Breach of Contract Remedies

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Questions and Answers

In the context of modern contract law, which statement best reflects the instrumentalist view's impact?

  • The judiciary adheres strictly to precedents set during the steamship era, ensuring consistent application of contract law.
  • Courts prioritize the interests of large corporations, recognizing their significant role in modern commerce.
  • Courts rigidly enforce contracts as written, emphasizing freedom of contract above all else.
  • The judiciary increasingly acknowledges the economic and psychological factors influencing contracts, moving away from strict enforcement. (correct)

What is a key challenge facing current contract principles given the evolution of the market?

  • The relevance of rules developed in earlier eras, such as the steamship era, to today's digital age. (correct)
  • The over-reliance on good faith negotiations.
  • The strict adherence to the principle of freedom of contract.
  • The limited recognition of psychological factors in contract formation.

Which of the following is a primary concern regarding the relevance of traditional contract principles in contemporary business practices?

  • The lack of emphasis on good faith performance in contracts.
  • The balance of power between individual consumers and large corporations.
  • The extent to which these principles account for privacy interests in modern transactions. (correct)
  • The complexity of modern legal language used in contracts.

How does modern contract law grapple with power imbalances between contracting parties?

<p>By accounting for the scenario where a single individual negotiates with a large corporation. (C)</p> Signup and view all the answers

In Bhasin v Hrynew, what specific obligation regarding contract performance was imposed by the Supreme Court of Canada?

<p>Good faith obligations related to the performance of the contract. (A)</p> Signup and view all the answers

Under what circumstance(s) does the parol evidence rule have the least strength?

<p>When the contract is a standard form contract created by one party and the oral term simply adds to the written terms. (A)</p> Signup and view all the answers

A company enters into a detailed written contract with a supplier, including a limitation of liability clause. Prior to signing, the supplier's representative orally assures the company that this clause will not apply under certain circumstances. If those circumstances arise and the company sues, what is the most likely outcome regarding the oral assurance?

<p>The court may consider the oral assurance as evidence to rebut the presumption that the written contract represents the complete agreement, considering the potential contradiction. (B)</p> Signup and view all the answers

Which statement best describes the relationship between the parol evidence rule and proving misrepresentation or warranty claims?

<p>The parol evidence rule poses challenges to, but does not necessarily eliminate the possibility of, proving misrepresentation or warranty claims. (B)</p> Signup and view all the answers

A contract for the sale of goods includes a clause stating 'This agreement constitutes the entire agreement between the parties.' Prior to signing, the seller orally promised expedited delivery. The written contract does not mention delivery speed. If the seller does not provide expedited delivery, can the buyer enforce the oral promise?

<p>No, because the 'entire agreement' clause indicates the written contract is a complete and final expression of the parties’ agreement, barring evidence of the prior oral promise. (C)</p> Signup and view all the answers

In a dispute over a written construction contract, one party seeks to introduce email correspondence from before the contract was signed. The email contains details about specific materials to be used, which are not explicitly mentioned in the final written contract but also do not contradict it. Under the parol evidence rule, is this email admissible as evidence?

<p>Admissibility depends on whether the written contract contains an integration clause stating that it is the complete and final agreement; if so, the email is likely inadmissible. (C)</p> Signup and view all the answers

Which of the following scenarios best exemplifies the general principle that a court will not compel specific performance of a contract?

<p>A famous artist breaches a contract to paint a portrait, and the client sues, seeking a court order to force the artist to complete the painting. (A)</p> Signup and view all the answers

A software company, 'Code Gurus,' contracts with 'Startup X' to develop a mobile application. Halfway through the project, Code Gurus demands a 50% increase in price due to underestimation of the project's complexity. Startup X refuses to pay the increased fee, and Code Gurus stops working. Which of the following is true regarding Startup X's options?

<p>Startup X can sue Code Gurus for damages resulting from the breach of contract, but must continue to fulfill its own obligations under the original agreement. (A)</p> Signup and view all the answers

Sarah hires a caterer, 'Gourmet Grub,' for her wedding. The contract stipulates a specific menu and service style. Two weeks before the wedding, Gourmet Grub informs Sarah that they can no longer provide the agreed-upon menu due to a supplier issue, but offer a cheaper, less desirable alternative. If Sarah refuses the alternative and hires another caterer at a higher cost, what damages can she likely recover from Gourmet Grub?

