What is it called when a pre-defined penalty is specified in a contract? In contract law, what is a pre-defined penalty for non-performance called? For example, if the contract says something like: "so-and-so will do xyz by May 5, 2021, and if so-and-so should fail to do so by that date then so-and-so will be liable for $100,000 due to the party of the first part." What is the $100,000 penalty called?
It has to be 'liquidated damages', since a penalty clause is unenforceable. It has to have a reasonable relation to the party's legitimate interest. The point is that it has to represent a good faith estimate of the actual damage.
This would appear to be a simple application of contract law - the exchange of money for a promise (to sell at a fixed price in the future). Option contracts are only regulated if they relate to options over securities (like company shares) - not if they are over personal property (like baseball cards).
Neither The contract is completed when each party has totally fulfilled its obligations under the contract. In this case, it is when the purchaser has consumed or otherwise dealt with the banana to their satisfaction. The vendor has ongoing obligations under the contract until this happens. For example, obligations that the banana is of merchantable quality and fit for purpose. If the purchaser peels the banana and discovers that it is "off" or eats the banana and develops food poisoning then the vendor still has obligations and can be sued under the contract. Yes, I realize that no one is going to sue anyone over a rotten banana but let's assume that "banana" is code for 54km of motorway construction and £1 is actually £1 billion. When is the contract formed? This is not a trivial determination and there are literally hundreds of thousands if not millions of lawsuits that have turned on this exact question. Once the contract is formed its binding on both parties; until then, either can walk away (subject to estoppel) The traditional analysis involves offer and acceptance. In your banana scenario, the shop displaying "Banana's: 50p/each" (it's a fruit shop - they always have unnecessary apostrophes) is not an offer - it is an invitation to treat. An offer is made by Ben placing the banana on the counter and proffering the £1, it is accepted by Sam taking the £1. At this point, the sale is binding on both parties. Ben has fulfilled all his obligations under the contract, Sam still has some. In addition to those discussed above, he owes Ben 50p. Strictly speaking, this is not an obligation under the contract but a debt due and payable. Consumer protection law The proceeding is a strict contract law interpretation - many jurisdictions have consumer protection legislation (and food safety laws for bananas) that impose additional protections and may change the contract law position.
Yes Quite a large chunk of the legal system deals with those general concepts. 27 - pretty much all contract law deals with when and how you must discharge your obligations 28 - ditto, although if it’s not owed until tomorrow … 29 - there are laws against criminal conspiracy 30 - making false accusations can be a crime and can give rise to defamation
Assuming there is a contract (and it is not clear that there is), this is a purported liquidated damages clause. Alice is trying to dictate what Bob will owe her if he breaches his promise to not share the file. However, there are limits on what can be stipulated in a liquidated damages clause. Super Save Disposal Inc. v. Blazin Auto Ltd., 2011 BCSC 1784: The enforceability of a liquidated damages provision in an agreement engages two competing objectives: freedom of contract versus the right of the courts to intervene in a given case to relieve against an oppressive or unconscionable result flowing from enforcement of the liquidated damages term. It is well settled that the enforceability of such a term turns on whether it is a genuine pre-estimate of the expected loss that a party will sustain in the event of a breach of contract or a penalty clause so oppressive or unreasonable that equitable intervention is justified to prevent an injustice. Judicial interference with a liquidated damages provision will be justified if enforcement of the term results in payment of a sum which is extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach Oppressive liquidated damages clauses work against a person's freedom to breach and the possibility of efficient breach. Perhaps if the file were a trade secret like the Coke recipe, the $1,000,000 might be a genuine pre-breach estimate, but without much more information about the nature of the file, I predict a court would find the $1,000,000 to be extravagant and unconscionable in comparison to the greatest loss that could conceivably be proved to have followed from the breach. What follows is less researched. If it is not a contract then I think it is at best a licence, which would make Bob's agreement to pay $1,000,000 a free-standing unenforceable promise. I also agree with Matthew's position on the possibility (and limitations of) a claim in promissory estoppel, especially in jurisdictions following Waltons Stores or similar reasoning.
At what point passed the original ETA is the contract still valid? There is no hard limit or deadline other than the one (if any) the contract itself provides. The contract remains valid regardless of a party's breach or non-performance. The remedies that would be available to you are in the form of rescinding the contract --without having to pay the cancellation fee--, or forcing the store to deliver the furniture soon. The longer the delay, the clearer your entitlement to either remedy. The manager's allegation about other customers is unavailing: Your description does not reflect that the contract or estimates are in terms of the delay that non-parties tolerated. Their contracts are totally unrelated to yours. The contracts might not even be comparable. The purpose of estimates is to give the counterparty some rough information that is known to likely influence his decision-making. Accordingly, a huge departure from the estimate supports the finding that the store deprived you of information that was material to your decision. The store's failure to timely inform you strikes the contract law tenet that you entered the contract knowingly. Furthermore, the store's deliberate act of specifying even the day of the month [mis-]led you to rule out that the delivery might actually take years. Typically furniture is purchased with the expectation of being able to start using it relatively soon, not years later. In addition to breach of contract, the store might also be in violation of statutes against unfair and misleading practices.
Contracts are a relationship between two or more people Just as it is meaningless to speak of marrying yourself, it is equally meaningless to speak of a contract with yourself. Even if you were to draft such a thing, you would not have standing to sue because you can’t sue yourself. Your example probably isn’t a “one person contract” It’s a contract between the car owner (person 1) and the car yard (person 2) - probably a corporation. The fact that person 1 is representing both parties to the contract doesn’t make it a “one person contract”. There are potential conflicts of interest with this but they are not necessarily ones that can’t be overcome. However, if the car owner runs a business as a car dealer as a sole trader, then, no, they cannot make this kind of contract.
Does this still count as consideration, even though there was never any possibility of B getting anything out of it? Yes. The sole fact that the promisee and the beneficiary are different and unrelated entities does not invalidate a contract. In terms of the Restatement (Second) of Contracts at § 302(1)(b), what matters is that "the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance".