Excuses for Nonperformance Flashcards
Conditions
Conditions are agreed-upon limitations on performance in a K
*Conditions make an obligation to perform contingent on the occurrence of some specific event or condition
*Identifying conditions in Ks - often indicated by words such as “only if,” “provided that,” “until,” “so long as,” “subject to,” “if,” etc.
Condition vs. promise - failure of a promise leads to a breach, whereas failure of a condition relieves a party’s performance obligation
Types of conditions:
*Conditions can be implied or express
*Condition precedent - condition must occur before performance due; non-occurrence excuses performance
*Condition subsequent - condition that occurs after performance has begun and excuses further performance
Excuse of condition - parties must strictly comply with conditions, but substantial performance of the condition may suffice if it fulfills the condition’s purpose
*A person who is protected or benefited by a condition may make statements that constitute a waiver of the condition or estop the condition from being enforced
Insecurity
Insecurity is the prospective inability inability to perform as demonstrated by a party to a K:
*Arises if A gives B reasonable grounds for insecurity or uncertainty as to whether A will perform under the K
*Grounds for insecurity or uncertainty must be reasonable
**Insecure party’s options”” - insecure party may either:
a) Make demand - demand adequate assurances, or
b) Suspend performance - suspend performance until adequate assurances are provided (if commercially reasonable)
*Party may treat K as repudiated if adequate assurances are not provided
Insecurity vs. anticipatory repudiation - insecurity involves uncertainty regarding the other party’s performance, whereas anticipatory repudiation involves a clear indication the other party will not perform
Anticipatory Repudiation
Anticipatory repudiation arises when one party to a K makes it clear that he will not perform under the K
* Effect - excuses performance by the other party
Requirements - arises if one party:
1) Unambiguous act - makes an unambiguous statement or conduct
2) Prior to full performance - prior to the time performance is due
3) Indicating non-performance - which indicates he will not perform
- Note - distinguish from insecurity, which involves mere uncertainty regarding other party’s performance
Non-repudiating party’s options - may either:
a) Treat the anticipatory repudiation as a total repudiation and sue,
b) Suspend performance until performance date is due and wait to sue,
c) Treat repudiation as an offer to rescind and treat K as discharged, or
d) Ignore repudiation and urge promisor to perform
Impossibility & Impracticability
If an unforeseen event occurs after K formation but before performance is complete, performance may be excused as impossible or impracticable
Requirements - an unforeseen event, which neither party assumed would occur, must make completing performance either:
a) Impossible - performance is objectively impossible, or
b) Impracticable - performance is only possible with extreme and unreasonable difficulty or expense
Frustration of purpose
A party’s duty to perform under a K may be discharged if an unforeseen event occurs that undermines (i.e. frustrates) one or both party’s principal purpose for entering into the K
Requirements - a K may be discharged if:
1) An unexpected event destroys one or both party’s purpose for entering into the K ;
*Whether performance is possible after the event is irrelevant; Issue is whether performance after the unforeseen event nullifies one or both party’s original purpose for the K
2) The unforeseen event is not the fault of the frustrated party; and
3) The non-occurance of the event was a basic assumption of the K
Frustration of purpose vs. impossibility - distinction is that impossibility concerns duties specified in the K, whereas frustration of purpose concerns the reasons a party entered into the K
