Business Law Study Set 13

Business

Quiz 20 :

Breach of Contract and Remedies

Quiz 20 :

Breach of Contract and Remedies

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Trading Corp (JRC) bought computer software and hardware from Progressive Data Systems (PDS) for $167,935, which it paid in full, to track movement of its trucks with inventory and to process transactions. The purchase agreement also called for a $7,500 per year licensing fee for an 18-year period, and it stated that in the event of default PDS could "accelerate and declare all obligations of Customer as a liquidated sum." A dispute arose between the parties, and when the case was litigated the only actual contract charges owed PDS were the license fees of $7,500 for two years. The application of the liquidated damages clause would yield an additional $120,000 cash for PDS for the future fees for 16 years without any reduction for expenses or the present cash value for the not-yet-earned fees. JRC contends that actual damages were clearly ascertainable and that the liquidated damages clause was a penalty provision that should not be enforced. Progressive argued that the court must interpret the contract as written, stating that the court has no power to rewrite the contract. Decide. [ Jefferson Randolf Corp. v. PDS, 553 S.E.2d 304 (Ga. App.)]
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Case summary:
JRC Trading Corp. bought computer hardware and software from PDS for $167,935. JRC made full payment of his bought products so that it can track the movements of truck with its inventory. The purchase agreement also stated that amount of $7,500 would be paid as a licensing fee per year for 18 years stating that if the customer defaults then in this case it would be considered as a liquidates firm. PDS applied this fee over JRC over this JRC argued that after being made full payment of the products bought, this fee is not applicable. PDS argued that the court must take this contract as it is been written and should not rewrite the contract.
Conclusion:
As it been given in this case that JRC had made complete payment for the products he purchased from PDS thus it is not liable to pay that licensing fee and the amount of default by the customers in future. This is because all the payments have been made and this shows that the agreement between JRC and PDS has been completed. Thus the court should not allow PDS to obtain this fee from JRC and should held PDS responsible for this fraud.

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contractor departed from the specifications at a number of points in a contract to build a house. The cost to put the house in the condition called for by the contract was approximately $14,000. The contractor was sued for $50,000 for breach of contract and emotional disturbance caused by the breach. Decide.
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Depending on the situation the plaintiff, owner, of the house may only be able to get compensatory damages - money award to fix the damages, in this case $14,000. In order to sue for more damage the owner will have to show that the contractor acted with gross negligence in a way which endangered the life of the owner. This may allow the owner to recover more in terms of punitive damages which grants more than compensatory damage usually as a way to penalize the wrongdoer. Alternatively, the owner may find less troubling to settle out of court as litigation costs and frustration may rack up more cost than damage award.

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Wassenaar worked for Panos under a three-year contract stating that if the contract were terminated wrongfully by Panos before the end of the three years, he would pay as damages the salary for the remaining time that the contract had to run. After three months, Panos terminated the contract, and Wassenaar sued him for pay for the balance of the contract term. Panos claimed that this amount could not be recovered because the contract provision for the payment was a void penalty. Was this provision valid? [Wassenaar v Panos, 331 NW2d 357 (Wis)]
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Refer to the case Wassenaar v Panos (331 NW2d 357).
Facts
1) Plaintiff an ex-employee of defendant is suing for liquidated damages given by plaintiff's employment contract.
2) Trial court held for plaintiff. Appeals court reversed claiming liquidated damage was void as it was a penalty to the defendant. Plaintiff appealed.
Relevant Terms, Laws, and Cases
Liquidated damages - are damages resulting from delay or breach of contract duties. The damage amount must be reasonable for the damage caused and not excessive.
Opinion
The Wisconsin Supreme Court reversed the decision of appeals. The plaintiff is granted liquidated damages in terms of his contract.
The court also held that mitigation of damages is unnecessary for the validity of liquidated damages; plaintiff's new income does not affect the render the clause unenforceable.

