What Is a Breach of Contract?

A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. The breach could be anything from a late payment to a more serious violation, such as failing to deliver a promised asset.

A contract is binding, and a written one will be upheld in court if it is not considered fraud.

If it can be proved that a contract was breached, the remedy would generally be to give the victim what they were initially promised. A breach of contract is not considered a crime or tort, and punitive damages are rarely awarded for failing to perform promised obligations.

Breach Of Contract: The Basics

• A breach of contract occurs when one party in a binding agreement fails to deliver according to the terms of the agreement.
• A breach of contract can happen in both a written and oral contract.
• The parties involved in a breach of contract may resolve the issue among themselves or in a court of law.
• There are different types of contract breaches, including a minor or material breach and an actual or anticipatory breach.

Understanding a Breach of Contract

A breach of contract is when one party breaks the terms of an agreement between two or more parties. This includes when an obligation stated in the contract is not completed on time—for example, you are late with a rent payment—or when it is not fulfilled, such as a tenant vacating their apartment owing six months’ back rent.

Sometimes the process for dealing with a breach of contract is written in the original contract. For example, a contract may state that the offender must pay a $25 fee and the missed payment in case of late payment. Suppose the consequences for a specific violation are not included in the contract. In that case, the parties involved may settle the situation, leading to a new contract, adjudication, or resolution.

Types of Contract Breaches

You can think of a contract breach as a  may think of a contract breach as either minor or material

• Minor breach: A minor breach happens when you don’t receive an item or service by the due date. For example, you bring a suit to your tailor for a custom fit. The tailor promises (an oral contract) that they will deliver the adjusted garment in time for your important presentation but, in fact, they deliver it a day later.
• Material breach: A material breach is when you receive something different from what was stated in the agreement. Say, for example, that your firm contracts with a vendor to deliver 200 copies of a bound manual for an auto industry conference. But when the boxes arrive at the conference site, they contain gardening brochures instead.

Further, a breach of contract generally falls under one of two categories:

• Actual breach: When one party refuses to fully perform the terms of the contract.
• Anticipatory breach: When a party states in advance that they will not deliver on the contract terms.

Legal Issues Concerning a Breach of Contract

A plaintiff who brings a lawsuit to court claiming that there has been a breach of contract must first establish that a contract existed between the parties. The plaintiff also must demonstrate how the defendant—the one against whom a claim or charge is brought in court—failed to meet the contract’s requirements.

Is the Contract Valid?

The simplest way to prove that a contract exists is to have a written document that both parties sign. It’s also possible to enforce an oral contract, though certain types of agreements still would require a written contract to carry any legal weight. These contracts include the sale of goods for more than $500, the sale or transfer of land, and contracts that remain in effect for more than one year after the parties sign the agreement.

Courts will review the responsibilities of each party of the contract to determine whether they have fulfilled their obligations. Courts also will examine the contract to see if it contains any modifications that could have triggered the alleged breach. The plaintiff must notify a defendant that they are in breach of contract before advancing to legal proceedings.

Possible Reasons for the Breach

The court will assess whether or not there was a legal reason for the breach. For example, the defendant might claim the contract was fraudulent because the plaintiff misrepresented or concealed material facts.

The defendant could alternatively argue that the contract was signed under duress, adding that the plaintiff compelled them to sign the agreement by applying threats or using physical force. In other cases, there might have been errors made by both the plaintiff and the defendant that contributed to the breach.

How to Avoid a Breach of Contract

To avoid a breach of contract lawsuit, you should check any contract you sign for three things.

1. Clarity: The contract’s language should be clear and precise. Suppose the other party is not a native speaker of the contract’s language. In that case, it may be worthwhile to hire an interpreter to ensure that everyone understands their roles and expectations under the contract.
2. Expectations: You and any other parties signing the contract should understand its expectations and know that you can fulfill them. Your ability to meet those expectations should not rely on future amendments because those may not happen.
3. Legality: To be binding, your contract needs to be legal where it is signed. If you are unsure, work with a lawyer specializing in contract law before anyone commits to signing.

You can also avoid breach of contract lawsuits by carefully selecting the people or companies you work with. Take time to research their professional reputations and legal history. You may not wish to do business with them if they have previously been involved in breach of contract lawsuits.

Damages and Legal Remedies

Generally speaking, the goal of contract law is to ensure that anyone wronged is basically left in the same economic position they would have been in had no breach occurred. A breach of contract is not considered a crime or even a tort, and punitive damages are rarely awarded for failing to perform promised obligations, with payouts limited to the figures listed in the contract.

For example, if you completed a job for which a contract stated you would get paid $50,000, but you only got $20,000, you could be awarded damages of $30,000.

Normally, a party whose contract was breached cannot claim more than the money they were initially owed—as the contract states.

However, the reliance damages doctrine offers some exceptions in particular circumstances. Additional monetary damages may be awarded if it can be proved that reliance on the contract being fulfilled triggered other connected expenses, such as lifeguard equipment being bought based on the assumption laid out in the contract that a pool would be built.

