Excuse for Nonperformance Flashcards
(UCC) Seller’s rejection of check
If a seller rejects a buyer’s check, seller must allow buyer additional reasonable time to return with cash.
Common law damages rule
Injured party can recover damages for any breach of contract, whether the breach is material or not.
Restitution
Breaching party can still get this remedy if the injured party did not compensate them for their already provided services.
Divisible contract
Contract that is divided between duties, where performing party is paid per duty fulfilled.
Immaterial Breach in a Divisible Contract
If a party doesn’t fulfill all duties in his divisible contract he is still liable for breach, but entitled to be paid for duties performed.
Material breach (CL)
only this provides an excuse to suspend an innocent party’s performance.
Anticipatory repudiation (CL)
Treated as a material breach and excuses performance unless retracted and not yet relied upon.
Injured party’s option under anticipatory repudiation
If a party anticipatorily repudiates, the injured party may immediately stop performance and immediately sue for breach.
Repudiation retraction rule
Repudiations can be retracted so long as they are not yet relied upon.
Effect of repudiation retraction
Reimposes injured party’s duty to perform
UCC failure to give adequate assurance
A party with reasonable grounds for being insecure about the other party’s performance may, in writing, request adequate assurance that the other party will perform in accordance with the contract.
Failure to give adequate assurance
if the other party doesn’t give adequate assurance after a reasonable request to do so, the injured party’s performance is excused.
What adequate assurance cannot be used for
Cannot use adequate assurance to re-write the contract or demand a particular kind of adequate assurance
Rescission
A mutual agreement to cancel the contract
Modification
An agreement to replace an existing contract with a new one.
Breach under a modified contract
If a party breaches after a contract has been modified, the injured party can sue to enforce only the modified contract, not the original one
When a proper modification takes effect
A proper modification takes effect immediately
(i.e. excuses original obligations immediately)
Accord
an agreement to accept a different performance in future satisfaction of an existing duty.
Accord rule
The pre-existing duty is suspended by the accord, but is not excused until the accord is satisfied (new term performed).
Language typical of an accord/satisfaction contract
If, then…
Plaintiff’s options if the defendant breaches an accord
Plaintiff may sue on either the accord or the original contract.
Accord/modification distinction
- Whether you have a modification or an accord and satisfaction depends on timing.
- Ask: Is the underlying obligation excused right now (modification) or only later on (accord/satisfaction)?
Novation
an agreement to substitute a new party for an existing one.
All parties are in on the deal.
Delegation
Party finds another person to perform his contract obligations without the other party’s consent.
This party is liable if the new party breaches after a delegation
The original party who delegated the work
This party is liable if the new party breaches after a novation
- Only the new party is liable.
- Old party cannot be held liable for new party’s breach.
Impossiblity Rule
A later unforeseen event that makes performance impossible may provide the seller with an excuse.
Impracticability
UCC verion of impossibility
Destruction of the contract’s subject matter under impossibility (CL)
Provides an excuse for nonperformance
Destruction of the contract’s subject matter under impracticability (UCC)
- Destruction of the contract’s subject matter provides an excuse if the seller bore the risk of loss and the goods damaged/destroyed had been identified to the contract
- (e.g. already set for sale to the buyer)
- No remedy is available to the buyer if the risk of loss already passed to the buyer before an event triggering impracticability occurred
Death of someone as basis for excuse rule
- Must be someone special/essential for performance of the contract.
- e.g. Van Gogh is essential and excused if he’s painting a portrait, but not if he’s just painting a barn.
Effect of a party’s duty after he has died
The estate is still liable for performance if the party dies after the other party has performed.
Subsequent supervening governmental regulation rule
If performance becomes illegal due to a subsequent supervening governmental regulation, performance is excused due to impossibility/impracticability
Impracticability and increase in the cost of the seller’s performance
cost increase is not an excuse for impracticability
Frustration of purpose rule
Even though performance is possible, if the central purpose of the contract is undermined, and both parties understood that essential purpose, contract is excused.
Express condition
Language in the contract that limits obligations created by other contract language, but does not create an independent obligation.
How to spot an express condition
Look for words like “if” “as long as” “when” “provided that” etc…
Effect of noncompliance of condition
If an express condition is not strictly complied with, the party is excused from performance, but cannot sue for breach.
e.g. I promise to buy a house if it is valued at $2mil. If house worth less, I can’t sue seller, but I don’t have to buy.
Express conditions waiver
Even if not complied with, express conditions can subsequently be waived.
How satisfaction imposed by a satisfaction clause is measured
measured by a reasonable person standard unless the contract deals with art of matters of personal taste.
Types of express conditions
condition precedent and condition subsequent
Condition precedent
An event that must occur before performance is due (e.g. I will lease the gym space from you for $1000 IF I first sell 2000 memberships) [usually tested].
Condition subsequent
An event that cuts off an existing duty (e.g. I will lease the gym space for $1000 until the zoning changes from commercial to residential only).
Excusing a condition
occurrence of a condition may be excused by the later action or inaction of the person protected by the condition.
How to tell if a condition is excused
Ask who is protected by the condition, then see if she did anything to lose the protection.
Failure to cooperate
- A party protected by a condition does something/fails to do something to forfeit the protection.
- e.g. buying a house on the condition of a mortgage, then never seeking a mortgage.
Consequences of failure to cooperate
The party is no longer protected by the condition and must fulfill the duties of the contract.
Waiver
The voluntary giving up of a condition’s protection
Consequences of waiver
Party is no longer protected by the condition and must fulfill the duties of the contract.
Waiver can be retracted.
