique or rare so that money damages are not an adequate remedy for the injured party. Because the court considers real property to be unique, it will often order a contract for the purchase or sale of real property to be specifically performed.
II. UNDERSTANDING LEGAL CONCEPTS
1. The transfer of a duty is known as an assignment.
FALSE (duty)
2. With some exceptions and unless otherwise agreed, rights and duties cannot be transferred to other people. FALSE (can)
3. Most contracts come to an end by agreement. FALSE (performance)
4. If a time for performance is stated in a written contract, the court may allow additional time for its performance. TRUE
5. If no time for performance is put in a contract, it must be performed within a reasonable time. TRUE
6. When parties agree to perform in a different manner than originally agreed upon and the new performance is completed, it is called an accord and completion. FALSE (satisfaction)
7. The law of bankruptcy aims to give a fresh start to debtors who are overwhelmed with debt. TRUE
8. In the case of a breach of contract for the sale of goods, suit must be brought within six years from the date of the breach, to be actionable. FALSE (four years)
9. Whenever a contract is breached, the breaching party owes a duty to keep the damages as low as possible. FALSE (injured)
10. Specific performance is used only when the subject matter of a contract is either unique or rare so that money damages are not an adequate remedy for the injured party. TRUE
III. CHECKING TERMINOLOGY
(a-6) accord and satisfaction: an agreement to perform in a different manner than originally called for and the completion of that agreed-upon performance.
(b-10) anticipatory breach: The announcement, before the time for performance, by a party to a contract that he or she is not going to perform.
(c-3) assignee: one to whom a right is transferred by assignment.
(d-1) assignment: the transfer of a right from one person to another.
(e-2) assignor: one who transfers a right by assignment.
(f-8) bankruptcy: a legal process that aims to give a fresh start to debtors who are overwhelmed with debt and to provide a fair way of distributing a debtor’s assets among all creditors.
(g-9) breach of contract: the failure of a party to a contract to carry out the terms of the agreement.
(h-30) compensatory damage: damages that compensate the plaintiff for actual losses resulting from the breach.
(i-15) consequential damages: losses that flow not directly from a breach of contract, but from the consequences of it.
(j-11) damages: compensation in money for loss or injury.
(k-4) delegation: the transfer of a duty by one person to another.
(l-12) exemplary damages: damages as a measure of punishment for the defendant’s wrongful act (also called punitive damages).
(m-7) impossibility: a method of discharging a contract that is impossible to perform, not merely difficult or costly.
(n-26) incidental beneficiary: one who is indirectly benefited by a contract.
(o-14) incidental damages: reasonable expenses that indirectly result from a breach of contract.
(p-28) intended beneficiary: the condition that exists when a contract is made with the purpose of benefiting the third party.
(q-5) legal tender: coin, paper, or other currency that is sufficient under law for the payment of debts.
(r-13) liquidated damages: damages that are agreed upon by the parties at the time of the execution of a contract, in the event of subsequent breach.
(s-32) mitigate: lessen, keep as low as possible.
(t-33) nominal damages: damages in Name only.
(u-17) novation: an agreement whereby an original party to a contract is replaced by a new party.
(v-18) performance: discharging a contract by doing that which one agreed to do under the terms of the contract.
(w-16) privity of contract: the relationship that exists between two or more contracting parties.
(x-27) punitive damages: damages as a measure of punishment for the defendant’s wrongful act (also called exemplary damages).
(y-29) specific performance: an order by the court ordering a breaching party to do that which he or she agreed to do under the terms of the contract.
(z-24) statute of limitations: law that sets forth time limits for bringing legal actions.
(aa-19) substantial performance: a doctrine allowing a contracting party to sue the other party for breach even though slight omissions or deviations were made in his or her own performance of the contract.
(bb-23) tender of payment: to offer to the other party that money owed under a contract.
(cc-22) tender of performance: to offer to do that which one has agreed to do under the terms of a contract.
(dd-31) third-party beneficiary: someone for whose benefit a promise is made, but who is not a party to the contract.