In such cases, those harmed will be rewarded extra damages only if they did their best to get themselves out of that unfavorable situation—such as, in the example above, by selling the lifeguard equipment.

Economics of a Breach of Contract

Economically, the costs and benefits of upholding or breaching a contract determine whether either party has an economic incentive to breach the contract. If the net expected cost to a party of breaching a contract is less than the expected cost of fulfilling it, then that party has an economic incentive to breach the contract. Conversely, if the cost of fulfilling the contract is less than the cost of breaking it, it makes sense to respect it.

Furthermore, when the expected cost to each party of following through with a contract is greater than the expected benefit, both parties are incentivized to forgo the transaction in the first place or mutually agree to void the contract. This may occur when the relevant market or other conditions change over the course of the contract.

Example of a Mutually Beneficial Breach of Contract

A farmer agrees in the spring to sell grapes to a winery in the fall, but over the summer, the price of grape jelly rises, and the price of wine falls. The winery can no longer afford to take the grapes at the agreed price, and the grape farmer could receive a higher price by selling to a jelly factory. In this case, it may be in the interest of the farmer and the winery to breach the contract.

If the parties were to uphold the contract, the farmer would miss out on an opportunity to sell at higher prices. The winemaker would suffer by paying more than it can afford, given what it would receive for the resulting wine at the new market price. Consumers would also be punished; the change in relative prices for grape jelly and wine signals that consumers want more jelly and less wine.

Economists recognize that upholding this contract (making more wine and less jelly, contrary to consumer demand) would be economically inefficient for society. Breaching this contract, therefore, would be in the interests of everyone: the farmer, the winemaker, the jelly maker, and the consumers.

Societal Effects of Breach of Contract

It could also be the case that a breach of contract is in the interest of society as a whole, even if it may not be favorable to all parties. Suppose the total net cost of breaching a contract to all parties is less than the net cost to all parties of upholding the contract. In that case, it can be economically efficient to breach the contract, even if that results in one (or more) parties to the contract being harmed and left worse off economically.

This is an example of what economists call Kaldor-Hicks Efficiency: If the gains to the winner from breaching the contract outweigh the losses to the loser, then society as a whole can be made better off by breaching the contract.

What Is Considered a Breach of Contract?

A breach of contract occurs when one party fails to fulfill its obligations as outlined in the contract. That could include something relatively minor, such as being a couple of days late on a payment or something more serious.

Can I Sue for Breach of Contract?

If you have a contract with another person or entity and they fail to fulfill the contract as agreed, you can file a lawsuit to recover any damages you lost. Before filing a lawsuit, though, you will want to speak with a lawyer who specializes in contracts to ensure that your case can succeed.

Is Breaching a Contract a Crime?

Breaching a contract is generally not considered a criminal offense unless it involves something like a fraud. It is considered a matter between private parties rather than something that affects society.

What Are the Consequences of Breaching a Contract?

That depends. Generally speaking, if it can be proved that there was a contract and that it was breached, the party wronged should be left in the same economic position they would have been in had no breach occurred.

What Is the Most Often Awarded for Breach of Contract?

If you successfully take someone to court for breach of contract, the most common remedy is compensatory damages. Usually, a court will order the person who breached the contract to pay you enough money so that you can go elsewhere to get the services they failed to provide.

Contracts are designed to be upheld and give all parties to the agreement peace of mind. However, there are cases when they are breached, and a solution must be found to remedy a failure to perform promised obligations.

While not strictly a crime, a contract must be honored—unless all parties agree to renege on it—and it is difficult to wriggle out of one. The punishment for breaching may already be outlined in the contract itself. Alternatively, a resolution might need to be found, forcing the breacher to abide by its original commitment.

Quasi-Contract

A quasi-contract is a court-created legal agreement between two parties who did not have a previous obligation to each other.

What Is a Quasi Contract?

Quasi-contract is another name for a contract implied in law, which is a remedy for a dispute between two parties that don’t have a contract. A quasi-contract is a legal obligation—not a traditional contract—in which a judge decides for one party to compensate the other. Thus, a quasi-contract is a retroactive judgment to correct a circumstance in which one party acquires something at the expense of the other.

These arrangements may be imposed when goods or services are accepted by a party even though they might not have been requested. The acceptance then creates an expectation of payment for the providing party.

• A quasi-contract is a retroactive remedy between two parties with no contract.
• A judge creates it to correct a circumstance in which one party acquires something at the expense of the other.
• The plaintiff must have furnished an asset, item, benefit, or service to another party such that the defendant should have known to pay for it.
• The defendant must have accepted or acknowledged receipt of the item but made no effort or offer to pay for it even when they knew they should.

Understanding Quasi Contracts

Under common-law jurisdictions, quasi-contracts originated in the Middle Ages under a form of action known in Latin as indebitatus assumpsit, which translates to being indebted or to have undertaken a debt

This legal principle was the courts’ way of making one party pay the other as if a contract or agreement already existed between them. So the defendant’s obligation to be bound by the exchange is viewed to be implied by law. The quasi-contract was typically imposed to enforce restitution obligations from its earliest uses.

