Excuses for Nonperformance Flashcards
Conditions - Overview
Conditions are agreed-upon limitations on performance in a K
- Performance is contingent on the occurrence of some event
- e.g. A agrees to buy B’s car is B gets new tires; B getting new times is a condition of A’s performance (buying the car)
Conditions - Indicated by
Words such as “if: “provided that,” “subject to,” etc.
Conditions - Condition vs. Promise
Failure of a promise leads to a breach; failure of a condition relieves a party’s performance obligation
Conditions - Condition Precedent
Condition must occur before performance due; non-occurrence excuses performance
Conditions - Condition Subsequent
Condition that occurs after performance has begun and excuses duty to perform
Conditions - Purpose Controls Interpretation
Substantial performance of a condition may suffice if it fulfills the condition’s purpose
- Parties’ intent controls: e.g. if a condition is clearly designed to protect one party, it will be interpreted consistently with that intent
- A party protected or benefitted by a condition may waive or estop the condition from being enforced
Conditions - Excuse
Conditions may be legally excused by breach repudiation, etc.
- A party whose performance is subject to a condition cannot prevent or hinder the condition’s occurrence; will result in excuse of condition
Insecurity & Adequate Assurances - Overview
Insecurity arises when a party to a K has reasonable grounds to believe the other party will be unwilling or unable to perform under the K
- Insecure party may demand adequate assurances the other party will perform and suspend performance in the meantime
- Arises out of UCC, but many states apply to non-UCC Ks
Insecurity & Adequate Assurances - Demand for Adequate Assurances
Must be made in writing based on reasonable and justified grounds for insecurity
- No response required if demand is unjustified or unreasonable (i.e. if party seeking adequate assurances is unreasonably secure)
- Suspension of Performance: A justifiably insecure party may suspend performance until adequate assurances are provided
Insecurity & Adequate Assurances - Adequate Assurances
Commercially reasonable commitment from a party that it will perform under the K
- If not provided, insecure party may treat K as repudiated
- Failure to respond to unreasonable demand is not a repudiation - If adequate assurances are provided, the formerly insecure party must perform; failure to do so will constitute a breach
Insecurity & Adequate Assurances - 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 - Overview
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
Anticipatory Repudiation - Requirements (3)
1) Unambiguous Act: Makes an unambiguous statement of conduct
2) Prior to Full Performance: Prior in time performance is due
3) Indicating Non-Performance: Which indicates he will not perform
- E.g. A hires B to remodel A’s kitchen, B is almost finished when A tells B she does not want the remodel and will not pay; B can treat K as breached, which excuses B’s obligation to continue working
Note: Distinguish from insecurity which involves mere uncertainty regarding other party’s performance
Anticipatory Repudiation - Withdrawal
Repudiation can be withdrawn unless other party has either:
a) materially changed position in reliance on the repudiation,
b) cancelled the K in response to the repudiation, or
c) indicated they consider the repudiation to be final
Anticipatory Repudiation - Non-repudiating Party’s Options
She 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
d) Ignore repudiation and urge promisor to perform
Impossibility and Impracticability - Overview
If an unforeseen event occurs after K formation but before performance is complete, performance may be excused as impossible or impracticable
Impossibility and Impracticability - 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
Impossibility and Impracticability - Common Unforeseen Events
Substantial damage or destruction of K’s subject matter
- Damage or destruction must not have been either party’s fault
Death: K obligations generally survive the death of a party, unless deceased party’s K obligations are non-delegable
- Usually only unique personal services are non-delegable
Subsequent law or regulation (e.g. supervening illegality)
- If performance becomes illegal, excuse by impossibility
Frustration of Purpose - Overview
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
Frustration of Purpose - Requirements (3)
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-occurrence of the event was a basic assumption of the K
- Does not have to be a stated assumption in the K
