LEGAL ENGLISH Unit 7 Breach of contract

LEGAL ENGLISH Unit 7 Breach of contract

Discussion A contract may be breached only by... a) One of the parties to a contract b) Both parties to the contract c) A lawyer

Discussion A breach of contract is... a) the termination of a contract b) the failure of one party to perform as agree in the contract c) the complete performance of one s obligations under the contract

Breach of contract minor (or immaterial) breach of contract material breach of contract specific performance; or damages fundamental breach of contract specific performance and damages

Breach of contract Anticipatory breach / repudiation the party unequivocally states that it will not perform its obligation the non breaching party is then discharged by repudiation and can sue for damages, even before the performance was due see Art. 71 CISG - A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of: a serious deficiency in his ability to preform or in his creditworthiness his conduct in preparing to perform or in performing the contract also see art. 1460 c.c.

Seller s breach under CIGS (Simplified) S stands for the seller B stands for Buyer performance avoidance B may reduce the price - art. 50 CISG plus damages - art. 45 CISG art. 38 - B must examine the goods within a short time

Seller s breach under CIGS art. 39 if B finds a lack of conformity, B must give notice to S, stating the nature of the lack of conformity, within a reasonable time after discover note sim. - under art. 1495 c.c. 8 days note sim. - under Codice del Consumo 2 months art. 132 D.lgs n. 206/2005

Seller s breach under CIGS note, art. 39 (2) CISG in any event the B loses the right to rely on a lack of conformity of the goods if B does not give S notice within 2 years (at the most) after delivery This time limit applies unless it is inconsistent with a contractual period of guarantee

Seller s breach under CIGS under art 40 CIGS, S cannot claim art. 38 and 39 exemption whether he knew or should have known the lack of conformity see sim. in art. 132 Codice del Consumo and art. 1495 c.c.

Seller s breach under CIGS under art 45 CIGS, B can exercise right set forth in artt. 46-52 claim damages set forth in art. 74-77

Seller s breach under CIGS art. 46 - Remedies for breach of contract by the seller the buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement. If the goods do not conform with the contract, the buyer may require delivery of substitute goods only of the lack of conformity constitutes a fundamental breach of contract, and a request for substitute goods is made either in conjunction with notice give under art. 39 or within a reasonable time thereafter. if the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under art. 39 or within a reasonable time thereafter.

Seller s breach under CIGS under art 47 CIGS, B can fix and additional period of time of reasonable length for performance by S check art. 130 comma 5 Codice del Consumo

Seller s breach under CIGS under art 48 CIGS, S can remedy at his own expenses with the exception of unreasonable delay unreasonable inconvenience to B no uncertainty of reimbursement by the seller of the expenses advanced by B S may require B to state within reasonable time whether B will accept the performance

Seller s breach under CIGS under art 49 CIGS, B may declare the contract avoided if (among other things): there is a fundamental breach in case of non delivery within the additional time period according to art. 47 par. 1. Remember CIGS does not apply to consumers

Language note on damages: the builder A supplier agrees to supply a ton of concrete mix to a contractor in exchange for 100 so that the contractor can use it to build a skyscraper. The supplier delivers the concrete mix, but it has become damp and turned to solid concrete. The builder is then unable to start work on building the skyscraper for two weeks while he is waiting for new concrete mix.

Example: the builder The builder takes the supplier to court, seeking recovery of the 100 for the faulty concrete mix (general or actual damages = the natural result of the breach), as weel as 2,000 for the cost of the two-week delay (special or consequential damages). The 2000 is subject to the foreseeability rule: the court must ascertain whether the supplier could have foreseen the breach (and therefore made alternative preparations such as keeping a spare ton of concrete mix in stock for emergencies).

Example: the builder In addition to this two type of damages a.k.a. expectation damages (=attempts to compensate the non-breaching party for the loss of the benefits it would have received if the contract had been performed), the builder might seek punitive damages of 2000000 to punish the supplier for its reprehensible action (e.g. fraud).

