Excuses from Non-Performance

Question 1

When can the other party’s breach excuse non-performance?

Answer 1

The other party’s breach *may *provide an excuse for non-performance - it depends on the nature of the contract:

Article 2 Sale of Goods: If seller’s performance is not perfect in every respect, buyer has pretty much free reign. The buyer has three options: (1) reject all goods, not just non-conforming goods, (2) accept all goods, (3) accept some goods and reject others. No matter which option buyer chooses, he or she can still get damages.

Common Law Contracts: the injured party can recover damages for any breach of the contract, whether the breach is material or not. But only a material breach provides an excuse.

Question 2

What is anticipatory repudiation?

Answer 2

When one party indicates that they will not perform before performance is due. AR is a material breach, and the non-breaching party can stop performance, and sue for damages as long as she was “ready, willing, and able to perform.”

Exception: If the repudiator changes their mind and says they will perform as promised, this is considered a retraction and does not provide excuse from performance, as long as the other party has not relied on it.

Question 3

What is “failure to give adequate assurance” under Article 2?

Answer 3

A party with reasonable grounds for being insecure about the other party’s performance may request in writing adequate assurance that the other party will perform in accordance with the contract.

If the other party does not provide the concerned party with adequate assurance, the concerned party can treat this as anticipatory repudiation.

However, a party cannot use this to change the contract or demand a particular kind of assurance - all the insecure party has a right to is adequate assurance, which depends on facts and circumstances.

Question 4

What are the four types of later agreements that provide excuse from non-performance?

Answer 4

1. Recission: an agreement to cancel the contract. For a recission to be effective, each party must have some performance remaining.
2. Modification: An agreement to replace an existing contract with a new one. A modification takes effect immediately.
3. Accord and Satisfaction: An accord is an agreement to accept performance in future satisfaction of an existing duty; **satisfaction **is performance of the accord. The existing duty is extinguished only when the accord is satisfied.
4. Novation: An agreement to substitute a new party for an existing one. All parties must agree to the substitution for it to be a novation - otherwise, it may be a delegation.

Question 5

How does impossibility excuse performance?

Answer 5

A later unforseen event that makes performance impossible may provide seller with an excuse. Under Article 2, the doctrine is called impracticability.

1. Destruction of Something Necessary for Performance: Under the common law, destruction provides an excuse for non-performance. Under Article 2 sale of goods, it is the same general rule, with two exceptions:
   a. Risk of Loss: A seller who bore ROL when goods were damaged or destroyed is excused by impracticability.
   b. Unidentified Goods: Seller is excused only if the goods that were damages or destroyed had been “identified to the contract.”
2. Death/Incapacity of an Essential Person
3. Supervening Governmental Regulation
4. Increase in Cost of Seller’s Performance - on the MBE, increase in cost almost never excuses the seller, but on the NY bar, seller may be excused if (1) look at how much the increase is in $, (2) the % increase.

Question 6

How can frustration of buyer’s primary purpose excuse performance?

Answer 6

There can be excuse from frustration of primary purpose, but only if the seller knows the buyer’s purpose at the time they entered the contract.

Question 7

What is an express condition and how does it excuse performance?

Answer 7

Express Condition: limits obligations created by other contract language; does not create an independent obligation. Look for words like “if,” “as long as,” “when,” “provided that,” “on condition that,” and “unless.”

Strict Compliance Required - express conditions must be completely satisfied. They do not create new obligations, they only limit obligations created by other contract language.

Question 8

What are the different types of express conditions?

Answer 8

1. Satisfaction Clauses: “Satisfaction” is measured by a reasonable person standard unless the contract deals with art or matters of personal taste.
2. Condition Precedent: An event that must occur before performance is due.
3. Condition Subsequent: An event that cuts off an existing duty.

Question 9

How does one excuse a condition?

Answer 9

Occurence of a condition may be excused by the later action or inaction of the person who is protected by the condition.

1. Failure to Cooperate: If a party having a duty of performance that is subject to a condition prevents the condition from occurring, the condition will be excused if the prevention is wrongful.
2. Waiver: when the person who is protected by the condition states, in either words or action, that meeting the condition(s) is no longer necessary.