At the end of lecture the other day the professor added, with emphasis, that “Chapter 16 is very important to the rest of the course“. The topic of the chapter is Remedies for Breach of Traditional and E-Contracts. Performance and Breach The chapter contains starts of with a discussion of performance and breach. It was interesting that a distinction was made between ‘complete’ and ‘substantial’ performance. In other words, if one party to a contract completes most of the terms, the contract may be substantially performed. This would give rise to a minor breach. In other words, the court or jury are likely to consider partial remedies that related to the minor breach, rather than treat it as a full breach. The spectrum of possibilities deviates from the black and white view often given to contracts. Damages There are various ways to look at damages. This range from very little to enormous and serve various purposes. A summary list of types of damages should include Monetary damages Compensatory damages Consequential (or special) damages Nominal damages (typically $1) Liquidated damages (or penalty) Mitigation of damages was new to me. It makes perfect sense, but I didn’t know it had been articulated in the law. Mitigation of damages suggests that the person not in breach of the contract has a responsibility to reduce the overall damages if possible. For example, if I have a work contract with a term of three years and I’m laid off after one year, then I’m entitled to damages of pay equal to what I would have made during the remaining two years unless I find other employment equivalent to what I lost. Under mitigation of damages, I’m required to look for work to reduce the overall damages to the breaching party (my previous employer). If I don’t look for work, they may be able to get a reduction to the overall damages at court. Remedies and Torts The remainder of the chapter discusses remedies and torts related to contract law. Among remedies are garnishment of wages, compelling to perform, etc. Torts include intentional interference, covenants of good faith, etc. These play out much like you might...

The second lecture for Business Law was interesting. It felt more like a round table discussion and was infused with a lot of back and forth, including both the lecturer and the students. It Depends One interesting comment the teacher made about half way through with respect to law was “It Depends”. In other words, is someone guilty or not? It depends. Is someone liable? It depends. On what does it depend? A host of things, including the context, the timing, the judge or jury. Perhaps most interesting was the discussion of a Reasonable Person. So much of law comes back to what a reasonable person would or would not do. However, there isn’t a definition of a reasonable person. So law is left to the spectrum of human experience and emotion to weigh in on guilt or innocence. Lord Goddard C.J.R. in Regina v. McCarthy, 2 Q.B. 105 (1954) (copied from Cheesman) stated: No court has ever given, nor do we think ever can give, a definition of what constitutes a reasonable or an average man. Certainly there are mechanisms to account for aberrations, such as the option for a judge to recuse himself. Jury selection plays a part. In those few cases where someone feels there has been a miscarriage of justice, the appeals process is available to seek remedy. So, then next time you get caught up in the letter of the law and think you have a sure thing figured out, just remember, it...

When it comes time to inform an investment decision, it’s essential to know whether or not a present opportunity represents enough present value to justify the investment. If so, at what level and over what time period. Certainly risk factors in, and with such a broad range of opportunities today, including stock markets, bonds, start ups, etc., there’s a lot to take in to account. The answer to the value and timing of an investment with respect to other available investments is given by the Present Value formula (ref for all equations). where P is the present value C is the anticipated future cash flow r is the interest rate of an alternative investment of similar risk t is the number of investment periods. This may change depending on compounding Another way to look at this is as a cash flow C and a Discount Factor D. where The rate r above is the opportunity cost of captial, or opportunity cost. Note that for multiple cash flows, the equation can be summed  Amount, Time and Risk From an investment perspective, the focus of the above equation is cash flow. More specifically, Amount of cash flow Timing of the cash flow Risk associate with the cash flow All three items factor in to the present value formula, and the present value formula informs many financial decisions, including being the basis for perpetuity and annuity analysis and...

In the first lecture of my corporate finance course, the professor make a case in favor of having financial markets, including their intermediaries, like banks. He summarized his case into the four following points. Transport consumption over time (save money, invest) Reduction of risk (through diversification) Liquidity (allows trade to happen faster) Information (trends, evaluation of health) Information From a business manager’s perspective, the fourth bullet is critical. The information that comes from financial markets informs nearly every decision he makes, including production schedules, marketing functions, labor decisions, benefits structure and timing, etc. Since business decisions should be informed by data (unfortunately we find that is not always the case, but I’ll comment on that more in another post), the financial markets provide that data. Opportunity Cost of Capital One common question is whether or not some opportunity represents enough value to justify investment. If so, at what level and over what time period. Certainly risk can factor in, but with such a broad range of opportunities today, including stock markets, bonds, start ups, etc., there’s a lot more to take in to account. Ultimately the information that comes from the financial markets drives the valuation of investment opportunities, including their amount, timing and...

The first class session of my Business Law class this semester focused on four aspects that make up a contract. Without all four elements, there is no contract. With all four in place, a contract is valid. The four elements are: Agreement Consideration Capacity Lawful object Agreement Agreement refers to the understanding between the parties to the contract about what the contract means. This includes the nature and details of a promise or act. In a bilateral contract the agreement is made up of a promise for a promise. A unilateral contract involves a promise for an act. Consideration Consideration is anything of legal value that is in play for the contract. This may include money or other assets. It may also be something else that each party to the contract assigns value to, regardless of it’s monetary value. In some cases promissory estoppel is used in place of consideration. Capacity Capacity refers to the ability of a party to the contract to understand and commit to its terms. Some things that affect capacity include age, state of mind and even blood alcohol level. Contracts entered into by parties that have impaired capacity may be considered voidable or even void. Lawful object A contract must have a Lawful object. This means the contract cannot have an end that is illegal or prohibited. If a contract is entered into which has an illegal object, it is unenforceable. This may include crimes and fraud. Uniform Commercial Code The Uniform Commercial Code (UCC or U.C.C.) is a collection of recommendations or ideals that are generally agreed upon and can be used in the creation of a contract. The UCC may vary from state to state and is not strictly a law in all places. The UCC deals most specifically with Goods. Timing Timing plays several roles in contract law. May contracts become void after a certain amount of time has elapsed. This is one way to terminate a contract. Timing also is crucial to the establishment of a contract. The effects of timing in terms of the offer being accepted, rejected or a counter offer being made were complicated in the past when the primary communication mechanism was traditional mail. Today, with email and other forms...