DISCHARGE: 8 Events Where K Performance is Excused

Question 1

DISCHARGE: 8 Excuses/Events Where Valid K Performance is Excused.

Answer 1

1. Rescission (Mutual & Unilateral), 2. Accord & Satisfaction, 3. Contract Modifications (Substituted Agreement), 4. Novation (Substituted Person), 5. Later Unforeseen Events, 6. Failure of Condition Precedent, 7. Anticipatory Repudiation, and 8. Material Breach.

Question 2

RESCISSION (Mutual & Unilateral)

Answer 2

NOTE: Rescissions are generally mutual.

Question 3

MUTUAL RESCISSION: Define.

Answer 3

An express agreement (written/oral) by both parties to cancel the original K (i.e., the parties changed their minds).

Question 4

MUTUAL RESCISSION: Legal Issues.

Answer 4

1. CONSIDERATION: A rescission agreement is itself a binding contract supported by consideration (i.e., each party gives up the right to demand performance from the other party). 2. WRITING NOT REQUIRED (oral discharge sufficient). 3. EXECUTORY: Original K must be executory to both parties (i.e., neither party has finished performance). 4. VESTED 3RD BENEFICIARIES: Not available if 3rd parties beneficiaries already vested contract rights (knowledge and reliance).

Question 5

UNILATERAL RESCISSION: Define.

Answer 5

Available only if one of the parties has an adequate legal ground to rescind (e.g., fraud, duress, mistake, lack of consideration, etc.)(i.e., K Formation Defenses!).

Question 6

ACCORD (& Satisfaction): Define.

Answer 6

ACCORD: A subsequent agreement, whether actual or implied, that discharges a party’s (usually D) obligations under the original agreement. The accord itself does not discharge a party’s obligations under the original agreement, but merely suspends the right to enforce the original contract. Performance of the accord (which is a lesser performance), or satisfaction, discharges both the original contract and the accord contract. If the accord is not satisfied, then the non-breaching party may sue on the original un-discharged contract or for breach of the accord agreement.

NOTE: Usually seen when a party owes another party money.

NOTE: ACCORD different from MODIFICATION bc original contract survives until accord is satified, whereas under modification original contract dies upon modification.

Question 7

MODIFICATION (Substituted by New Contract): Define.

Answer 7

MODIFICATION: An agreement where the parties to an existing contract accept a different agreement in satisfaction of the existing obligation. The modification agreement immediately discharges the terms of the original contract.

Question 8

MODIFICATION: CL Contracts (New Consideration Required).

Answer 8

If a common law contract is to be modified, then new consideration (legal detriment or forbearance) is required, UNLESS:

1. ADDITION or CHANGE in Performance (any change is new consideration),
2. UNFORESEEN DIFFICULTY (must be fair and equitable in light of the circumstances not anticipated by the parties when the K was made), OR
3. THIRD PARTY PROMISE TO PAY.

Question 9

MODIFICATION: UCC Contracts (Good Faith Required).

Answer 9

If a UCC sale of goods contract is to be modified, then no new consideration required so long as the party modifying acted in good faith.

Question 10

MODIFICATION: In Writing Issues.

Answer 10

S.O.F.: If the contract as allegedly modified is within the SOF (MY LEGS), then the modified contract must be in writing (even if the original contract was not required to be in writing).

CL K’s & PROVISIONS PROHIBITING ORAL MODIFICATION (or, requires Writing): Ignore.

UCC K’s & PROVISIONS PROHIBITING ORGAL MODIFICATION (or, requires Writing): Valid, UNLESS waiver.

Question 11

NOVATION (Substituted by New 3rd Party): Define.

(New Party + Original Contract Content = New Contract)

Answer 11

An agreed third-party substitution of at least one of the original-parties to a contract, creating a new contract (i.e., the third party steps into the shoes of the original-party). The original-party’s contractual benefits and obligations are extinguished, thus excused from any liability for non-performance.

NOTE - Delegation vs. Novation: If all of the parties (originals and thirds) do not agree to the substitution, then there is a delegation, and an original-party’s performance is not excused.

Question 12

NOVATION: Requirements.

Answer 12

1. A valid previous contract,
2. An agreement by all the parties (including 3rds), and
3. A valid and enforceable new contact.

Question 13

LATER UNFORESEEN EVENTS

Answer 13

x

Question 14

FAILURE OF CONDITION PRECEDENT

Answer 14

x

Question 15

ANTICIPATORY REPUDIATION

Answer 15

x

Question 16

MATERIAL BREACH

Answer 16

x