It would be handed down, ordering the defendant to pay restitution to the plaintiff. The restitution, known in Latin as quantum meruit, or the amount deserved, is calculated according to the amount or extent to which the defendant was unjustly enriched.

This remedy is also called a constructive contract, as it is constructed by a judge when there is no existing contract between two parties. If an agreement or contract is already in place, a judge will not create a quasi-contract because there is no need to do so.

The implied-in-law contract is an alternate name for a quasi-contract.

Purpose

Quasi-contracts outline the obligation of one party to a second when the first receives a benefit or property from the second. A person might knowingly or unknowingly give something of value to another without an agreement being made. It is assumed that a reasonable person would pay for it, give it back, or otherwise compensate the giver upon receiving the item or service.

Quasi-contracts are awarded as a remedy to a giver to keep them from being taken advantage of and keep others from being unjustly enriched.

Legality

Because the agreement is constructed in a court of law, it is legally enforceable, so neither party has to agree to it. The purpose of the quasi-contract is to render a fair outcome in a situation where one party has an advantage over another. The defendant—the party who acquired the property—must pay restitution to the plaintiff—the wronged party—to cover the item’s value.

Requirements

Certain aspects must be in place for a judge to issue a quasi-contract:

• One party, the plaintiff, must have experienced a loss due to a transfer.
• The defendant must have or acknowledged receipt of and retained the value item but made no effort or offer to pay for it.
• The plaintiff must then demonstrate through the burden of proof why the defendant receives an unjust enrichment.
• The item or service cannot have been given as a gift.
• The defendant must have been given a choice to accept or deny the benefit.

What are the differences between a Quasi Contract and vs. Contract? 

Quasi Contract

• Only Implied in Law: Implied in law means that a payment obligation is created by law, in this case, a judge who renders a remedy.
• Ordered by a Judge: Quasi-contracts are ordered by a judge because contracts implied in law are not covered under contract law.
• No Contract Exists: Quasi-contracts are not contracts; they are remedies for disputes between parties that result from one party receiving an unjust enrichment.

Contract

• Can Be Express or Implied: There are generally two types of contracts, express and implied. An express contract is one where terms are laid out, and both parties agree to abide by the terms. An implied contract is one where mutual assent is given for an exchange, but there are no explicit terms.
• Initiated by Party Agreement: The parties involved agree to the exchange.
• A Legal Contract Exists: Express and implied contracts are legally recognizable and enforceable.

Types of Quasi Contract

The types of quasi-contracts are outlined in sections 68 through 72 of the Contract Act of 1872, as follows:

• Section 68: A person who is incapable of making contracts is provided with the supplies by a third party on behalf of the incapable person or anyone he is legally obligated to support. Third parties can recover the supplier’s price from the unable person’s property.
• Section 69: A person who makes a payment on behalf of another party is obligated to pay the money according to law. Therefore, the person who made the payment is entitled to reimbursement from the other party.
• Section 70: When a person does something lawfully for another person or delivers something without intending to do the same gratuitously, the receiving party is obliged to compensate the former party.
• Section 71: A person who finds goods that belong to another party and takes ownership of them has the same responsibility as a bailee.
• Section 72: Someone who has been paid, delivered under coercion, or mistakenly must repay or return the money.

Unjust enrichment happens when an individual benefits from a situation inappropriately, either because of luck or another person’s bad fortune.

Advantages and Disadvantages of Quasi Contracts

Advantages of using a quasi-contract include that these legal instruments are typically based on the unjust enrichment principle. This prevents one party from gaining an undue advantage over another. Thus, it is a safeguard for innocent victims of wrongful acts and a legal alternative to compensation for damages, ensuring that the one who provides services or goods gets compensated.  In order to comply with quasi-contracts, all parties involved are obliged to follow them, as they are created by court order.

There are also some drawbacks or limitations. Those who received benefits negligently, unnecessarily, and by miscount will not be held liable. Although a person can be liable under a quasi-contract, he cannot be charged more than the amount he received. Thus, no provision is available for the recovery of more amount than the plaintiff has received. If the plaintiff obtains only part of the services/goods he originally contracted for, he cannot claim compensation as the whole amount is not recovered.

If there’s an express agreement between the parties, plaintiffs must give up all profits. Though a quasi-contract is a legal remedy that protects the unjust enrichment of the beneficiaries of the services or goods, a plaintiff can get relief only if he can prove that he has suffered losses due to the breach of the defendant’s contractual obligations.

Quasi Contract Pros and Cons

Pros

• Prevents one party from unfairly benefitting at the expense of another
• Court order is legally binding

Cons

• Not suitable in all cases
• Amount cannot include additional damages

What Are Quasi Contracts?

A quasi-contract is also known as an “implied contract,” in which a defendant is ordered to pay restitution to the plaintiff, or a constructive contract, meaning a contract that is put into existence when no such contract between the parties exists.