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Rogers made a contract with Salisbury Brick Corp. that allowed it to remove earth and sand from land he owned. The contract ran for four years with provision to renew it for additional four-year terms up to a total of 96 years. The contract provided for compensation to Rogers based on the amount of earth and sand removed. By an unintentional mistake, Salisbury underpaid Rogers the amount of $863 for the months of November and December 1986. Salisbury offered this amount to Rogers, but he refused to accept it and claimed that he had been underpaid in other months. Rogers claimed that he was entitled to rescind the contract. Was he correct? [Rogers v Salisbury Brick Corp., 882 SE2d 915 (SC)]
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Kuznicki made a contract for the installation of a fire detection system by Security Safety Corp. for $498. The contract was made one night and canceled at 9:00 the next morning. Security then claimed one-third of the purchase price from Kuznicki by virtue of a provision in the contract that "in the event of cancellation of this agreement... the owner agrees to pay 331/3 percent of the contract price, as liquidated damages." Was Security Safety entitled to recover the amount claimed? [Security Safety Corp. v Kuznicki, 213 NE2d 866 (Mass)]
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Shepherd-Will made a contract to sell Emma Cousar: 5 acres of land adjoining property owned by the purchaser and this being formerly land of Shepherd-Will, Inc., located on north side of Highway 223. This 5 acres to be surveyed at earliest time possible at which time plat will be attached and serve as further description on property. Shepherd-Will owned only one 100-acre tract of land that adjoined Emma's property. This tract had a common boundary with her property of 1,140 feet. Shepherd-Will failed to perform this contract. Emma sued for specific performance of the contract. Decide. [Cousar v Shepherd-Will, Inc., 387 SE2d 723 (SC App)]
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Protein Blenders, Inc., made a contract with Gingerich to buy from him the shares of stock of a small corporation. When the buyer refused to take and pay for the stock, Gingerich sued for specific performance of the contract on the ground that the value of the stock was unknown and could not be readily ascertained because it was not sold on the general market. Was he entitled to specific performance? [Gingerich v Protein Blenders, Inc., 95 NW2d 522 (Iowa)]
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buyer of real estate made a down payment. The contract stated that the buyer would be liable for damages in an amount equal to the down payment if the buyer broke the contract. The buyer refused to go through with the contract and demanded his down payment back. The seller refused to return it and claimed that he was entitled to additional damages from the buyer because the damages that he had suffered were more than the amount of the down payment. Decide. [Waters v Key Colony East, Inc., 345 So2d 367 (Fla App)]
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Forsyth School District contracted with Textor Construction, Inc., to build certain additions and alter school facilities, including the grading of a future softball field. Under the contract, the work was to be completed by August 1. Various delays occurred at the outset of the project attributable to the school district, and the architect's representative on the job, Mr. Hamilton, told Textor's vice president, William Textor, not to be concerned about a clause in the contract of $250 per day liquidated damages for failure to complete the job by August 1. Textor sued the school district for breach of contract regarding payment for the grading of the softball field, and the District counterclaimed for liquidated damages for 84 days at $250 per day for failure to complete the project by the August 1 date. What legal basis exists for Textor to defend against the counter-claim for failure to complete the job on time? Was it ethical for the school district to bring this counterclaim based on the facts before you? [Textor Construction, Inc. v Forsyth R-III School District, 60 SW3d 692 (Mo App)]
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Melodee Lane Lingerie Co. was a tenant in a building that was protected against fire by a sprinkler and alarm system maintained by the American District Telegraph Co. (ADT). Because of the latter's fault, the controls on the system were defective and allowed the discharge of water into the building, which damaged Melodee's property. When Melodee sued ADT, its defense was that its service contract limited its liability to 10 percent of the annual service charge made to the customer. Was this limitation valid? [Melodee Lane Lingerie Co. v American District Telegraph Co., 218 NE2d 661 (NY)]
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Soden, a contractor, made a contract to build a house for Clevert. The sales contract stated that "if either party defaults in the performance of this contract," that party would be liable to the other for attorneys' fees incurred in suing the defaulter. Soden was 61 days late in completing the contract, and some of the work was defective. In a suit by the buyer against the contractor, the contractor claimed that he was not liable for the buyer's attorneys' fees because he had made only a defective performance and because "default" in the phrase quoted meant "nonperformance of the contract." Was the contractor liable for the attorneys' fees? [Clevert v Soden, 400 SE2d 181 (Va)]
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Protection Alarm Co. made a contract to provide burglar alarm security for Fretwell's home. The contract stated that the maximum liability of the alarm company was the actual loss sustained or $50, whichever was the lesser, and that this provision was agreed to "as liquidated damages and not as a penalty." When Fretwell's home was burglarized, he sued for the loss of approximately $12,000, claiming that the alarm company had been negligent. The alarm company asserted that its maximum liability was $50. Fretwell claimed that this was invalid because it bore no relationship to the loss that could have been foreseen when the contract was made or that in fact "had been sustained." Decide.
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Sulejmanagic, aged 19, signed up for a course in scuba diving taught by Madison at the YMCA. Before the instruction began, Ken was required to sign a form releasing Madison and the YMCA from liability for any harm that might occur. At the end of the course, Madison, Ken, and another student went into deep water. After Ken made the final dive required by the course program, Madison left him alone in the water while he took the other student for a dive. When Madison returned, Ken could not be found, and it was later determined that he had drowned. Ken's parents sued Madison and the YMCA for negligence in the performance of the teaching contract. The defendants raised the defense that the release Ken signed shielded them from liability. The plaintiffs claimed that the release was invalid. Who was correct? [Madison v Superior Court, 250 Cal Rptr 299 (Cal App)]
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Anthony makes a contract to sell a rare painting to Laura for $100,000. The written contract specifies that if Anthony should fail to perform the contract, he will pay Laura $5,000 as liquidated damages. Anthony fails to deliver the painting and is sued by Laura for $5,000. Can she recover this amount?
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is a business brokerage firm that assists in the purchase and sale of businesses. Jennings and Hennessey were independent contractors working for FNBC. They left FNBC, and FNBC sued them for breach of their contracts with FNBC. The trial court issued a permanent injuction prohibiting the former contractors from using proprietary information and the court awarded attorneys' fees under a clause in the contract that would obligate Jennings and Hennessey to indemnify FNBC against claims "brought by persons not a party to the provision." Jennings and Hennessey appealed the decision on attorneys' fees. Decide. [FNBC v Jennessey Group, LLC, 759 NW2d 808 (lowa Ap)]
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