<p>The difference between the original contract price with Gourmet Grub and the cost of hiring the new caterer, representing the direct loss suffered. (A)</p> Signup and view all the answers

A construction company, 'Build It Right,' enters into a contract to build an office building for 'Develop Now.' Due to unforeseen economic downturn, Develop Now realizes they will not be able to afford the building. They inform Build It Right that they are backing out of the contract. Which statement accurately reflects Build It Right's legal position?

<p>Build It Right can sue Develop Now for damages equivalent to the profit they would have made on the project, compensating for their loss. (A)</p> Signup and view all the answers

John agrees to sell his car to Mary for $5,000, with delivery and payment scheduled for next week. Before the agreed-upon date, John informs Mary that he has decided not to sell the car. Mary finds an identical car elsewhere, but it costs her $5,500. What accurately describes Mary's entitlement?

<p>Mary is entitled to $500 from John, representing the difference in cost between the contract price and the replacement car. (D)</p> Signup and view all the answers

What distinguishes a contractual warranty from a representation?

<p>A warranty is a promise ensuring the truth of a statement, leading to liability if untrue, while a representation may not result in liability. (D)</p> Signup and view all the answers

In contract law, what is the primary impact of a breach of condition on the innocent party?

<p>The innocent party has the option to either affirm or disaffirm the contract. (A)</p> Signup and view all the answers

What is the key difference in the consequences of breaching a warranty versus breaching a condition in a contract?

<p>Breaching a condition allows the innocent party to terminate the contract, while breaching a warranty only allows for damages. (C)</p> Signup and view all the answers

What does it mean for an innocent party to 'affirm' a contract after a breach?

<p>To continue with their obligations under the contract, despite the breach, while also retaining the right to sue for damages. (C)</p> Signup and view all the answers

What is the significance of a 'repudiatory breach' in contract law?

<p>It allows the innocent party to treat the contract as terminated due to the other party's unwillingness or inability to fulfill their obligations. (D)</p> Signup and view all the answers

In the context of contract law, what does 'disaffirming' a contract entail for the innocent party?

<p>It signifies the innocent party's decision to end the contract due to a breach, releasing them from future obligations. (D)</p> Signup and view all the answers

According to the case 968703 Ontario Ltd v Vernon (2003), which factor is considered when determining if a breach deprives a party of substantially the whole benefit of the contract?

<p>The ratio of the obligation not performed to the obligation as a whole. (A)</p> Signup and view all the answers

Which of the following best describes an 'innominate term'?

<p>A term whose effect of breach depends on the severity of the consequences. (A)</p> Signup and view all the answers

If a contract is affirmed after a breach, what actions can the innocent party take?

<p>The innocent party must continue to perform their obligations under the contract; however, can also sue for damages from the breach whilst continuing to perform. (C)</p> Signup and view all the answers

Which scenario best illustrates a situation where a party might choose to disaffirm a contract?

<p>A major defect in a key component that renders the entire product unusable. (A)</p> Signup and view all the answers

Which of the following statements accurately distinguishes between rescission and damages for breach of contract?

<p>Rescission is an equitable remedy subject to the court's discretion, whereas damages for contract breach are awarded as a right upon proof of breach and loss. (D)</p> Signup and view all the answers

In the context of contract law, what is the primary consideration that mitigates against awarding damages for innocent misrepresentation?

<p>The party making the statement did not consciously guarantee its truthfulness or agree to pay damages for its inaccuracy. (A)</p> Signup and view all the answers

A party claims an oral warranty exists alongside the written terms of a contract. What legal principle presents a hurdle to demonstrating this warranty?

<p>The Parol Evidence Rule (C)</p> Signup and view all the answers

What defines 'parol evidence' in the context of contract law?

<p>Any evidence beyond the words of the contract itself, including oral agreements or prior negotiations. (A)</p> Signup and view all the answers

Under what circumstances does the Parol Evidence Rule most logically apply?

