Chapter 14 Performance and Discharge Flashcards
What is a breach of contract?
A contracting party’s failure to perform an absolute duty owed under a contract
Three types of performance
1) Complete performance
2) Substantial performance (minor breach)
3) Inferior performance (material breach)
What is performance to the satisfaction of another?
-if its personal, then it must satisfy one party. only personal satisfaction of the party fullfills the condition.
What is substantial performance?
a party who in good faith performs substantially all of the term of a contract can enforce the contract against the other party under this doctrine.
What is qualification for substantial performance?
- must not vary greatly from the performance promised in the contract
- must create substantially the same benefits
What is an exception to the performance satisfaction of another?
unless a court finds that the party is expressing dissatisfaction simply to avoid payment or otherwise is not acting in good fait
What is a material breach of contract?
a breach is material when performance is not at least substantial.
What are the consequences of material breach of contract?
if there is a material breach, the non-breaching party is excused from the performance of contractual duties and can sue for damages caused by a breach.
What is anticipatory repudiation?
an assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.
common occurrence of anticipatory repudiation?
Sharp fluctuation of market price
Why is anticipatory repudiation treated as a material breach?
(1) the nonbreaching party should not be ready and willing to perform when one party isnt
(2) the nonbreaching party should have the opportunity to seek a familiar contract elsewhere and may have the duty to do so to minimize his or her loss
breaching party in anticipatory repudiation
-until the nonbreaching party treats it as a breach, the breaching party can retract the A.R. by proper notice and restore the parties to their original obligations
Discharge by agreement?
any contract can be discharged by agreement of the parties. the parties can even create a new contract for the express purpose of discharging the original contract
Ways to discharge by agreement?
mutual rescision, novation & Accord & Satisfaction
Mutual rescission?
an agreement between parties to cancel their contract, releasing the parties from further obligation under the contract. objective is to restore parties to postions they would have had if the contract had never been formed
compliance with mutual rescission?
there must be legal requirements for this type of contract ( offer, acceptance, and consideration)
Novation
the substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. typically novation involves the substitution of a new person who is responsible for the contract and the removal of the original party’s rights and duties under the contract
Example of novation?
You have a one year lease. You leave 4 months in. You are liable for the 8 months of rent unless you substitute a new contract with a new roommate to take over your remaining lease
Discharge by accord and satisfaction
parties agree to accept performance different from the performance originally promised.
satisfaction
the performance of the accord agreement. an accord and its satisfaction discharge the original contractual obligation.
what happens once the accord is made?
the original obligation is merely suspended until the accord agreement is fully performed. if it is not performed, the party to whom performance is owned can bring an action on the original obligation or for breach of the accord
example of accord & satisfaction
-you’re friend owes you $8,000 and you obtain a judgement against him. Later, you both agree that the judgement will be satisfied if you’re friend gives you her automobile in lieu of $8,000 cash. if you receive the car, the accord agreement is fully performed, and the 8,000 debt is discharged.
material alteration
the law allows an innocent party to be discharged when one party has materially altered a written contract without the knowledge or consent of the other party.
discharge by operation of law
material alteration, statues of limitations, bankruptcy , impossibility of performance
bankruptcy
bankruptcy once the assets of the person in debt have been allocated, the debtor receives a discharge in bankruptcy.
impossibility of performance
a doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible or totally impracticable (though no fault of either party).
commercial impracticability
-a doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency’s occurence makes performance impracticable, and (3) the nonoccurence of the contingency was a basic assumption on which the contract was made.
