(2) Contracts: Discharge of Performance Flashcards
Condition (Definition, Standard used, Ambiguity, etc.)
A condition may be express or implied and makes performance contingent upon the occurrence or completition of the condition.
If there is ambiguity if it is a condition or a promise courts tend to resolve in favor of a promise.
The court will use a reasonable person standard to determine if the condition has been satisfied.
Party’s must make a good faith effort to satisfy the condition and cannot try to prevent satisfaction of the condition.
Condition Precedent
A condition precedent in a contract makes performance conditional upon one party’s completion of the condition. If the condition fails there is no obligation to perform.
*A party must make a good faith effort to satisfy the condition;
Can a Condition Precedent be waived?
Condition Precedent
A party may waive (voluntarily give up the protection of the condition) –Conditions are waived when (1) a party indicates through words or conduct that a condition does not need to be satisfied; AND (2) the other party detrimentally relies on that waiver
Condition Subsequent
A condition excuses the duty to perform after a particular event occurs. Only exists in relation to a duty that is absolute.
Frustration of Purpose
Performance is discharged if the purpose of the contract no longer exists. (1) a party’s principal purpose is substantially frustrated not by their fault; (2) by an unforeseeable supervening event outside of the parties control (non-occurrence was a basic assumption of the contract); AND (3) both parties knew the purpose at the time of formation.
*The event can be foreseeable but the frustration so severe that it is not within the assumed risks inherent under the contract.
Rule/Common Law/UCC
Impossibility
Performance is discharged when it is objectively impossible to perform a contract because of (1) death or physical incapacity of the person necessary to effectuate the contract (if the person can easily be replaced then performance is not excused); (2) unanticipated destruction of the subject matter necessary to fulfill the contract; OR (3) a new law or regulation that was unanticipated makes performance extremely and unreasonably difficult or expensive.
* Common Law: if the risk of the loss is on the buyer, then destruction of subject matter does not excuse performance.
* UCC: Performance is excused only if the destroyed goods were special AND were destroyed before the risk of loss shifted to the buyer.
Common Law vs UCC
Impracticability
Performance is discharged when (1) an unforeseeable event occurs after contract formation; (2) that is unanticipated by both parties; AND (3) makes performance extremely and unreasonable difficult or expensive
*Under UCC: Additional element – Nonoccurrence of the event was a basic assumption of the contract.
Waiver
A waiver is a voluntary and intentional relinquishment of a contract right by words or conduct.
Performance of a condition is excused through waiver if: (1) a party voluntarily waives the condition through words or conduct; AND (2) the other party detrimentally relies on that waiver.
If a party doesnt detrimentally rely on the waiver the party may revoke the waiver.
Rule/Definitions of Each/ Remedy if a breach occurs
Accord and Satisfaction
A party is excused from their contractual obligations when there is an accord and satisfaction.
- An accord is an agreement formed where a party to contract agrees to accept a performance from the other party that differs from the promised performance in the existing contract.
- A satisfaction is the performance of the accord agreement. The original contract and accord agreement aren’t satisfied until the performance is fully complete.
- If the accord is breached, then the party may sue on the original contract or the accord agreement.
Minor Breach
A minor breach will not excuse performance, and the non-breaching party must still perform and then bring a separate action for damages resulting from the breach.
Rule
Material Breach
A material breach will excuse the non-breaching party’s performance.
How to determine if a breach is material?
To determine whether a breach is material courts will consider: (1) the extent of the benefit deprived to the injured party (what was the extent of performance); (2) the adequacy of compensation for loss to the non-breaching party; (3) the extent the breaching party will suffer forfeiture (hardship); (4) the likelihood that the breaching party will cure; AND (5) absence of good faith or fair dealing by the breaching party (was the breach intentional, negligent or innocent).
Time is of the Essence Clause
Material Breach
If the contract contains an explicit “time of the essence” clause which requires performance by a specified date, then the failure to perform by said date is deemed a material breach.
Performance by a Specified date
Material Breach
Failure to perform by a specified date is generally not a breach. If the time passes and no party seeks enforcement the clause is considered waived.
Rule
UCC Perfect Tender Rule
Under Article 2 of the UCC a seller must delivery conforming goods and the buyer must accept and pay the price under the contract. If there is even the smallest non-conformity then this is a breach and the buyer may reject all or a portion of the goods. (Buyer has the right