<p>When the contract is the result of negotiations between parties of equal strength and is intended to be a complete and final agreement. (A)</p> Signup and view all the answers

In what scenario might parties agree to a mix of written and oral contract terms, despite having a written estimate?

<p>When the details of the work, such as timelines and materials, are discussed and agreed upon outside of the written estimate. (A)</p> Signup and view all the answers

Why might a general contractor's estimate, though written, often be supplemented by oral agreements?

<p>Because estimates typically cover only the general scope of work and price, leaving details to be discussed and agreed upon orally. (D)</p> Signup and view all the answers

A homeowner and a contractor negotiate an estimate detailing the scope and price for a kitchen renovation. After agreeing to the written estimate, they verbally agree on a specific timeline and the type of tile to be used, which isn't in the estimate. If a dispute arises over the timeline, can the homeowner introduce evidence of the verbal agreement in court? Assume that the written estimate does not contain a clause stating that it is the complete and final agreement.

<p>Maybe, because the evidence may be admissible, as the Parol Evidence Rule might not apply to terms discussed after signing the contract (D)</p> Signup and view all the answers

John hired Jane to walk his dog every Wednesday. Jane breached the contract by not showing up. According to the expectancy principle, what is the primary goal of awarding damages to John?

<p>To compensate John for the loss he suffered as a direct result of Jane's breach. (C)</p> Signup and view all the answers

Which of the following is NOT a limitation to the expectancy principle when determining contract damages?

<p>Punitive measures (D)</p> Signup and view all the answers

John contracted with a local farmer to purchase 100 bushels of apples for his pie shop. The farmer breached the contract and John had to buy the apples from a more expensive supplier. Under the expectancy principle, which of the following would be considered a direct damage?

<p>The difference in price John had to pay to the new supplier. (D)</p> Signup and view all the answers

A construction company breaches its contract with a client, causing significant delays in the completion of a project. Which of the following losses would likely be recoverable as damages, assuming they meet the requirements of causation and foreseeability?

<p>The increased costs the client incurs due to the delay, such as renting temporary office space. (B)</p> Signup and view all the answers

A software company contracts to provide a customized program to a business, but it delivers the software late. As a result, the business misses a critical deadline and loses a major client. Which principle will a court consider when determining damages?

<p>The principle of foreseeability. (A)</p> Signup and view all the answers

A bakery contracts with a supplier for a special type of flour, but the supplier breaches the contract. To mitigate its losses, the bakery purchases a similar flour from a local store at a higher price. Which statement aligns with the principle of mitigation?

<p>The bakery must demonstrate it took reasonable steps to minimize its losses. (C)</p> Signup and view all the answers

A landscaping company breaches its contract with a homeowner, failing to plant agreed-upon trees. The homeowner hires another company at a higher cost but also adds additional landscaping features. What damages can the homeowner claim?

<p>Only the difference in cost between the original contract and the replacement, excluding the additional features. (A)</p> Signup and view all the answers

An author signs a contract with a publisher, who then fails to publish the book. Which potential loss could the author claim as damages if they can prove causation and foreseeability?

<p>The royalties the author would have earned from book sales. (C)</p> Signup and view all the answers

Flashcards

Breach of Contract

Failure of a party to fulfill their contractual obligations.

Monetary Damages

Compensation awarded to the aggrieved party for losses from a breach.

Specific Performance

A legal remedy that forces a party to fulfill their contract obligations.

Aggrieved Party

The party that suffers due to the breach of contract.

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Contract Obligations

The duties each party must perform under the contract.

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Contract Damages

Monetary compensation for losses due to a breach of contract.

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Expectancy Principle

Contract damages aim to place the injured party in the position they would have been if fulfilled.

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Causation in Breach

Loss must directly result from the breach to claim damages.

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Foreseeability

Loss must have been a foreseeable result of the breach to be compensable.

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Mitigation

Obligation to minimize losses after a breach occurs.

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Types of Losses

Includes lost profits, delivery expenses, and replacement costs from a breach.

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Sally Wertheim Case

Legal precedent emphasizing placing parties in the position they would have been without breach.

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Recission

An equitable remedy where the court can undo a contract.

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Damages for Breach

Compensation owed when a contract is breached, mandatory if proven.

