Excuse of Nonperformance of Contract Because Something that Happened After Contract was Made

Question 1

What is the rule regarding excuse of performance because of the other guy’s nonperformance

Answer 1

The nonbreaching party is excused from performing.

Example: P contracts to paint O’s house on Saturday for $1,000. P does not paint the house. Obviously, O does not have to pay P, i.e., O is excused from performing (paying) because of P’s nonperformance.

Question 2

What is anticipatory repudiation?

Answer 2

Excuse of performance because of the other guy’s saying it is not going to perform.

Anticipatory repudiation is an unambiguous statement or conduct

(i) that the repudiating party will not perform
(ii) made prior to the time that performance was due.

Anticipatory repudiation by one party excuses the other party’s duty to perform.

NOTE: Anticipatory repudiation generally gives rise to an immediate claim for damages for breach unless the claimant has already finished her performance.

Question 3

Can a party retract an anticipatory repudiation?

Answer 3

Anticipatory repudiation can be withdrawn (retracted) so long as there has not been a material change in position by the other party.

If the repudiation is timely retracted, the duty to perform is reimposed but performance can be delayed until adequate assurance is provided.

Question 4

Recall that anticipatory repudiation requires an unambiguous statement or conduct indicating that a party will not perform. What if the words or conduct of a party merely makes performance uncertain? (EXCUSE BECAUSE OF INSECURITY ABOUT WHETHER THE OTHER GUY IS GOING TO PERFORM)

Answer 4

Look for this in sale of goods problems. If the words or conduct of one party give “reasonable grounds for insecurity,” then the other party can, in writing, demand adequate assurance and if it is “commercially reasonable,” can suspend performance until it gets adequate assurance.

The three concepts again are:

(1) reasonable grounds for insecurity, and
(2) written demand for adequate assurance, and
(3) commercially reasonable to stop performance.

Question 5

What is the rule about excuse of performance because of the other guy’s improper performance?

Answer 5

(A) Article 2 and perfect tender rule;

(B) Common law and material breach rule:

1. Damages can be recovered for any breach.
2. Only a material breach by one guy excuses the other guy from performing a contract governed by common law.
3. Whether a breach is material is a fact question (and so whether a breach is material is not likely to be a bar exam question).
4. If there is substantial performance then the breach is not material. If the breach is material, then the performance was not substantial.

Question 6

What is the divisible contract exception to the rule regarding excuse of performance because of the other guy’s impropert performance?

Answer 6

In a “divisible contract” there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of entire contract.

On the bar, look at whether price is stated as a lump sum or on a per performance basis.

Question 7

What is the exception to the rule regarding excuse of performance because of nonoccurrence of an express condition?

Answer 7

Condition of personal satisfaction of one of the parties – honest and good faith dissatisfaction: A promise by X to pay Y for her work only if X is satisfied with the work is not an illusory promise.

X is excused from paying Y only if X’s not being satisfied is honest and good faith. In other words, conditions of personal satisfaction of one of the contracting parties do not have to be strictly complied with.

While the contract language is “only if X is satisfied with the work,” courts simply look to whether a reasonable person would be satisfied.

Question 8

What is the standard for determining whether an express condition has occurred, i.e., been “satisfied”?

Answer 8

General rule – strict compliance is required for “satisfaction” of a condition

Question 9

What is an express condition and how can express conditions be identified?

Answer 9

(1) language in a contract,
(2) limits obligations created by other contract language,
(3) triggering words: “if,” “only if,” “provided that,” “so long as,” “subject to,” “in the event that,” “unless,” “when,” “until,” and “on condition that” in the contract.

Question 10

How can an express condition be eliminated so that its nonoccurrence does not affect performance obligations?

Answer 10

(a) Waiver: Identify the person who benefits from or is protected by the express condition. Then look for a statement by that person giving up the benefits and protection of the express condition.
(b) Prevention: Look for the person protected by the express condition hindering or preventing the occurrence of the express condition.

Question 11

What is the difference between conditions precedent and conditions subsequent?

Answer 11

(1) Different facts: Almost all contract conditions are “conditions precedent” – conditions that excuse performance until and unless they occur.

• Conditions subsequent occur subsequent to the start of performance and excuse performance when they occur.
• For example, you and Spike Lee agree that he will sell you his Knicks courtside seats for $10 a game until the Knicks are in first place.

(2) Same law: Conditions subsequent, like conditions precedent, do not create new performance obligations but instead merely limit performance obligations otherwise created.

Question 12

What are the rules regarding excuse of performance by reason of a later contract?

Answer 12

(A) Rescission (cancellation): The key is whether performance is still remaining from each of the contract parties. (executory). (

B) Accord and satisfaction (substituted performance);

(C) Modification (substituted agreement);

(D) Novation

Question 13

What is the meaning of “accord and satisfaction”?

Answer 13

Same parties, different performance.

An agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.

The effect of accord and satisfaction is:

(a) if the new agreement (“the accord”) is performed (satisfaction), then performance of the original obligation is excused.

OR

(b) If the accord is not performed, then the other party can recover on either the original obligation or the accord.

Question 14

What is a modification?

Answer 14

Modification (substituted agreement) is an agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.

Question 15

What is a novation?

Answer 15

** different party, same performance.**

• A novation is an agreement between BOTH parties to an existing contract to the substitution of a new party.
• A novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originially belonged to one of the original parties under the terms of the old contract.
• A novation will serve to discharge the old contract.

Question 16

Who is liable after a novation?

Answer 16

Novation excuses the contracted for performance of the party who is substituted for or replaced.

Question 17

How is delegation different from novation?

Answer 17

• Novation requires the agreement of BOTH parties to the original contract, and excuses the person replaced from any liability for nonperformance.
• Delegation does not require the agreement of both parties and does not excuse.

Question 18

What is the rule regarding excuse of performance by reason of a later, damage or destruction of the subject matter of the contract? Under common law? Under Article 2?

Answer 18

Damage or destruction of subject matter of contract: Recall Taylor v. Caldwell where a concert promoter sued the owner of Surrey Gardens for breach of a contract to use Surrey Gardens for three concerts. After the contract but before the concerts, fire destroyed Surrey Gardens. The court excused the owner’s nonperformance, reasoning that the continued existence of the concert was an implied condition.

Under common law, (see Handouts p. 62).

Under Article 2, If sale of goods [like Karl and his coffee] do risk of loss first.

(a) Risk of loss on the buyer: If risk of loss is on the buyer, then the buyer pays.
(b) Risk of loss on the seller: If the risk of loss is on the seller, then the buyer does not have to pay. Whether the buyer can recover damages from the seller depends on the facts. [Seller’s risk of loss and destruction of identified goods]. [Seller’s risk of loss and destruction – different answer].

Question 19

What is the rule regarding excuse of performance by reason of a later, death after the contract? What is the exception?

Answer 19

General effect of death on contract obligations: Death does not make a person’s contract obligations disappear. Exception: Death of party to contract who is “special” person excuses performance. (e.g. an actor who dies nonperformance is excused by impossibility).

Question 20

What is the rule regarding excuse of performance by reason of a subsequent law or regulation?

Answer 20

(1) If later law makes performance of contract illegal – excuse by impossibility. OR (2) If later law makes mutually understood purpose of contract illegal – excuse by frustration of purpose.