(ee-20,21) time is of the essence: time is critical/ a period, left to the discretion of the judge or jury, that may be fairly allowed depending on the circumstances.
(ff-25) toll: to bar, defeat or take away.
IV. SHARPENING YOUR LATIN SKILLS
Assumpsit: an action to recover damages for breach of contract.
Ex contractu: arising form or based on a contract.
Gratis: free.
In pari delicto: a doctrine that bars a plaintiff who has participated in wrong doing from recovery damages for loss resulting from the wrong doing.
Locus sigilli: the place of or for the seal.
Non assumpsit: a plea in an action assumpsit by which the defendant denies having made any promise or under taking.
Nudum pactum: an agreement or promise is made without consideration and hence unenforceable.
Quasi: having a legal status only by operation or construction of law and without reference to intent.
V. USING LEGAL LANGUAGE
Needing a car for a trip she was planning, Holly entered into a contract to buy a late-model Toyota from Enrique for $7,000. Time was of the essence with regard to this contract, because Holly planned to leave on the trip the next day. Before she could carry out the contract, however, Holly’s trip was canceled. She decided to transfer her right to the car to her friend Maxine. The transfer for a right is called an assignment rather than a delegation, which is a transfer of a duty. Holly was the assignor, and Maxine was the assignee. Enrique agreed to deal solely with Maxine and to release Holly from all obligations under the contract, thus creating a novation. Enrique and Maxine were in privity contract, which is the legal name for the relationship that existed between them. When the time for performance – that is, the carrying out of the contract – arrived, Enrique made tender of performance by offering to turn the car over to Maxine. She offered to pay him with Mexican pesos, which is not legal tender in the United States. Enrique refused the tender of payment but then reached an agreement with Maxine to change the price for the car to $6,000 and to postpone the time for performance for a week. This agreement to change the performance is called an accord. When the agreed-upon performance is completed, it will be known as a satisfaction. The next day Maxine told Enrique that she had changed her mind and was not going to buy the car. Because this occurred before the time for the performance had arrived, it is known as an anticipatory breach. Enrique would not able to ask the court to order specific performance, because the subject matter of the contract was not unique. Similarly, because the parties had not agreed on damages at the time of the execution of the contract, no liquidate damages existed. If Enrique suffered no actual monetary loss because of the breach of contract by Maxine, he would be able to recover only damages from her in court, plus incidental damages to take care of any reasonable expanses resulting from the breach. Enrique owed a duty to Maxine to mitigate the damages – that is, keep them as low as possible. This case was not one involving exemplary damages or punitive damages, such as double or triple the amount of actual damages. The statute of limitations – that is, the time limit for bringing suit – had not run out.
VI. PUZZLING OVER WHAT YOU LEARNED
Caveat: Allow squares for spaces between words and punctuation (apostrophes, hyphens, etc.) when filling in crossword.
Across
2. The failure of a party to a contract to carry out its terms. BREACH OF CONTRACT
9. One who transfers a right by assignment. ASSIGNOR
12. Compensation in money for loss or injury. DAMAGES
13. The transfer of a right from one person to another. ASSIGNMENT
14. One to whom a right is transferred by assignment. ASSIGNEE
Down
1. The relationship that exists between two or more contracting parties. PRIVITY OF CONTRACT
3. Announcement before time for performance of a breach of contract. ANTICIPATORY BREACH
4. Damages in name only. NOMINAL DAMAGES
5. Discharging a contract by doing that which one agreed to do. PERFORMANCE
6. Damages agreed to at the time of the execution of a contract. LIQUIDATED DAMAGES
7. A time that may be fairly allowed depending on the circumstances. REASONABLE TIME
8. Lessen; keep as low as possible. MITIGATE
10. An agreement whereby an original party to a contract is replaced. NOVATION
11. The transfer of a duty by one person to another. DELEGATION
Source: Brown, G. W., & Kauffman, K. D. (1998). Legal terminology. Prentice Hall.
CHAPTER 19: Contract Requirements, Book 1, Pages 187-190
Edited by Nguyễn Nhật Linh
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