Excuses for Nonperformance

Question 1

Conditions & Non-Occurrence of Conditions

Answer 1

Common Law Concept. Conditions can be expressed or implied, and are based on the occurrence of some specific event or condition. Which determines if a party has the obligation to perform.

TWO TYPES

1. Condition Precedent - Performance is not obligated unless condition occurs. Non-occurrence excuses performance.
2. Condition Subsequent - Condition that occurs after performance has begun and excuses further performance.

Waiver- The beneficiary of the condition may waive it, but can reinstate it if (1) Condition has not occurred yet and (2) the other party has not relied on it.

Condition vs. Promise - failure of a promise leads to a breach, failure of a condition relieves a party’s performance obligation. Look to parties’ intent to distinguish.

Excuse of Condition - Conditions must be strictly complied with but substantial performance of the condition may suffice to fulfill condition if it fulfills purpose of condition.

Question 2

Insecurity

Answer 2

Excuse by insecurity arises if A gives B reasonable grounds it will not perform. B’s insecurity must be reasonable.

Insecure Party’s Options:

(1) Demand adequate Assurances.
(2) Suspend performance until she receives adequate assurances.

Distinguish between anticipatory repudiation where a party gives clear intent that it will not perform; versus insecurity by one party that the other will not perform. (One is an act the later is a guess)

Question 3

Anticipatory Repudiation

Answer 3

Arises if one party to a K:
1. Makes an unambiguous statement or conduct
2. Prior to the time performance is due
3 that indicates the party will not perform.

EFFECTS OF ANTICIPATORY REPUDIATION

1. Non-repudiating party’s duty to perform is excused and can treat repudiation as a breach.
2. The repudiation can be retracted if the non-repudiating party has not materially changed position on repudiation.

Question 4

Impossibility and Impracticability

Answer 4

Performance on a K may be excused as impossible or impracticable if an unforeseen event occurs after K formation but prior to performance completion.

Requirements to Excuse Performance - an event, which was a basic assumption of the K, must occur that both parties assumed would not occur that makes performance either:

a) Impossible: Performance is objectively impossible, or
b) Impracticable: Performance is only possible with extreme and unreasonable difficulty or expense.

Common Unforeseen Events

a) Major damage or complete destruction of K’s subject matter. Can be used to trigger either one if damage / destruction not caused by either party.
b) Death. K obligations survive the death of a party unless deceased party’s obligations were non-delegable (unique personal services)
c) Subsequent law or regulation - If performance becomes illegal, impossibility applies.