What Is a Quasi Contract in Simple Words?

A quasi-contract is an obligation between two parties created by a court order rather than an agreement between the parties to prevent enrichment.

What Is a Quasi Contract Example?

An example might be if Person A offers to pay Person B to help them move to a new apartment and agrees to pay the $100 for the help. The agreement is verbal and not a formal contract. Person B commits to the job, turns down a different job, and shows up on the required day to help with the move. But when Person B shows up, Person A tells them they are not needed after all and that the job is canceled. Person B files a civil suit to have the missing money paid, and a quasi-contract might be instituted if the judge agrees that money is owed.

With a quasi-contract, a defendant must behave as if there was a legal contract with the plaintiff. It is designed so that one party is not unjustly enriched at the expense of the other. Unjust enrichment is when someone benefits unfairly due to circumstance or the other party’s misfortune. A quasi-contract is rendered by a judge, as a settlement, after the fact when a formal contract otherwise did not exist

Statute of Frauds: Purpose, Contracts It Covers, and Exceptions

The statute of frauds is a legal concept that stipulates that certain types of contracts must be executed in writing to be valid.

What Is the Statute of Frauds?

The statute of frauds is a legal doctrine that requires certain types of contracts to be in writing. The most common contracts covered by the statute of fraud include the sale of land, agreements involving goods worth over $500, and contracts lasting one year or more.

The statute of frauds aims to prevent fraud or other injury. These purposes are often described as being evidentiary and cautionary. The evidentiary function of the statute of frauds is to provide documentation that a legal, binding agreement exists. The cautionary function of the statute of fraud is meant to make each party more intent, serious, and deliberate in their transacting.

The statute of frauds was adopted in the U.S. primarily as a common law concept—that is, as unwritten law. However, it has since been formalized by statutes in most states. In a breach of contract case where the statute of frauds applies, the defendant may raise it as a defense as the burden of proof is on the plaintiff. The plaintiff must establish that a valid contract was indeed in existence.

WHAT YOU NEED TO KNOW ABOUT THE STATUTE OF FRAUDS:

• The statute of frauds is a common law concept requiring written contracts for binding certain agreements.
• The statute applies to land sales and most purchases of goods over $500.
• There are significant exceptions, such as oral contracts where work has already started.
• The statute of frauds varies somewhat between states in the United States.
• Many aspects of the statute of frauds are included in the Restatement (Second) of the Law of Contracts.

Contracts Covered by the Statute of Frauds

As applied in the United States, the statute of frauds generally requires the following types of contracts to be written to be legally binding.

• Any promises made with marriage, including gifts like an engagement ring.
• Contracts that cannot be completed in less than one year.
• Contracts for the sale of land. (Leases need not be covered unless they’re of a year or more in length.)
• Promises to pay an estate’s debt from the personal funds of the executor. (However, promises to pay such debt from the estate’s funds are not subject to the statute of frauds.)
• Contracts for selling goods above a specific dollar amount, typically $500.
• A contract in which one person promises to pay another person’s debt is considered a surety and is subject to the statute of frauds.

Various legislative bodies outline statute of frauds requirements. The Restatement (Second) of the Law of Contracts is a legal treatise that oversees general principles of common contract law. In addition, Uniform Commercial Code (UCC) Article 2 outlines rules over the sale of goods.

Requirements of the Statute of Frauds

Not every written document is necessarily protected under the statute of frauds. Examples of some requirements of the statute of frauds include the following:

• Both parties must sign the agreement. Otherwise, the agreement is not enforceable.
• The quantity of goods shown in the written agreement differs from that in writing.
• Written rejection of the agreement is given within a specified time.
• Written correspondence must be properly dispatched; improper address or other failures to ensure safe transmission yield the correspondence invalid.
• A mistake by one party when the contract was made leads to a material effect on the agreed exchange, yielding the contract invalid.

Extensive federal and state laws outline specific requirements for any given contractual situation.

Emails and invoices can sometimes satisfy statute-of-fraud requirements for an enforceable contract.

Exceptions to the Statute of Frauds

In some situations, agreements that would ordinarily require a written contract under the statute of frauds may be enforceable without them.

Several exceptions relate to situations where oral agreements result in work beginning or financial outlays. Take a case in which steps are taken to create a series of specially manufactured items, such as monogrammed shirts. If the customer who commissioned them over the phone subsequently decides to cancel the order, they will likely still be responsible for at least partial payment.

The same will usually apply if improvements or modifications to a customer’s possessions are begun and canceled based on oral agreements. Take a situation in which a house painter purchases materials based on a homeowner’s request and begins to redecorate a house. The contractor would likely prevail if the homeowner reverses course and claims no firm painting agreement was in place. That’s because of what’s known as promissory estoppel.

Promissory estoppel is a “fundamental fairness” principle intended to remedy a substantial injustice. There are also cases of partial performance. The fact that one party has already performed its responsibilities under the agreement may serve to confirm that a contract existed.

