Contracts Flashcards
Condition
event that is uncertain to occur but must occur, unless nonoccurrence is excused, before performance under the contract becomes due. (R 224)
If a contract is ambiguous…
courts prefer to impose a duty rather than a condition. (R 227)
Why do courts prefer to impose a duty?
reduce obligee’s risk of forfeiture, courts prefer deal go through
Once the condition has occurred…
the obligor’s performance is due (R 225)
2 Types of Conditions
Express and Constructive (Implied)
Express Conditions
strictly enforced conditions agreed upon by both parties (Luttinger)
When does a breach excuse the other party’s performance?
A party’s breach excuses the other party’s performance if the non-breaching party’s obligations were dependent on the breaching party’s obligations.
If a condition is precisely described…
it has to be met for the contract to be enforceable
Time is of the essence
Specific date of performance does not necessarily mean that performance by that date is “of the essence” to the contract (R 242; Internatio)
When can express conditions be waived?
after being repeatedly and constantly disregarded (McKenna)
Satisfaction as a Condition
If satisfaction is a condition that must be met before the other party has to perform,, a reasonable person’s opinion of satisfaction (if practicable) satisfied the condition. (R 228, Gibson)
Unqualified approval is a…
condition precedent to purchaser’s obligation to pay
Duty of Good Faith and Fair Dealing
R 205–making decisions regarding satisfaction in good faith is a constructive condition; it is a breach if you say something is unsatisfactory in bad faith
If nonoccurrence of a condition causes disproportionate forfeiture…
a court may excuse the nonoccurrence, unless its occurrence is material to the contract (R 229)
Framing Questions for Conditions: (Internatio)
- What was the condition?
- What was the obligation if the condition occurred?
- Who was the condition to benefit?
- Who had the risk of the condition not occurring?
- Who controls whether or not the condition occurs?
- Was the condition also a duty?
Mitigating Doctrines of Express AND Constructive Conditions
- Prevention
- Waiver, Estoppel, and Election
- Interpretation and the Avoidance of Forfeiture
Nonoccurrence of a Condition
Where a party’s breach by nonperformance contributes materially to the nonoccurrence of a condition of one of her duties, the nonoccurrence is excused
Who does nonoccurrence have a very large forfeiture on?
The obligee
When is a duty due?
when the condition has occurred, or the nonoccurrence of a condition is excused
When is a duty discharged?
Nonoccurrence of a condition
Constructive Conditions
the making of contractual obligations into conditions due to the court’s interpretation of what the parties intended, imposed by the law to do justice
If one performance takes time…
it must be fully performed before the obligor’s performance becomes due, unless otherwise specified in the contract (R 234(2))
If a contract does not dictate when payments shall occur…
it is implied that the work must be substantially performed before payment becomes due (Stewart)
2-511
in a sale of goods, payment is a constructive condition to the seller’s duty to deliver; seller doesn’t have to deliver goods until he gets paid
2-507(1)
seller must offer/deliver goods before the buyer has to pay
R 234/R 238
Simultaneous transactions occur simultaneously and each performance is conditional
Mitigating Doctrines of Constructive Conditions ONLY
substantial performance, divisibility, restitution
Substantial Performance
performance of the condition has been completed enough that the court will deem it to be full performance of the condition which then triggers the conditional duty; mitigates the harshness of constructive conditions
Does substantial performance apply to the sale of goods?
NO GOODS MUST BE PERFECT
Doctrine of Substantial Performance
choice between difference in market value of expected and received performance or the cost of completing or remedying the nonconforming performance
Can a willful deviation result in a finding of substantial performance?
NEVER
Rule of Jacob & Youngs v. Kent
don’t have to complete it perfectly, just substantially
When determining if substantial performance has occurred, consider
- purpose to be served
- desire to be gratified
- excuse for deviation
- cruelty of enforcing adherence
If substantial performance has occurred, is there material breach?
NO, but can still recover damages for partial breach; difference in value of expected vs. received performance (In J&Y it was 0); HOWEVER, a breach is a breach is a breach no matter how small and can still result in damages
Perfect Tender Rule
substantial performance equivalent for sale of goods
Seller may substitute conforming goods if:
- he had reasonable grounds to believe the substitute tender would be accepted, AND
- he notified the buyer of his intention to use substitute tender
If both are met, buyer is obligated to perform their duty. STRICT PERFORMANCE is the only exception
2-508
Seller’s right to cure
Divisibility
a contract can be severable if the part to be performed by one party consists of several distinct items and the price to be paid is attached to each distinct item being performed (Gill)
Do progress payments constitute a divisible contract??
NO
Magic Tees
if parts or steps are “merely incidental” to the contract as a whole, the court may determine the contract to NOT be divisible
Restitution
party in breach can ask for restitution to recover any value he gave to the injured party (R 374); usually when a down payment is involved or breach due to mistake, impracticability, or frustration of purpose
Is materiality of breach within the control of the injured party?
NO, but whether to treat the breach as partial or total is
Factors to Determine Materiality of Breach (R 241)
- degree to which the injured party has already received the benefit
- degree to which the injured party may be compensated for lack of performance
- extent to which the party failing to perform has already partly performed or prepared to perform
- hardship that termination of the contract would impose on the party failing to perform
- willful, negligent, or innocent behavior of the party failing to perform
- degree of uncertainty that the party failing to perform will complete the contract
If the breach is non-material…
the injured party must continue performance and treat the breach as partial
If the breach is material…
- continue performance and treat the breach as partial
2. stop performing and treat the breach as total (R 236-237)
Claim for damages for partial breach:
damages based on only part of the injured party’s remaining rights to performance
Claim for damages for total breach:
damages based on all of the injured party’s remaining rights to perform
R 242, UCC 2-508(2)
if circumstances make it appropriate for the injured party to suspend performance and demand a cure, the injured party is expected to do so before declaring total breach and terminating the contract
Certainty of Material Breach
must be certain it is a material breach before repudiating, because if it is not material, YOU become the breaching party and are liable for damages
For repudiation to be warranted…
the breach must be sufficiently material
After-Acquired Evidence
if a party terminates a contract a contract and only later discovers facts that would have justified termination, those facts can be used to avoid liability;
Cooperation
implied obligation to not hinder the promisor’s performance, but there is not an obligation to help someone perform; good faith obligation to adhere to contracts
Prevention
mere difficulty to perform does not excuse breach, but if the buyer prevents the seller from performing, it may be excused
Anticipatory Repudiation
not accompanied by a breach by non performance; occurs before the time for performance is due
Repudiation
sufficiently positive communication by words or actions that a party will not or cannot perform–NOT A BREACH
Breach
failure to perform an obligation
If repudiation is accompanied by breach…
gives rise to a claim for damages for total performance
Timing of repudiation affects…
how damages calculated
