6. Excuses for Nonperformance

Question 1

CONDITIONS:

Condition vs. Promise

Answer 1

failure of a promise leads to a breach, whereas failure of a condition relieves a party’s performance obligation.

Question 2

CONDITIONS:

Types of Conditions

Answer 2

♣ Conditions can be implied or expressed

♣ Condition precedent: condition must occur before performance is due; non-occurrence excuses performance

♣ Condition subsequent: condition that occurs after performance has begun and excuses further performance

Question 3

CONDITIONS:

Excuse of Condition

Answer 3

Parties must strictly comply with conditions, but substantial performance of condition may suffice if it fulfills conditions’s purpose.

Question 4

CONDITIONS:

Answer 4

Conditions are agreed-upon limitations on performance in a contract.

♣ Conditions make an obligation to perform contingent on occurrence of some specific event or condition.

• Often indicated by words like “only if” “provided that” “until” “so long as”

EXAMPLE: Ali agrees to buy Bob’s car if Bob gets new tires (Bob getting new tires is a condition of Ali’s performance)

Question 5

Insecurity

Answer 5

o Insecurity is the prospective inability to perform as demonstrated by a party to a contract

o Grounds for insecurity must be reasonable

o Insecure party may either:
♣ 1. Make demand: demand adequate assurances or
♣ 2. Suspend performance: suspend performance until adequate assurances are provided (if commercially reasonable)

Question 6

INSECURITY vs. ANTICIPATORY REPUDIATION:

Answer 6

Insecurity involved uncertainty regarding the other party’s performance, whereas anticipatory repudiation involves a clear indication the other party will not perform.

Question 7

ANTICIPATORY REPUDIATION:

Answer 7

One party to contract makes it clear he will not perform.

EXCUSES PERFORMANCE TO OTHER PARTY!

Question 8

ANTICIPATORY REPUDIATION:

requirements

Answer 8

♣ 1. Unambiguous act

♣ 2. Prior to full performance

♣ 3. Indicating non-performance

Question 9

ANTICIPATORY REPUDIATION:

Non-repudiating party’s options

Answer 9

♣ Treat the anticipatory repudiation as a total repudiation and sue
♣ Suspend performance until performance date is due and wait to sue
♣ Treat repudiation as an offer to rescind and treat contract as discharged or
♣ Ignore repudiation and urge promisor to perform

Question 10

IMPOSSIBILITY and IMPRACTICABILITY:

Answer 10

If an unforeseen event occurs after contract formation BUT before performance is complete, performance may be excused as impossible or impracticable.

Question 11

IMPOSSIBILITY and IMPRACTICABILITY:

requirements

Answer 11

♣ An unforeseen event, which neither party assumed would occur, must make completing performance either:

• 1. Impossible: performance is objectively impossible or
• 2. Impracticable: performance is only possible with extreme and unreasonable difficulty or expense

Question 12

IMPOSSIBILITY and IMPRACTICABILITY:

Common unforeseen events

Answer 12

♣ Death
• Generally survive the death of a party unless deceased party’s contract obligation are non-delegable.

♣ Subsequent law or regulation

♣ Substantial damage or destruction of contract’s subject matter

Question 13

FRUSTRATION OF PURPOSE:

requirements

Answer 13

♣ 1. An unexpected event destroys one or both party’s purpose for entering into the contract
• whether the performance is possible after the event is irrelevant

♣ 2. The unforeseen event is not the fault of the frustrated party; and

♣ 3. The non-occurrence of the event was a basic assumption of the contract

Question 14

FRUSTRATION OF PURPOSE:

Answer 14

Unforeseen event occurs that undermines one or both party’s principal purpose for entering into the contract.

Question 15

FRUSTRATION OF PURPOSE vs. IMPOSSIBILITY

Answer 15

♣ Distinction is that impossibility concerns duties specified in the contract, whereas frustration of purpose concerns the reasons a party entered into the contract