Examples of the Statute of Frauds

Provisions for the statute of frauds are enforced by states based on federal codes. The Universal Commercial Code (UCC) in the U.S. provides a good example. It is the standardized set of business laws that regulate financial contracts. Most states have fully adopted the UCC.

In cases where articles of the UCC that affect the statute of frauds change, it may take time for those alterations to be reflected in every state’s laws. Some states, like Louisiana, also have long-standing variations from the norm in their statute of frauds and related regulations.

Before relying on the statute of frauds in any given situation, it is wise to research the statute-of-fraud provisions in your state or territory and seek legal advice as needed.

What Is the Meaning of the Statute of Frauds?

The statute of frauds is a body of legislation that requires certain contracts to be written to be valid. In addition, that written agreement often has stipulations such as delivery conditions or what must be included in that written agreement. The idea behind the statute of frauds is to protect parties entering into a contract from a future dispute or disagreement on the terms of the deal.

What Is an Example of Statute of Frauds?

Real estate, such as land sale, falls under the statute of frauds. In order to acquire land, you must enter into a written agreement. This is to ensure both parties agree to the exact area of land being sold, the exact terms of the agreement, and other relevant terms to the contract.

What Are Exceptions to the Statute of Frauds?

Even when not written, some contracts may still be enforceable to protect one party at a disadvantage. For example, one exception is when a seller makes specially manufactured goods for a buyer. If the seller can’t easily sell the goods to others in the normal course of business, they are protected by different rules. Another exception is when the seller has already made and received payment. In this case, the seller must furnish the agreed terms to the buyer since they have already received payment.

The statute of frauds is a law that deems certain types of verbal contracts non-binding and unenforceable without written evidence to support them. As was the case when this concept was brought alive in seventeenth-century England, its job is to ensure both parties in a contract are protected from fraudulent behavior.

Variations can exist, though, depending on where you live. In the U.S., certain states have different rules regarding the statute of frauds. And there are situations when a written agreement can become void or an oral agreement enforceable, such as after payment or work commences.

What Is a Specific Performance Clause?

This specialized remedy requires a defendant to complete the terms of a contract when money does not adequately compensate the injured party.

What Is a Specific Performance Clause?

A specific performance clause is a specialized type of equitable contractual relief that may require the defendant to complete the terms of a contract when the court believes that no other remedy (such as money) will adequately compensate the injured party.

Parties to an agreement may insert a specific performance clause into the contract to protect their interests in the event of a breach of contract by either party, especially when the awarding of a monetary award may be deemed insufficient.

For example, a contract for the sale of a specific piece of property, in which the owner pulls out, may result in a specific performance order requiring the seller to complete the sale to put the buyer in the position they would have enjoyed if the contract had been honored in the first place.

• A specific performance clause is part of a contract that calls for the party that breaches a contract to fulfill the terms of the contract (as opposed to paying a monetary penalty).
• Specific performance clauses are used primarily in cases where a monetary award would not be sufficient.
• To have a specific performance clause invoked, an injured party must prove that the contract is valid, that they have lived up to the terms of the contract, that the defendant could have done the same but did not do so, and that a monetary award is not sufficient.
• Specific performance is a type of equitable relief vs. legal (monetary) relief and is rarer than the latter.

How Specific Performance Clause Works

A specific performance clause is typically enforced by a court when money cannot adequately compensate the injured party, and the contractual obligation is unique or difficult to value.

In New York state, for example, a court will order specific performance only if the non-breaching party can prove that:

• The underlying contract is valid and enforceable;
• The plaintiff has performed (or the court believes it will perform) its contractual obligations;
• The defendant could perform its obligations but has failed to do so; and
• A monetary remedy is not sufficient.

In addition to real estate, which is considered unique, courts have deemed other commodities appropriate for specific performance clauses, including works of art, custom-made products, or items in short supply.

Specific Performance vs. Monetary Compensation

As noted above, specific performance is equitable relief. Equitable relief is a court-ordered action rather than a monetary award. Equitable relief is often granted when monetary compensation is not adequate. Monetary compensation is a type of legal relief.

The court may require that monetary damages are unavailable or, more likely, that it is difficult to calculate the actual amount of damages before a specific performance or some other form of equitable relief is ordered.

On the other hand, monetary compensation is a type of legal remedy and can include compensation for damages, reimbursement, or even punitive damages. Monetary compensation is a much more common type of remedy than specific performance.

What is an Example Specific Performance Clause?

Suppose an art collector paid $1 million for a famous van Gogh painting, but the seller changed their mind at the last minute and did not deliver it. In a normal contract transaction, the buyer would be entitled to their money back. If the contract included a specific performance clause, in the event of a breach of contract suit, the court would likely enforce the clause and require the seller to relinquish the painting rather than refund the buyer his money.

Sample Specific Performance Clause

“It is understood and agreed by the Parties that money damages would not be a sufficient remedy for any breach of this Agreement by any Party, and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief (including attorneys’ fees and costs) as a remedy of any such breach, without the necessity of proving the inadequacy of money damages as a remedy, including an order of the Bankruptcy Court requiring any Party to comply promptly with any of its obligations hereunder.”

