BA 265 Week 3 assignment The Open Offer

Breach of Contracts






Breach of Contracts

A contract is a legally binding agreement, either spoken or written, between two given parties. In the scenario given above involving Jimmy, Tommy and a Van Goph painting, there is a breach of the contract. This is because, initially Jimmy and Tommy had made a contact whereby Jimmy was to sell Tommy the priceless piece of art. They had made an agreement that he was to take the art piece at some cost of $500,000 that they had agreed on. However, Jimmy gets a better offer and forfeits their initial agreement to take the better offer that he received from someone else.

There is a serious breach of contract because, even despite the agreement they had made alone, Tommy had also sent a check to that effect with the total amount that they had agreed on. Therefore Tommy had incurred a loss of the painting he was to be given (emotional loss) as well as the money that he had sent in the form of a check to Jimmy. He is no longer at the same place he was before their contract was made. He has therefore undergone both financial and emotional loss. This is because, when he was contacted by Jimmy to buy the painting he had always wanted, he was very excited and thus did not anticipate such a tremendous loss. Other than that, if Jimmy were to refuse to return the check that he had sent together with the response letter, he would incur financial losses as well.

A breach of contract occurs in a scenario whereby the binding agreement or the agreement that two parties had agreed upon is not honored by one of the two binding parties. One party in most cases usually forfeits the initial agreement and fails to honor whatever the two had agreed upon. Breach of contract may be either actual or anticipatory. Actual breach occurs where one party refuses to form his side of the bargain completely on the due date or performs incompletely. Anticipatory breach occurs where one party announces, in advance of the due date for performance, that he intends not to perform his side of the bargain. The innocent party may sue for damages immediately the breach is announced. In the scenario of Tommy and Jimmy, there is an actual breach of contract. This is because Jimmy doesn’t perform his side of his bargain.

Damages is the most common remedy available for several instances of breaching of contracts. It is a very commonly seen law remedy that can be claimed as of right by the innocent party. This is a monetary sum fixed by the court to compensate the injured party, in this case, the innocent party. The main objective of damages is usually to put the injured party into the same financial position he would have been in had the contract been properly performed. Sometimes damages are not an adequate remedy and this is where the equitable remedies (such as specific performance and injunction) may be awarded. In this case, the easiest remedy for Tommy is the provision of damages by Jimmy to cater for the losses that he incurred. This will be regarded as his right because he is the innocent party in this scenario. This will able to repay the losses that he incurred in the process of the unfulfilled contract.

Another remedy that Tommy could receive is an order of specific performance. In this case, an order is provided by the court that requires the performance of the positive contractual obligation. This forces the person who breached the contract to fulfil his part of the bargain as a solution or remedy to the breach. It is classified as an equitable remedy and can be used in certain instances. However, it’s not always applicable in all situations for instance in cases whereby: damages already provide an adequate remedy, where the order could cause undue hardship to either of the parties involved, where the contract is of such a nature that constant supervision by the court would be required and thus will be extremely involving, and where an order of specific performance would be possible against one party to the contract, but not the other. It’s also not applicable where the party seeking the order has already acted unfairly or unconscionably to the person who breached the contract. He is deterred by the maxim that ‘He who comes to Equity must come with clean hands’. Also, specific performance cannot be used where the order is not sought promptly. In this case, the claimant will be barred by the maxims ‘Delay defeats the Equities’ and ‘Equity assists the vigilant but not the indolent’.

The third option that Tommy has is an injunction. This is an order of the court requiring a person to perform a negative obligation. There are two main categories of injunctions which include prohibitory injunction and mandatory injunction. A prohibitory injunction is an order that something must not be done. In this case, a court of law is allowed to provide an order that Jimmy must not sell the painting to the other potential buyer even with the better offer that that buyer has provided. A mandatory injunction, is an order that something must be done, for example, Jimmy giving Tommy the painting as initially agreed. In other words, agreeing to the initial bargain of the contract and keeping to his word as stated initially in their first letter.

In conclusion, all the remedies listed above may be used by a claimant in the event of breaching of a contract between two parties. The claimant thus decides on which among the remedies to use depending on the level and type of breach of contract by the other party and the circumstances surrounding the event.

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