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Canada (161,434)
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ACTG 2P40 (8)
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Breach of Contract - Fundamental Breach

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Chapter - Breach of Contract Fundamental Breach – a breach that is so significant that it deprives the innocent party of most (if not all) of the benefit of the contract 1. Implication of Breach a. Breach may be a method of discharge b. Not every breach may discharge a contract c. Breach does not discharge a contract automatically, even when a breach is sufficient to discharge the contract d. Minor breach – a breach of a non-essential term of a contract or of an essential term in a minor respect e. Major breach – a breach of the whole contract or of an essential term so that the purpose of the contract is defeated f. Condition – an essential term of a contract g. Warranty – an non-essential term of a contract 2. Repudiation a. Express repudiation – a declaration by one of he contracting parties to the other that it does not intend to perform as promised b. Promise is entitled to find another party to perform and sue for whatever damages it sustains in delay and higher costs because the original contract will not be performed. c. They must first tell the repudiating party that it is treating the contract as terminated at once and is reserving its rights to sure for damages for breach d. Anticipatory breach – a breach that occurs in advance of the time agreed for performance of a contract e. Right to treat the contract as discharged is lost i. Aggrieved party has decided to proceed with the contract anc accept benfits under it despite the breach ii. The aggrieved party may have received the benefit for the contract and not learned of the breach until performance was complete 3. Exemption Clauses a. A clause in a contract that exempts a party from liability b. Purpose – o arty that runs a significant risk to harm to the other party through some failure in the course of performing the contract must plan to cover its potential liability. Alternatives when bargaining; i. The party may obtain insurance against the risk and raise its price accordingly. ii. It may ‘self-insure’ – that is, charge a higher fee and build up a reserve fund to pay any claim that arise later from harm to customers iii. It may include an exemption clause in the contract, in effect excluding itself from any liability for the risk and transferring the risk to its customers. c. Requirement of Adequate Notice i. Both parties must be aware of the exemption clause; even when it’s a document a customer doesn’t sign like ticker, a receipt, or a sign on a wall. ii. The defendant must establish that it has specifically drawn the onerous limitation clause to the plaintiffs attention or has accurately stated its legal effect to the plaintiff before he signs the contract. 4. Damages a. A money award to compensate an injured party for the loss caused by the other party’s breach b. Mitigation of Damages – the party that suffers because of a breach of contract is expected to do what it can to mitigate the extent of the loss. c. To qualify for recovery; the loss resulting from breach must be within the foreseeable limits of what the parties would have expected. d. Expectation damages – an amount awarded for breach of cont
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