Typically, specific performance disputes are more complicated than the example above. A recent example of this involves the contract between Elon Musk and Twitter for Musk to purchase the social media platform for $44 billion. Musk wants to back out of the agreement, and Twitter has threatened to take him to court to enforce the specific performance clause that both parties signed. Musk, however, contends that Twitter failed to disclose information about the number of bots (not humans) users. The resulting controversy could take years to resolve.

What is a specific performance clause?

A specific performance clause is a part of some contracts, agreed to by both parties, to require the contract to be completed even if one party breaches or fails to perform their obligations.

When will a court enforce a specific performance clause?

Specific performance clauses are enforceable only if the underlying contract is fair and equitable. If the court considers the contract to be one-sided or unfair, then enforcement of a specific performance clause is not likely.

How can a party defend against a specific performance clause?

Suppose the injured party delayed bringing their lawsuit for a limited period of time or otherwise didn’t perform their obligations or provided false information. In that case, a court will not likely enforce a contract’s specific performance clause.

The purpose of a specific performance clause is to protect both parties to a contract or agreement when simple monetary compensation would not be adequate. This could involve purchasing or selling unique property such as real estate, artwork, or other valuables.

A specific performance clause is typically enforceable as long as it is fair to both parties and the injured party can prove that the defendant failed to live up to their obligations and that they (the injured party) lived up to theirs. The injured party must also demonstrate that a monetary award is insufficient.

Liquidated Damages and Contracts

Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.

• Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties.
• These damages are paid out in the case of a breach of contract and are pre-estimated and spelled out in advance when the contract is signed.
• Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain.
• The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause when the contract is signed.

Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. In general, liquidated damages are designed to be fair rather than punitive.

Liquidated damages may be referred to in a specific contract clause to cover circumstances where a party faces a loss from assets that do not have a direct monetary correlation. For instance, if a party in a contract were to leak supply chain pricing information that is vital to a business, this could fall under liquidated damages.

What Are Liquidated Damages (LDs)? How They Work, With Example,

Liquidated damages represent a legal assessment for the payment of a specified sum if one of the parties is in breach of contract.

Example of Liquidated Damages

A common example is a design phase for a new product that may involve consultation with outside suppliers and consultants in addition to a company’s employees. A product’s underlying plans or designs might not have a set market value. This may be true even if the subsequent product is crucial to the progress and growth of a company.

These plans may be deemed to be trade secrets of the business and highly sensitive. If a disgruntled employee or supplier exposed the plans, it could greatly hamper the ability to generate revenue from releasing that product. A company would have to estimate in advance what such losses could cost to include this in a liquidated damages clause of a contract.

What are some Special Considerations with Contracts?

It is possible that the courts might not enforce a liquidated damages clause. This can occur if the monetary amount of liquidated damages cited in the clause is extraordinarily disproportional to the scope of what was affected by the breached contract.

Such limitations prevent a plaintiff from claiming an unsubstantiated exorbitant amount from a defendant. For instance, a plaintiff might not claim liquidated damages that amount to multiples of its gross revenue if the breach only affected a specific portion of its operations.

When the contract is signed, the courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause. This can provide a sense of understanding and reassurance of what is at stake if that aspect of the contract is breached. A liquidated damages clause can also give the parties involved a basis to negotiate for an out-of-court settlement.

The concept of liquidated damages is framed around compensation related to some harm and injury to the party rather than a fine imposed on the defendant.

How Do Liquidated Damages Differ From a Penalty Clause?

Liquidated damages are intended to recover what has been lost and make the damaged party whole. A penalty clause, in contrast, is intended to be a form of punishment (punitive).

What Are Unliquidated Damages?

Unliquidated damages are similar to liquidated damages in that they seek to compensate a harmed party for a breach of contract. Unliquidated damages, however, are not pre-estimated when the contract is signed, as is the case for liquidated damages.

What Are the Types of Damages in the Legal Context?

When there is a legal violation that harms or injures another party, there are three general types of compensatory damages (paid out as money) that the plaintiff can seek and which may be awarded by a court:

• Economic damages to recover money or other financial losses
• Non-economic damages to make whole for non-monetary losses such as bodily or emotional harm
• Punitive damages to impose an additional punishment on the guilty party

Everything you need to Know About Meeting of the Minds

The term meeting of the minds refers to an understanding or mutual agreement between two or more parties and their understanding of that agreement. In legal terms, the phrase denotes the essential element in validating a contract.

A meeting of the minds occurs when both parties actually assent to a contract’s terms. It may also highlight the time of a mutual agreement, although the acts of this agreement need not co-occur. A subjective meeting of the minds was traditionally required when it came to the assent of contract theory, but modern law dictates that a meeting of the minds must be objective.

