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ACC 473 > Chapter 18: Performance and Discharge > Flashcards

Chapter 18: Performance and Discharge Flashcards

1
Q

When are a party’s obligations under a contract at an end (discharged)?

A
  1. Complete or substantial performance
  2. Material breach by the other party
  3. A condition occurring or not occurring
  4. Agreement of the parties
  5. Operation of law
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2
Q

What are the three types of conditions

A
  1. Precendent
  2. Subsequent
  3. Concurrent
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3
Q

Conditions

A

Possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract

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4
Q

Conditions Precedent

A

A condition that must be fulfilled before a party’s performance can be required. An absolute duty to perform.

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5
Q

Real estate contract may be conditioned on the buyer obtaining bank financing is an example of

A

Conditions Precedent

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6
Q

Conditions Subsequent

A

A condition which operates to terminate a party’s absolute promise to perform. Follows an absolute duty to perform

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7
Q

Law firm hires a newly licensed attorney. Contract provides firm is not obligated to continue to employ attorney if fails to maintain law license. A failure to maintain license would discharge law firm’s duty to employ attorney is an example of

A

Conditions Subsequent

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8
Q

In condition subsequent, if the condition occurs, then party is

A

Discharged from performance

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9
Q

T/F: Conditions Precedent are rare, conditions subsequent are common

A

False. Conditions precedent are common, conditions subsequent are rare.

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10
Q

Conditions Concurrent

A

Each party’s performance is conditioned on the other party’s performance or tender of performance (offer to perform). Occurs only when contract calls for parties to perform their selected duties simultaneously.

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11
Q

If buyer promises to pay for goods then the seller delivers them, each party’s promise to perform is mutually dependent. This is an example of

A

Conditions Concurrent

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12
Q

Tender

A

An unconditional offer to perform by a person who is ready, willing, and able to do so

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13
Q

Tender of delivery

A

Buyer’s duty to perform is conditioned on seller’s delivery

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14
Q

Tender of payment

A

Seller’s duty to perform is conditioned on buyer’s payment

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15
Q

Express Conditions

A

Provided for by the parties’ agreement. Prefaced by wording “if”, “provided”, “after” or “when”

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16
Q

Implied Conditions

A

Similar to expressed conditions, understood to be part of contract, but not found in expressed language. Could lead to court implying from purpose of contract or intent of the parties

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17
Q

Types of performance (2)

A
  1. Complete
  2. Substantial
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18
Q

Complete Performance

A

Conditions expressly stated in contract are completely performed

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19
Q

Substantial Performance

A

A minor breach. Performance is not completely performed

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20
Q

Basic Requirements for Performance to Qualify as Substantial

A
  1. Party has performed in good faith
  2. Omission or defect is not material, monetary damages can be awarded as a remedy
  3. Party has performed substantially all of the terms of the contract and conferred most of the benefit promised
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21
Q

Effect on Duty to Perform

A

The parties must continue performing under the contract. If one party’s performance is substantial, the other party’s duty to perform remains absolute

22
Q

Measure of damages for substantial performance

A

Cost to bring the object of the contract into compliance with its terms

23
Q

Reasonable Person Standard
(Performance to the Satisfaction of Another)

A

Contract need only to be performed to the satisfaction of a reasonable person unless expressly stated otherwise. Applies to most contracts

24
Q

Subjective Satisfaction
(Performance to the Satisfaction of Another)

A

Subject matter is personal in nature, contract to be performed to the satisfaction of one of the parties must satisfy that party

25
Q

Exception to Reasonable Person Standard

A

Contract explicitly states third party approval with superior knowledge or training in the subject matter is require i.e. supervising engineer

26
Q

Breach of Contract

A

The nonperformance of a contractual duty

27
Q

Material breach

A

Occurs when performance is not at least substantial (a failure of consideration)

28
Q

What can the nonbreaching party do when contract has been breached?