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Innocent Misrepresentation

A false statement made without knowledge of its inaccuracy, not guaranteed.

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Parol Evidence Rule

Prevents admission of external evidence to alter a written contract.

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Oral Terms

Spoken agreements that may accompany written contracts, but are often inadmissible.

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Equitable Doctrines

Legal principles involving fairness, like recission.

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Claimant’s Burden

The obligation of the claimant to prove the existence of terms or damage.

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Negotiated Agreement

A contract formed through discussions and mutual consent of the parties.

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Good Faith Performance

The obligation to perform contractual duties honestly and fairly.

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Bhasin v Hrynew

A case that established obligations of good faith in contract performance.

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Instrumentalist View

The perspective that contracts should reflect economic and psychological realities.

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Challenges of Contract Principles

Concerns whether existing contracts meet modern market needs.

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Power Imbalances in Contracts

The effect of the law on negotiations between individuals and corporations.

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Weak Parol Evidence

Occurs when oral terms merely add to, without contradicting, the written contract.

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Strong Parol Evidence

When oral evidence strongly contradicts the written terms, creating a presumption against it.

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Limitations of Liability Clause

A contract section that limits the damages one party can claim against another.

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Misrepresentation

A false statement that induces one party to enter a contract, which can make the contract voidable.

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Affirm or Disaffirm

A choice made by the innocent party after a breach to continue or end the contract.

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Condition vs. Warranty

Conditions allow for repudiation upon breach; warranties do not.

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Repudiatory Breach

Serious breach allowing the innocent party to terminate the contract.

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Breach Impact Factors

Criteria used to assess if a breach caused substantial loss.

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Innocent Party's Rights

Options available to the innocent party after a breach: affirm or disaffirm.

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Breach of Innominate Condition

Breach that may be treated as repudiatory, depending on consequences.

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Seriousness of Consequences

A key factor in determining the impact of a breach on benefits.

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Benefits of Contract

The positive outcomes expected from fulfilling a contract.

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Ratio of Obligations

Comparison of performed versus unperformed obligations in a contract.

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Electing Remedies

The process of choosing how to respond to a breach: affirming or disaffirming.

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Study Notes

Remedies for Breach of Contract

  • General principle: A contract cannot compel someone to perform.
  • Subject to exceptions, like specific performance.
  • Monetary damages are the typical remedy, representing losses incurred due to the breach.

General Principles

  • If one party breaches, the other party cannot simply walk away.
  • Both breaching and aggrieved parties must continue their obligations.
  • Damages (losses from breach) are the only recourse.

Example

  • John and Jane have a contract for Jane to walk John's dog weekly.
  • Jane fails to walk the dog on a Wednesday.
  • John cannot automatically void the remainder of the contract.
  • Instead, John's recourse is a claim for damages for the specific loss incurred due to the breach.

Expectancy Principle

  • Contract damages compensate for lost expectations, not to punish a party.
  • The aggrieved party should be placed in the same position as if the contract had been fulfilled.

Contract Damages

  • Not a punishment, but replacement for the loss resulting from the breach.

Limitations to Expectancy Principle

  • Causation: If lost directly results from the breach.
  • Foreseeability: Losses must be predictable consequences of the breach.
  • Mitigation: The aggrieved party must take reasonable steps to minimize their losses.

Contract Terms and Oral Statements

  • Oral statements during contract negotiations may or may not become part of the contract. Courts differentiates between warranties and other representations.
  • A statement of past or present fact must be material to the transaction, must be untrue at the time it was made, and must be pre-contractual

Parol Evidence Rule

  • Oral statements are not admissible to contradict a written contract (unless the contract is incomplete or ambiguous).
  • It deals with a written contract and the terms that were agreed upon during negotiations.
  • It creates a presumption that the written document represents the complete/only terms of agreement.

Week 3: Classification of Terms

  • Classifying terms (conditions vs. warranties) determines the innocent party's rights upon breach.
  • Conditions: A breach allows immediate termination.
  • Warranties: A breach only gives a right to damages, not termination.

Week 4: Duty of Honest Contractual Performance

  • A general duty of honest performance exists in many contracts. The good faith standard requires parties to act in ways that can prevent undue, unjustifiable exploitation of the other party.

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