Contract - Excuse of Nonperformance of Contract B/C Something Happened After Contract was Made.

Question 1

Do you have to continue performing if the other party does not perform?

Answer 1

NO!

Question 2

What can you do if the other party says they are not going to perform (anticipatory repudiation)?

Answer 2

Anticipatory repudiation is an unambiguous statement or conduct that

(i) the repudiating party will not perform
(ii) made prior to the time that performance was due.

This excuses the other party from performing.

Anticipatory repudiation generally gives rise to an immediate claim for damages for breach unless the claimant has already finished her performance in which case have to wait until contract is due.

Question 3

When can an anticipatory repudiation be withdrawn/retracted?

Answer 3

Can be withdrawn/retracted so long as there has not been a material change in position by the other party.

If the repudiation is timely retracted, the duty to perform is reimposed ,but performance can be delayed until adequate assurance is provided. (i.e. escrow)

Question 4

What if its just uncertain that the other party is going to perform?

Answer 4

If the words or conduct of one party give “reasonable grounds for insecurity”, then the other party can, in writing, demand adequate assurances and if its “commercial reasonable” suspend performance until it gets adequate assurances.

(1) Reasonable grounds for insecurity
(2) Written demand for adequate assurance[
(3) Commercially reasonable to stop performance.

Question 5

When can you excuse for improper performance? (UCC/Common Law)

Answer 5

UCC - Article 2 and Perfect tender rule

Common Law and material breach rule.

(1) Damages can be recovered for any breach
(2) Only a material breach by one party excuses the other party from performing a contract governed by common law.
(2) A material breach is a question of fact.
(4) If there is substantial performance then the breach is not material. If the breach is material, then the performance was not substantial.

Question 6

When is there a material breach for quantity (amount) of performance?

Answer 6

Any time you do less than half of the work - its a material breach - excused under contract law

However, if you are excused under contract law, still may have to pay under quasi-contract law for part performance.

Question 7

What is the divisible contract exception?

Answer 7

IN a divisible contract there can be a contract law recovery for substantial performance of a divisible part even though there has been a material beach of entire contract. [Look to see lump sum or per performance basis]

Question 8

What is an express condition?

Answer 8

Language in a contract that limits the obligations created by other contract language.

Question 9

What are the triggering words for an express condition?

Answer 9

“If”, “Only If”, “Provided that”, “So long as”, “Subject to”, “In the event that” “Unless” “When” UNtil” and “On the condition that”

Question 10

What is the standard for determining whether has an express condition has occurred?

Answer 10

General Rule: Strict compliance is required for “satisfaction” of a condition.

Exception: Condition of personal satisfaction of one of the parties. In that event, not satisfied if there is honest and good faith dissatisfaction. Court will look to see if a reasonable person would be satisfied.

Question 11

How can an express condition be eliminated so that its nonoccurence does not affect performance obligations?

Answer 11

(1) Waiver of the Condition
* Identify the person who benefits from or is protected by the express condition. Then look fro a statement by that person giving up the benefits and protection of the express condition.
(2) Prevention:
* Look for the person protected by the express condition hindering or preventing the occurrence of the express condition.

Question 12

Do conditions subsequent and precedent create new performance obligations?

Answer 12

No, they do not create new performance obligations, but instead merely limit performance obligations otherwise created.

Question 13

When can a parties rescind a contract?

Answer 13

The parties can cancel the contract so long as neither party has completed performance.

Question 14

What is accord and satisfaction (substituted performance)?

Answer 14

An agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.

Question 15

What is the effect of accord and sanctification?

Answer 15

If the new agreement (“the accord”) is performed (satisfaction), then the performance of the original obligation is excused.

If the accord is not performed, then the other party can recover on either the original obligation or the accord.

Question 16

What is a modification?

Answer 16

Modification is an agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.

Question 17

What is novation?

Answer 17

A novation is an agreement between BOTH parties to an existing contract to the substitution of a new party.

Question 18

Who is liable after a novation?

Answer 18

Novation excuses the contracted for performance of the party who is substituted for or replaced.

Question 19

How is delegation different from novation?

Answer 19

Novation requires the agreement of BOTH parties to the original contract and excuses the person replaced from any liability for nonperformance.

Delegation does not require the agreement of both parties and does not excuse.

Question 20

Common Law Rule on Excuse for damage or destruction of the subject matter of the contract.

Answer 20

If the subject matter is damage or destroyed, the court excuses the performance since the existence of the subject matter was an implied condition.

Question 21

Article 2 on the Damage or Destruction of the Subject Matter of Contract. [Look to risk of loss’

Answer 21

If risk of loss is on the buyer, then the buyer pays.

If the risk of loss is on the seller, then buyer does not have to pay. Whether the buyer can recover damages from the seller depends on the fact.

If its a common good that can be supplied by another means, buyer can likely recover. (i.e. grits).

Question 22

What is the effect of death after contract?

Answer 22

General Rule: Death does not make a person’s contract obligations disappear.

Exception: Death of party contract who is “special” person excuses performance.

Question 23

What if later law makes performance of contract illegal?

Answer 23

Excuse by impossibility

Question 24

What if later law makes mutually understood purpose of contract illegal?

Answer 24

Excuse by frustration of purpose.