A
  1. Sue for damages
  2. Excused from performance
29
Q

Non-material breach

A

Duty to performed is not excused, it is suspended until cured

Nonbreaching party must resume performance of contractual obligations

30
Q

Underlying Policy

A

Any breach entitles the nonbreaching party to sue for damages. Only a material breach discharges the nonbreaching party from the contract. Allows contract to go forward if there are only minor problems

31
Q

Anticipatory Repudiation

A

If before performance is due, one party may refuse to carry out his or her contractual obligations

32
Q

Anticipatory Repudiation (3)

A
  1. Results in material breach
  2. The nonbreaching party is not required to remain ready and willing to perform when the other party has repudiated the contract
  3. The nonbreaching party should have the opportunity to sue breach and seek a similar contract elsewhere
33
Q

Time for Performance

A
  1. If not stated in contract, a reasonable time is implied.
  2. Unless expressly stated to be vital, a delay in performance will not affect the performing party’s right to payment
  3. If time is expressly stated to be “of the essence,” the parties must perform within the time period since time is a condition
    (if party fails to complain about other party’s delay, breach of time may be waived)
34
Q

Discharge by Rescission

A
  1. Any contract can be discharged by agreement of the parties
  2. Rescission is the process by which contract is cancelled or terminated
  3. Parties are returned to their position prior to forming contract
35
Q

Mutual Rescission

A

Parties must make another agreement that also satisfies all legal requirements of a contract.

36
Q

When one party fully performs a contract, an agreement to cancel the original contract will not be enforceable, unless

A

There is additional consideration
(Needed because helps create balance)

37
Q

Discharge by Novation

A

Occurs when both parties to a contract agree to substitute a 3rd party for one of the original parties

38
Q

Requirements to be Discharged by Novation

A
  1. Previous valid obligation
  2. All parties agree to new contract
  3. Extinguishment (discharge) of old obligations
  4. New valid contract formed
39
Q

Discharge by Compromise or Settlement Agreement

A

Substituted as a new contract. Either expressly or impliedly revokes and discharges obligations under prior contract. Does NOT involve third party

40
Q

Accord

A

Contract to perform some act to satisfy an existing contract duty that has not yet been discharged
Different from the performance originally promised

41
Q

Satisfaction

A

Performance of accord agreement

42
Q

Types of Discharges by Operation of Law

A
  1. Material alteration of the contract
  2. Statutes of Limitations
  3. Bankruptcy
  4. Impossibility of Performance
43
Q

Material Alteration of the Contract

A

When other party has materially altered a written contract without consent
Innocent party can treat contract as terminated or discharged

44
Q

Statutes of Limitations

A

Restricts the period in which a party can sue on a particular cause of action

45
Q

Bankruptcy

A

Will ordinarily bar enforcement of the debtor’s contracts by the creditors

46
Q

Impossibility of Performance

A

After a contract has been formed, supervening events (such as a fire) ma make performance impossible in an objective sense
(Not foreseeable at time entered into contract)

47
Q

Objective Impossibility of Performance

A

Supervening even that was not foreseeable at the time of the contract
(It is impossible for anyone to perform)

48
Q

Subjective Impossibility

A

Does not discharge contractual obligation
(It is impossible for me to perform)

49
Q

Types of Objective Impossibility of Performance

A
  1. Death or incapacitation prior to performance
  2. Destruction of the specific Subject Matter
  3. Illegality in performance (change in law)
50
Q

Situations where Performance can be discharged

A
  1. Objective Impossibility of Performance
  2. Lapse in Time and Change in Circumstances
51
Q

Commercial Impraacticability

A

Anticipated performance becomes significantly more difficult and costly than originally contemplated at the time the contract was formed. Circumstances were not foreseeable

52
Q

Frustration of Purpose

A

Supervening event that is not reasonably foreseeable that makes it impossible to obtain performance that both parties contemplated when making contract. Typically decreases the value of what a party receives under the contract

ACC 473 (7 decks)

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