• The phrase meeting of the minds refers to the comprehension and mutual agreement of all obligations within a contract.
• A meeting of the minds is a critical element of a contract associated with acceptance and acknowledgment.
• It can be difficult to challenge a contract after a meeting of the minds occurs and is established.
• If contract issues, challenges, or court actions arise, it can be left up to the court to interpret the elements and language of a contract and its intentions.
• Ensure you negotiate the terms of your contract and consult a professional before you sign anything.

What Is a Meeting of the Minds? Definition and Use With Contracts

Understanding Meeting of the Minds and How It Applies To Your Contract

Drafting and creating a legally binding contract can take time. As such, a contract requires several key elements. For a contract to become legally binding, a meeting of the minds must occur between the parties named in the contract.

The phrase meeting of the minds denotes when both parties provide mutual comprehension and acceptance of the terms. This means both parties understand and accept the terms, obligations, and rights of entering the agreement. Mutual acceptance is usually consummated with signatures of agreement from both parties.

A meeting of the minds is synonymous with mutual agreement, mutual assent, and consensus ad idem. This is a Latin phrase that means all of the parties involved in a legal contract agree to its terms and conditions. As such, a meeting of the minds is when all parties acknowledge that they fully understand and agree to all of the terms of a contract.

Elements of a Contract

There are several elements associated with creating a legally binding contract that can be upheld in the courts. The parties who sign a contract may or may not be involved in the actual creation of the contract. Both parties often negotiate the contract terms until they can agree to all the provisions.

In all contracts, there is an offeror and an offeree. In many cases, an offeror may have a standard contract that is not necessarily negotiable. In all cases, there is a mutuality of obligation. This means that both parties have an obligation to one another. Contracts also require capacity, which states that the parties involved have the adequate mental capacity to understand and agree on the terms.

A meeting of the minds is a part of the element of acceptance. Acceptance is usually acknowledged and denoted by a signature. As such, contracts must also be detailed and signed in writing.

Contracts become active once they are signed. This leads to fulfillment and delivery on the contract’s terms. After a contract has been signed, both parties must fulfill their obligations and deliver what is required as detailed in the contract.

Contract elements help validate it if one or both parties dispute it in court.

Contract Issues and Court Actions

Contract elements ensure that an agreement is upheld by the individuals involved and viable in cases of conflict or court actions. A meeting of the minds and mutual acknowledgment of a contract’s terms can make it difficult to renege on a contract without repercussions.

Contract disputes can occur later on down the line. In some cases, elements of a contract can be questioned. A meeting of the minds denotes that both parties understand and agree, so capacity is usually one element that can be examined if a party suggests a misunderstanding.

Some parties may be able to prove that a successful meeting of the minds never actually occurred because the parties involved had two completely different interpretations. Evidence of a clear misunderstanding can invalidate a contract. A court will typically base the interpretation of contract clauses on the reasonable understanding of a person with legal knowledge of the industry if there is any legal action.

If a court finds that interpretations of a contract clause are unclear or seem to be intentionally vague, the contra proferentem rule may be enforced. This rule helps mitigate intentionally vague contract language for the benefit of either party. It requires courts to rule in favor of the plaintiff who feels the contract language is ambiguously detrimental or harmful.

It can be left up to the courts to decide the interpretations and intentions of contract language. A whole field of study is dedicated to contract law, known as contract theory, as well as several standard elements, rules, and legal precedents that can govern a court’s decision.

Examples of Meeting of Minds

Contracts are used in many situations and scenarios. This can create an opportunity for misunderstandings, mistakes, and misinterpretations. A breakdown in communication can potentially disrupt the successful achievement of a meeting of the minds and call to question its very existence. Below are some examples of challenging contract issues.

Different Interpretations of the Exchanged Item

Let’s say a business needs to resupply its inventory of toys. The owner speaks with a local supplier and indicates that he wants to buy the supplier’s stock, which he understands means the supplier’s total supply of toys. The supplier thinks that the businessman wants to buy out his business by acquiring his shares.

While both parties agreed contractually with an acknowledged meeting of the minds, they clearly did not agree to the same material exchange. As such, a court could rule that no meeting of the minds actually occurred to make the contract valid for either party.

Payment Terms

A contract may state that a defendant must pay a plaintiff to use a product or service for a specified amount.

The defendant may argue that their understanding of the contract allowed payments to be made at a time interval different from the plaintiff’s. They may also claim the payments would be broken up over a longer period of time if the contract does not include explicit language establishing due dates.

Such a defense could fail in court if a reasonable person reviewing the contract interpreted its intent and purpose with the same regard the plaintiff presented in their argument. This would imply that the meeting of the minds alluded to understanding certain payment terms.

Contracts come in many shapes and sizes. Although they may differ, one of the things they have in common is that the parties signing it must understand and agree to the terms, rights, and obligations. This is what is known as a meeting of the minds.

But in some cases, even a meeting of the minds may be contested, especially when one party may make certain assumptions about the agreement that the other party may not necessarily share. That’s why it’s always a good idea to sort out all the details beforehand and consult a professional before entering any legally binding agreement.

How Do You Prove a Meeting of the Minds?

