Excused/Discharged Performance Flashcards
Performance - Common Law v. UCC
Common law: requires substantial performance
UCC: requires perfect tender
Condition Precedent to Effectiveness vs. Performance
Condition precedent to effectiveness: parties orally agree that written contract won’t be effective until the condition is satisfied
* Oral agreement can come in under parol evidence rule
Condition precedent to performance: an absolute duty to perform is created only after condition is met; if other party doesn’t perform, it’s a breach
Condition subsequent: the occurrence/nonoccurence of a condition releases a party from duty to perform
Satisfaction of condition
Express satisfaction: requires literal compliance with condition
Personal satisfaction: good faith
Constructive satisfaction: substantial performance
List: Excuse of Conditions
Anticipatory Repudiation
* Divisibility of contract
* (Lack of) Adequate assurance
* Waiver/estoppel
* Breach of contract
* Substantial performance (common law)
* Hindrance/failure to cooperate
Hindrance/Failure to Cooperate
There’s a giant list of conditions
Hindrance/Failure to Cooperate: If Party A created a condition and then prevented that condition from occurring in a wrongful way (so that their absolute duty to perform couldn’t be triggered), then the condition is excused (poof).
“Wrongful” = Party B didn’t reasonably anticipate or assume the risk that Party A would prevent the condition
Anticipatory Repudiation
- Occurs when the promisor, prior to the time set for performance
- through words or conduct, unequivocally states he won’t perform
- and there is a bilateral contract with executory (unperformed) duties on both sides [neither party has started performance yet]
Nonrepudiating party can treat anticipatory repudiation as a total breach and sue immediately.
If nonrepudiating party already fully performed, it has to wait until time set for performance to sue, since repudiating party might withdraw repudiation and perform.
Define
Adequate Assurance
If a party has reasonable grounds for insecurity that other party won’t perform, the party can ask for assurances in writing that the other party will perform.
* Until they get assurance, the party can suspend their own performance
* If other party doesn’t give assurances within 30 days, can be treated as anticipatory repudiation
Discharge of Duties
By unforeseen events
* Impossibility
* Impracticability
* Frustration of purpose
By parties
* Rescission
* Reformation
* Modification of contract
* Novation - new contract replacing a party; releases original party and extinguishes original contract
* Accord and satisfaction
What is the trigger for impossibility/impracticability?
Unanticipated/unforeseen event
If an unanticipated event makes performance impossible or impractical, and the nonoccurrence of it was a basic assumption of the parties and the parties didn’t expressly assume the risk of it, then contract duties might be discharged.
Define
Discharge by Impossibility
If an unanticipated event makes performance impossible, and the nonoccurrence of it was a basic assumption of the parties and the parties didn’t expressly assume the risk of it, then contract duties might be discharged.
“Impossibility” is objective, not subjective.
Each party can sue for rescission and receive restitution for any partial performance.
Examples
* Death or physical incapacity
* Supervening illegality (law passed that makes work illegal)
* Destruction of subject matter
NOT: Contractor’s duty to construct building is not discharged if building destroyed since it can be rebuilt; but contractor can get extension on deadline. Contractor can only get contract price.
Define
Discharge by Impracticability
If an unanticipated event makes performance impractical, and the nonoccurrence of it was a basic assumption of the parties, contract duties discharged if they can only be performed with extreme and unreasonable difficulty or expense.
Mere increase in costs is NOT sufficient to discharge under impracticability.
UCC: Seller generally assumes risk of unanticipated events and must continue to perform unless parties wouldn’t have placed that risk on seller.
Examples
* shortage of raw materials
* war
* strike
* embargo
* catastrophic local crop failure (not mere shortage)
* unforeseen shutdown of major supplier
* increases in cost NOT enough (ex. even double the cost is not enough to excuse performance)
Frustration of Purpose
Occurs when a (i) supervening act that (ii) parties didn’t reasonably foresee when entering into contract (iii) destroys the purpose of the contract (iv) and both parties knew about the specific purpose/it was a central purpose to both parties.
Accord and Satisfaction
Agreement to accept different performance. Requires:
* Consideration, OR
* Bona fide dispute
Breach - Common Law
Breach occurs when promisor has absolute duty to perform and fails to do so. Nonbreaching party must show that it was willing/able to perform but for the other party’s breach.
* Unlike UCC, common law analyzes the materiality of the breach
Material breach: Breach is material if nonbreaching party didn’t get substantial benefit of bargain; nonbreaching party can treat contract as ended and sue immediately.
Minor breach: If nonbreaching party DID get substantial benefit of bargain, it must still perform but can claim damages.
* Only material breach excuses nonbreaching party’s performance
Ex. Time is of the essence: Generally, failure to perform by stated time is NOT a breach, but if contract expressly stated that time is of the essence, then it’s a material breach.
Courts look at following to see if breach was material:
* Extent to which nonbreaching party will receive expected benefit
* Extent to which nonbreaching party can be compensated for damages
* Hardship to breaching party if contract terminated
* Extent to which breach was negligent or willful
* Extent to which breaching party performed, and likelihood of full performance
Breach - UCC
Perfect Tender Rule: If goods/delivery fail to conform to contract in any way, buyer can:
* REJECT all
* ACCEPT all, or
* Accept any conforming goods and reject the rest
Nonbreaching party can then sue for damages
