Reviewing Important Points

1 As a general rule, one who is not a party to a contract has no rights or duties under the contract. However, a third party beneficiary may enforce a contract made for such party’s benefit. An assignee may also acquire rights or assume duties under another party’s contract.

2 In case of a breach of contract, the injured party has various remedies. An injured party may: a) rescind or cancel the contract, b) recover the amount of loss through damages, and c) in certain cases, require specific performance.

3 After default, the injured party usually may recover the amount already spent in carrying out the obligations incurred as part of the contract. But the injured party should not increase the damages. Instead, the damages should be mitigated — that is, reduced if reasonably possible.

4 Generally a party to a contract has the option of breaching it. The courts will not punish such action by awarding punitive or exemplary damages unless a tort is involved. Rather, the court will award compensatory damages. Sometimes the court will award either liquidated or nominal damages.

5 When the legal remedy of damages is not adequate, the court may grant the equitable remedy of specific performance, or it may prohibit specified acts.

6 At the time of entering into a contract, the parties may agree to pay a specified, reasonable amount of damages if actual damages would be difficult to prove in case of default. Such damages are known as liquidated damages. The amount must not be so excessive that it would constitute a penalty.

LESSON 10 TYPES OF SALE