Discharge Flashcards
Discharge General Overview
- Use discharge when termination is beyond the reasonable control of the parties
- Methods are all stand-alone independent arguments
- Not mutually exclusive
- Discharge differs from incapacitation or lack of capacity
Discharge General Rule
Discharge is the termination of contract duties
Legal effect of Discharge
The discharged parties are not liable for breach of contract
Substantial Performance Elements
- Substantial, but not complete performance
- The material part of the bargain has been given
- In such cases, the contract is enforced, less damages caused by the incomplete performance
Rescission
The contract is terminated upon mutual agreement of the parties or court order.
Statute of Limitations
A law which establishes a time deadline by which a lawsuit must be filed for breach of contract. If not filed within this time limit, the lawsuit is time-barred.
CA Statute of Limitations for a written contract
4 years from the date of breach
CA Statute of Limitations for an oral contract
2 years from the date of breach
Bankruptcy
Types of Impossibility
- Death or incapacity of a contracting party
- Destruction of the subject matter
- Unavailability of the subject matter
- Failure of an agreed-upon means of performance
- Subsequent illegality of the subject matter
Impossibility Characteristics
Impracticability Elements
- A supervening event occurs
- This event is not caused by the breaching party
- The occurrence/non-occurrence of the event was a basic assumption of the contract
- This event makes performance impractical
- Risk of loss is not allocated to the claimant in the
Impracticability Characteristics
- Mere financial hardship or increase in cost of performance alone is not enough
- The rise in cost must be extreme and due to an unforeseen contingency
- Must be unduly burdensom (when don’t have facts in terms of cost)
Frustration of Purpose Elements
- A supervening event occurs
- Event not caused by the breaching party
- Unanticipated/Unforeseeable
- Occurrence/non-occurrence of the event was a basic assumption of the contract
- This event destroys, or substantially frustrates, the purpose of the contract, as understood by the parties at the time of entering into the contract
- Risk of loss is not allocated to claimant
Accord & Satisfaction - Type 1 Elements
- The amount of a contract debt is in dispute
- The (breaching party) debtor tenders a check to the creditor in good faith payment of the debt
- The check must include (must be written on the check), or be accompanied by a letter which includes a conspicuous statement that the check is “payment in full” of the debt
- If the creditor negotiates the check, the debt is discharged
- Examples of negotiation of a check: cashing, depositing, exchanging
Exceptions to Type 1 Accord & Satisfaction
- Creditor can refund the payment within 90 days; in such case, no discharge
- Creditor can specify a central address to which all such checks must be mailed; if a check is not mailed to the central address, no discharge
CA Civil Code §1526
- The section states that a creditor can defeat an attempted accord and satisfaction by simply crossing-out or lining-out the words “payment in full” on the check
- Although still on the books, the section has been overruled by a court decision
When does Type 1 A&S apply?
Only applies when someone is paying by check.
When does A&S Type 2 apply?
(common law, not in the UCC)
A&S Type 2 Overview
No check is involved
The contract creditor agrees to accept performance different from the original promise
Accord
- A contract to perform an act to satisfy an existing contract duty.
- The contract creditor agrees to accept a stated, described performance from the contract debtor in satisfaction of the debtor’s existing contract duty. The new stated, described performance differs from the original performance.
Satisfaction
- The performance of the accord by the contract debtor discharges the original performance duty
