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Welcome to my Law blog specifically intended as an aid to law students. I will post comments and white papers, from time to time, and I am happy to carry on conversations with students who are in need of help in law school.


I am most conservative and appropriate in my approach so if you comment and/or have questions to ask, please do so with an equal degree of appropriateness.



I am a Professor of Law at Concord Law School, an Internet Law School located in Los Angeles, though I live, teach and otherwise work out of Lakewood, Colorado, resting up against the foothills just west of Denver.

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I have no set schedule of posting, but I hope you will check in from time to time.

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Tuesday, May 11, 2010

4 – Contract Performance (Breach of Contract)

4 – Contract Performance (Breach of Contract)

PLEASE NOTE THAT THE FOLLOWING IS TAKEN FROM SOME OF MY CLASS NOTES, SOME OF WHICH IS MY OWN PERSONAL WORK AND SOME OF WHICH BELONGS TO CONCORD LAW SCHOOL.  IT IS POSTED TO HELP MY IL STUDENTS IN PARTICULAR.  IT CANNOT BE DISSEMINATED WITHOUT EXPRESS, WRITTEN PERMISSION.

Now, we finally reach what many of you have been longing for. So remember, don’t jump ahead to breach before you have considered conditions.

As an example, suppose a product is defective and there is no time to cure, or that Seller failed to cure and Buyer failed to revoke acceptance in a timely fashion. THIS is a breach. But what kind of breach? Breaches can be either material or minor.

It would be a material breach if it passes the six-factor test explained in the Walker & Co. v. Harrison case:

     1.) Extent injured party will benefit
     2.) Extent the injured party may be compensated in damages
     3.) Extent breaching party has performed
     4.) Hardship on breaching party
     5.) Willful, necessary or innocent
     6.) Certainty that breachor will perform

You don’t really have to memorize the foregoing, but the point is you must determine if the breach is material or minor. If material, the Buyer has no duty to perform and can rescind the contract and get all of his money back. If the breach is minor, then he can sue for damages, but must perform and pay.

You CAN make some arguments for the Seller to avoid having to give all Buyer’s money back and take all of the goods back, even if the breach is material. One such argument is that of Divisibility. Seller can claim that the contract is divisible — that some of the goods were NOT defective and the total contract should be divided between the non-defective goods and the defective goods. So a breach should only apply to the defective goods and non-defective goods were properly performed and thus Seller’s liability is only for the breach of non-defective goods. Not all contracts are divisible, though. For example, the purchase of a computer is not divisible since one cannot cut the computer in pieces or even take the computer apart and require the Buyer to take the parts that are not defective. Now, if the contract is for the sale of ten computers and nine of the ten are not defective, divisible would work. There would be ten separate contracts for a single computer. Nine contracts would be enforceable since the computers are non-defective. One contract would be in breach due to a defective computer.

Another argument is that a breaching (Defaulting) party should be allowed to an offset against damages – “Recovery by a Breachor.” You have to be careful here because at common law, a breaching party could never recover, but now, in those jurisdictions adopting the Restatement 2d, 374, position, there is limited restitution. The party in breach is entitled to restitution for any benefit that he has conferred by way of part performance, or for reliance in excess of the loss that he has caused by his own breach. The theory is quasi-contract (where the court fashions a remedy even though a contract is not proven under the facts).

On the other hand, for the sale of goods, the UCC (2-718) permits a defaulting buyer to obtain restitution of payments minus one of two figures: $500 or 20% of the buyer’s obligation if the latter is less than $500. The buyer’s claim for restitution is subject to a further offset in the amount of the seller’s actual damages and the value of benefits received by the buyer as a result of the contract. The buyer’s rights may be curtailed or expanded by a valid liquidated damages clause.

Professor Doug Holden
© 2010. Douglas S. Holden. All rights reserved.

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