Conditions, Excuses For Nonperformance, Discharge

Question 1

performance for common law K’s in general

Answer 1

a party’s basic duty at CL is to substantially perform (meets essential purpose of the K) all that is called for in the K

material breach is not okay (that’ll excuse innocent party’s performance obligations)

Question 2

performance under Art 2 in general

Answer 2

art 2 generally requires perfect tender – delivery and conditions of goods must be exactly as promised

art 2 requires parties to act in good faith - can’t be waived

Question 3

buyer’s right of inspection

Answer 3

buyer’s right of inspection – buyer has right to inspect goods BEFORE they pay unless contract says otherwise

Question 4

conditions – has duty to perform become absolute?

Answer 4

contract may provide that a party doesn’t have a duty to perform unless some condition is fulfilled

if condition not met –> then no duty to perform

Question 5

express conditions

Answer 5

statement in K saying that either (1) event has to occur before duty to perform arises; or (2) if some event occurs/fails to occur, obligation of a party to perform under K is suspended/terminated (I’ll paint your house until it starts to rain)

conditions of satisfaction are common express conditions–
many K’s include express condition that a party will pay ONLY IF satisfied with other party’s performance (promisor is under no duty to pay..unless they’re satisfied)

*promisor’s lack of satisfaction must be honest/in good faith
*if promisor refuses to examine promisee’s performance, or rejects performance in bad faith, condition of satisfaction will be excused (meaning the promisor has to pay!)

Question 6

classification of conditions

Answer 6

1) condition precedent - one that must occur BEFORE absolute duty of immediate performance arises in other party (e.g., agreement to pay 10k if my house is sold by April 1; no payment unless house sold by April 1)

2) conditions concurrent – capable of occurring together and that parties are bound to perform at same time (e.g., tender of deed for cash; agreement to pay 1000k for Blackacre)

3) condition subsequent – one that, when it occurs, cuts off an already existing absolute duty of performance (e.g., agreement to buy Blackacre for 100k unless zoning is changed. if zoning changed, no duty to pay 100k or transfer deed)

Question 7

If K isn’t enforceable due to failure or occurrence of a condition…

Answer 7

if a K is not enforceable due to failure or occurrence of a condition and one of the parties has fully/partially performed… they can usually recover under unjust enrichment theories

Question 8

have conditions been excused?

Answer 8

duty of immediate performance re a conditional promise does NOT become absolute until conditions have
- (1) been performed OR
- (2) legally excused (excused means that the conditions are not met but party has duty to perform; we’re tossing the condition out the window)

*if facts don’t reveal performance of condition precedent or conditions concurrent, look to see if condition has been excused!

Question 9

excuse of condition by hindrance or failure to cooperate

Answer 9

if party who has a duty of performance - that is subject to a condition - PREVENTS condition from occurring, condition will be excused if prevention is WRONGFUL

example: Beyoncé agrees to buy my house, provided she get a mortgage. She makes zero effort to get a mortgage and then says she’s excused from performing b/c express condition wasn’t met. Is she right? No - she loses protection of the condition; it’s excused now

Question 10

excuse of condition by waiver or estoppel

Answer 10

• party protected or benefitted by a condition can waive or estop condition from being enforced
• if other party detrimentally relies on waiver, courts will hold to be binding waiver

Question 11

excuse of condition by anticipatory repudiation

anticipatory repudiation (both CL and UCC)

Answer 11

• promisor, before time set for performance of their promise, UNEQUIVOCALLY indicates they won’t perform when time comes (this will serve to excuse conditions)

anticipatory repudiation excuses conditions but it also is an excuse for nonperformance (for other party) and related to breach!

Question 12

requirements of anticipatory repudiation

Answer 12

anticipatory repudiation only applies if there’s a bilateral K with unperformed duties on both sides

nonrepudiating party has 4 options:
a) sue immediately
b) suspend their own performance and wait to sue until performance date
c) terminate K, or
d) ignore the repudiation and urge promisor to perform

retraction of repudiation:
- repudiating party can at any time before their next performance is due withdraw their repudiation unless other party materially changed their position in reliance on the repudiation

Question 13

excuse of condition by insecurity and adequate assurances

(UCC - usually by seller)

Answer 13

• party to K has reasonable grounds to believe other party won’t be able to perform
• can demand adequate assurances in WRITING that other party will perform, and can suspend performance in the meantime (until they get adequate assurances)
• if other party fails to provide, innocent party can be excused from their own performance and treat failure to provide assurances as repudiation

insecurity and adequate assurances excuses conditions but it also is an excuse for nonperformance (for innocent party) and related to breach!

Question 14

1. if condition is satisfied OR condition is excused (or if there’s no condition at all) -> party has absolute duty to perform
2. has this absolute duty to perform been discharged?

discharge by performance or tender of performance

Answer 14

discharge a contractual duty –> by full and complete performance

good faith tender of performance made in accordance with K terms will also discharge duties

Question 15

occurrence of a condition subsequent

Answer 15

cuts off existing obligation of performance!

