contracts- discharge of performance Flashcards
Release
A release is a discharge of a party’s obligations under a contract. A release usually must be in writing; it must be given voluntarily and in good faith; and it usually requires consideration
Waiver
A waiver by the nonbreaching party is a relinquishment of rights related to the other party to a contract and his or her breach.
Mutual rescission
A mutual rescission is an enforceable mutual agreement to discharge all contract obligations and restore the parties to their precontract positions.
Discharge by Novation
By agreement between the original parties to a contract and through a valid subsequent contract, a new party is substituted for one of the original parties, thereby discharging the duties of the parties under the original contract.
Discharge by Accord and Satisfaction
This is an agreement whereby the original contract can be satisfied either by completion of the original performance or by a different performance
Statute of limitations
If a suit for breach of contract is not filed in a court of law or equity within a statutory period of time, the nonbreaching party is barred from pursuing a remedy. This effectively discharges the contract. The statutory periods of time vary from state to state and depend on the type of contract. For the sale of goods, it is a four-year period from date of cause of action, but this period can be reduced to one year by agreement (see UCC 2-725). The time period for the statute of limitations starts when the cause of action arises. For example, the statute of limitations on a sales contract would run from the time the seller failed to deliver the goods.
Bankruptcy decree
Most obligations of a bankrupt debtor can be fully discharged by a decree in bankruptcy.
Discharge by impossibility or impracticability of performance
This type of discharge of performance occurs when it has become objectively impossible for the contract obligations to be completed.
Death or insanity of one of the parties is generally not an automatic discharge unless the contract is one for personal services
In personal services contracts, death or insanity do result in automatic discharge. Caution: The insanity would have to occur after the time that the contract was negotiated. If there is an insanity defense, the contract would either be void or voidable (depending on the type of insanity) and no discharge would be needed.
Automatic discharge of contract
Destruction of the specific subject matter
Illegality
If legal changes occur that now render the contract illegal, the contract is automatically discharged upon the change in the law.
Commercial impracticability
For the UCC doctrine of commercial impracticability to apply, the failed performance must meet an objective standard and not be merely more difficult to perform. Extreme difficulty or cost may meet the objective standard test.
Doctrine of substantial performance
Some contracts are complex in terms of determining whether performance has occurred, such as in the construction of a home. There can be variations from the contract, and the builder can still be paid as long as there is substantial performance. “Substantial performance” means that any deviation from the terms was done in good faith and for practical purposes
Contracts that require personal satisfaction
If a condition is precedent, it requires the actual satisfaction or approval for discharge of the contract.
Discharge by material breach
If one party has materially breached the contract, the other side is no longer obligated to perform and the other party’s duties under the contract are discharged. A material breach is one in which the nonbreaching party’s circumstances are affected by the other party’s breach. For example, an airline catering firm that fails to deliver meals on time for flights has materially breached that supply contract because there is no way to obtain other sources of food in those circumstances.