DAMAGES Liquidated / stipulated damages general / actual damages reliance damages punitive / exemplary damages special / consequential / indirect damages expectation damages / benefit of the bargain damages restitution damages

DAMAGES risarcimento predeterminato contrattualmente (clausola penale). gen. danno emergente (vs. lucro cessante loss of profits) risarcimento dovuto alla parte che incolpevolmente ha fatto affidamento sulla regolare esecuzione del contratto danni punitivi c.d. punies è un compensatory damages (come il general damage ) gen. limitato dalla foreseeability rule nella resp. contrattuale (sim. lucro cessante). risarcimento teso a porre la parte adempiente nella posizione laddove il contratto fosse stato adempiuto. restituzione da parte della parte inadempiente di quanto ottenuto in ragione del contratto

Liquidated damages/stipulated damages clause as a matter of its enforceability, a liquidated damages clause must meet the following requirements: the anticipated damages are uncertain in amount or difficult to prove; an intent of the parties to determine the damages in advance; and the amount is reasonable compared to the presumed loss;

Liquidated damages clause it is mutually agreed by and between the parties hereto that time is of the essence and that in the event of the Contractor s failure to complete the contract within the time stipulated and agreed upon, the Owner will be damaged thereby; and because it is difficult to definitely ascertain and prove the amount of such damages, inclusive of expenses for inspection, necessary traveling expenses and other similar expenses it is hereby agreed that the amount of such damages shall be the liquidated sum of 2000 per calendar day for each day of delay in

Liquidated damages clause finishing the Work in excess of the number of working days prescribed; and the Contractor hereby agrees that such sum shall be deducted from amounts due to the Contractor under the contract or, if no amount is due to the Contractor, the Contractor hereby agrees to pay to the Owner as liquidated damages, and not by way of penalty, such total sum as shall be due for such delay, calculated as aforesaid.

Penalty Penalty clause: a contract clause that provides for the payment of an amount as forfeiture in the event a party defaults If these requirements are not met, then the clause is a penalty which is not enforceable parties often include not by way of penalty in liquidated damages clause

Penalty penalty clauses are traditionally deemed as unenforceable if: the sum grossly exceeds the probable damages the same sum is made payable for any variety of different breaches (major, minor) a mere delay in payment has been listed among the events of default

Penalty In US/UK, the Court will look to the time of the contract in determining the reasonableness of the damages; UCC. 2-718 damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual harm caused by the breach...

UNIDROIT UNIDROIT international Institute for the Unification of Private Law Set up in 1926 as an auxiliary organ of the League of Nations and re-established in 1940 on the basis of a mutual agreement UNIDROIT s aim is to prepare modern and harmonised rule of international private law

LIQUIDATED DAMAGES CLAUSE UNIDROIT art. 7.4.13 - Agreed payment for nonperformance (1) Where the contract provides that a party who does not perform is to pay a specified sum to the aggrieved party for such non-performance, the aggrieved party is entitled to that sum irrespective of its actual harm (2) However, notwithstanding any agreement to the contrary the specified sum may be reduced to a reasonable amount where it is grossly excessive in relation to the harm resulting from the nonperformance and to the other circumstances

UNIDROIT art. 7.4.2 - Full compensation The aggrieved party is entitled to full compensation for harm sustained as a result fo the nonperformance, including any loss which it suffered and any gain of which it was deprived, taking into account any gain to the aggrieved party resulting from its avoidance of cost or harm Such harm may be non-pecuniary and includes, for instance, physical suffering or emotional distress

Liquidated damages clause in UNIDROIT UNIDROIT art. 7.4.3 - Certainty of harm compensation is due for present and future harm established with a reasonable degree of certainty compensation may be due for the loss of a chance in proportion to the probability of its occurrence Where the amount of damages cannot be established with a sufficient degree of certainty, the assessment is at the discretion of the Court

UNIDROIT UNIDROIT art. 7.4.4 - Foreseeability of harm The non preforming party is liable only for harm which it foresaw or could reasonably have foreseen at the time of the conclusion of the contract as being likely to result from its non-performance

UNIDROIT UNIDROIT art. 7.4.7 - Harm due in part to the aggrieved party Where the harm is due in part to an act or omission of the aggrieved party to another event as to which that party bears the risk, the amount of damages shall be reduced to the extent that these factors have contributed to the harm, having regard to the conduct of each of the parties

UNIDROIT UNIDROIT art. 7.4.8 - Mitigation of harm The non-performing party is not liable for harm suffered by the aggrieved party to the extent that the harm could have been reduced by the latter party s taking reasonable steps. The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the harm