Question 16

discharge of contractual duties by recission

Answer 16

• mutual: express agreement b/w parties to cancel K — excuse obligations under K for both sides; the K must be executory (both parties have obligations to perform)

agreement to rescind is itself a binding K supported by consideration (can be made orally); consideration is the giving up by each party of their right to counterperformance from the other

watch out for 3rd party beneficiary whose rights have vested—K cannot be discharged by mutual remission by promisor and promisee

• unilateral rescission: results when one of the parties to the K desires to rescind it; party desiring rescission must have adequate legal grounds – mistake, duress, etc.

Question 17

partial discharge by modification of contract

Answer 17

• if a K is subsequently modified by the parties, this will serve to discharge those terms of the original K that are the subject of the modification (it won’t serve to discharge entire K)

Question 18

discharge by accord and satisfaction

Answer 18

a K may be discharged by an accord and satisfaction

ACCORD: agreement in which one party to an existing K agrees to accept (in lieu of performance that they are supposed to get from the other party) SOME OTHER PERFORMANCE
- accord alone won’t discharge original K; it just suspends the right to enforce it

SATISFACTION: performance of the accord agreement (effect is to discharge not only original K but also accord K too)

NOTE: IF NO satisfaction of accord agreement, party can sue under either original obligation OR the accord

Question 19

fact to look for re: accord and satisfaction

Answer 19

party offering the accord is looking to discharge the contract

Question 20

accord and satisifcation can be accomplished by…

Answer 20

tender and acceptance of a check marked payment in full

Question 21

if accord agreement is breached by suing on original contract

Answer 21

can seek to have action enojoined by raising the accord agreement as defense

Question 22

accord requirements

Answer 22

consideration is generally REQUIRED

consideration of lesser value OK if new consideration is either:

a) DIFFERENT than originally bargained-for consideration
b) to be paid to a 3rd party, or
c) to resolve a GOOD FAITH DISPUTE concerning original K

Question 23

accord and satisfaction v. modification

Answer 23

• in an accord, the parties to an existing obligation agree to accept a DIFFERENT future performance in satisfaction of the ORIGINAL obligation (e.g., when payment or performance is overdue, or there’s a dispute as to performance due, and parties are looking for a resolution to discharge the K)
• modification: parties to an existing obligation wants to change their agreement so they agree to a different one

Question 24

discharge by novation

Answer 24

• a novation happens when a NEW K SUBSTITUTES a NEW party to receive benefits and assume duties that had originally belonged to one of the ORIGINAL parties under terms of OLD K
• serves to discharge the old K

Question 25

elements for a novation

Answer 25

1) previous valid K
2) valid new K
3) agreement among all parties; AND
4) immediate extinguishment of K duties as between original contracting parties

Question 26

discharge of contractual duties by impossibility, impracticability

Answer 26

UNFORESEEN EVENT makes completing performance impossible/impracticable

Question 27

discharge of contractual duties by impossibility
(usually raised by seller of land, goods, services)

Answer 27

• contractual duties will be discharged if it has become objectively impossible to perform them and the impossibility arose AFTER K was entered into

*effect: if K is discharged b/c of impossibility, each party is excused from duties arising under the K that are yet to be fulfilled (either party can sue for rescission and get restitution of any goods delivered, etc.)

Question 28

specific situations/common unforeseen events (3 of them)

Answer 28

1. death or physical incapacity – of a person necessary to effectuate K serves to discharge it (if services are of a kind that can be delegated, K is NOT discharged by death or incapacity of person who was to perform)
2. supervening illegality – if performance becomes illegal, excuse by impossibility
3. damage or destruction of K’s subject matter that is necessary to fulfill the K (can’t be either party’s fault) – A rents space to B to open ice cream parlor, and property is destroyed by an earthquake

*NOTE: remodel v. building a house
- remodel house K; when job is almost done, house destroyed by tornado; K is discharged b/c no longer a house to remodel (able to recover for your work in restitution for value of work done before building’s destruction)
- if contracted to build a house for me and the nearly completed house was destroyed, K would NOT be discharged (still possible to build a new house)

Question 29

discharge by impracticability
(usually raised by seller of land, goods, services)

Answer 29

• performance is only possible with extreme and unreasonable difficulty or expense

Question 30

discharge by frustration
(usually raised by the buyer who is supposed to pay)

Answer 30

• party’s duty to perform can be discharged if unforeseen event occurs that FRUSTRATES one/both party’s PURPOSE for entering into contract
  (concerns the REASONS a party entered into contract)

note: watch for facts showing a person has rented a venue for a specific purpose known to owner and a later event (storm) that was not reasonably foreseeable renders purpose of renting place moot