A written contract is the best way to prove a meeting of the minds. A contract should outline all the details, including the obligations and roles of each party, payment details, and any other terms that are pivotal to the agreement.

What Is Meeting of the Minds in Real Estate?

A meeting of the minds in real estate involves two or more parties in a transaction or contract. It occurs when one party makes an offer, and it is accepted. A meeting of the mind normally occurs before a purchase agreement or contract is drawn up.

Does Qualified Acceptance Signify Meeting of the Minds?

Qualified acceptance indicates conditional acceptance, such as a counteroffer made in a real estate deal. As such, it doesn’t necessarily signify a meeting of the minds until both parties agree upon the conditions.

What Is Meant by Quantum Meruit?

The term quantum meruit is a Latin phrase commonly used in contract law that means the amount he deserves. This can be translated to how much money someone earns. Claims can be made using quantum meruit by a plaintiff who feels they weren’t paid a reasonable sum of money in exchange for goods and services. Claimants must show that the defendant was in receipt of the goods and services and did so freely to have their claims heard.

What Is the Uniform Commercial Code (UCC)?

The Uniform Commercial Code (UCC) is a standardized set of laws and regulations for transacting business. The UCC code was established in 1953 because it was becoming increasingly difficult for companies to transact business across state lines, given the various state laws.

The Uniform Commercial Code (UCC) is important since it helps companies in different states transact by providing a standard legal and contractual framework. Most states have fully adopted the UCC laws in the U.S. Although there are slight variations from state to state, the UCC code consists of nine articles. The UCC articles govern various types of transactions, including banking and loans.

• The Uniform Commercial Code (UCC) is a set of business laws regulating financial contracts and transactions across states.
• The UCC code consists of nine articles covering different banking and loan aspects.
• Companies conducting business transactions outside their home state must comply with the Uniform Commercial Code (UCC).
• The UCC code has been fully adopted by most states and adapted slightly by others.
• The Uniform Commercial Code (UCC) was not established through Congress but rather by private organizations.

How the Uniform Commercial Code (UCC) Works

Uniform Commercial Code (UCC), laws regulate sales of personal property and various other transactions. If you’ve ever purchased a business or a vehicle in the past, chances are you signed a UCC-1 statement. The title remains in the lender’s possession until the loan is paid off.

The policies instituted under the Uniform Commercial Code (UCC) are largely focused on the activities of small businesses and entrepreneurs. Part of the intent is to clarify how each state might separately regulate such operations.

Although the UCC code regulates personal property dealings, it does not govern real property such as land or any structures attached to the land.

The UCC code imposes standards for processing checks and other types of commercial paper. Often it is applied to the property secured by a bank where the title is held until the borrower pays off the financing balance.

Companies conducting business transactions outside of their home state must comply with the applicable UCC law, including leasing equipment, selling goods, borrowing money, and establishing contracts.

History of the Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC) was not established through Congress. It was created by private organizations that include the Uniform Law Commission (ULC), which is also known as the National Conference of Commissioners on Uniform State Laws (NCCUSL), and the American Law Institute (ALI).

The ULC was established in 1892 with the purpose of creating uniform commercial law. The organization established various rules from its founding until the 1950s. In the 1950s, along with the ALI, the ULC compiled all the commercial laws into one set of commercial codes for states to follow.

The UCC was presented to the states in 1951, with Pennsylvania being the first to adopt the UCC in 1953, with other states adopting the code over time. Louisiana is the only state yet to ratify the code, though it has adopted part fully.

Special Considerations

Each state can adopt the code as it is written or adopt and modify its provisions.

Louisiana did not adopt Article 2 of the Uniform Commercial Code (UCC) as written. The state also did not adopt Article 2A, which covers the lease and rental of personal property not regarded as real estate.

California has made some modifications, too, implementing its own version of the UCC laws. Real estate contracts are one of the exceptions to California’s adoption of the UCC. For the purchase of the real estate, such as a warehouse, the laws regulating this purchase are not in California’s commercial code but the laws and regulations set explicitly by the state regarding real estate.

Service contracts in California are also not covered by the UCC. Service contracts include auto repairs, painting jobs, interior decor, etc. State insurance laws cover these activities.

Who Does the Uniform Commercial Code Protect?

The Uniform Commercial Code (UCC) was established to protect all individuals engaged in business. It was created to standardize commerce between states, whether that commerce occurs between individuals or businesses.

What Does the Uniform Commercial Code Article 2 and 2A Cover?

Uniform Commercial Code Article 2 covers the sale of goods, excluding real estate and service contracts, while Article 2A covers personal property leases.

How Does a UCC Lien Work?

A UCC lien, also known as a UCC filing, is a form that a creditor files to provide notice that they have an interest in the property of a debtor, whether that property is personal or business. The overall purpose of a UCC lien is to allow a creditor to claim collateral on financing with a debtor. The creditor will have the right to the property in the lien until the financial obligation has been repaid by the debtor.

What Is the UCC Filing Fee?

The UCC filing fee is $40 for paper and $20 for electronic filings in New York.