Excuses to Nonperformance Flashcards
lim
conditions
agreed-upon limitations on performance in a K
- performance is contingent on the occurrence of some event
Can be express or implied
eg, A agrees to buy B’s car if B gets new tires; B getting new tires is a condition of A’s performance (buying the car)
words indicating a condition
- if
- provided that
- subject to
- as long as
- until
- unless
- when
- on the condition that
conditions v. promise
- failure of promise: breach
- failure of condition: relieves a party’s performance obligation
Conditions are NOT promises –> no breach
express condition
NOT met: can grant excuse to innocent party
- must be perfectly satisfied
NO substantial performance rule for express condition (strict compliance)
types of conditions
- condition precedent
- condition subsequent
condition precedent
condition must occur before performance due
- non-occurrence excuses performance
condition subsequent
condition that occurs after performance has begun and excuses duty to perform/pay
satisfaction condition
measured by reasonable person standard UNLESS k deals w/ art or personal taste
eg, A will paint B’s fence to B’s satisfaction
condition’s purpose controls interpretation
substantial performance of a condition may suffice if it fulfills the condition’s purpose
- parties’ intent control
- a party protected or benefitted by a condition may waive or estop the condition from being enforced (aka conditions may be excused by action or inaction of person protected by condition)
ET: look for fail to cooperate or waiver + who’s protected
eg, if a condition is clearly designed to protect one party, it will be interpreted consistently w/ that intent
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
waiver of condition
voluntary giving up condition’s protect
- can be retracted before reliance
insecurity
arises when a party to a K has reasonable grounds to believe other party will be unwilling or unable to perform under 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
demand for adequate assurances
must be made in writing based on reasonable + justified grounds for insecurity
- NO response required: if demand is unjustified or unreasonable (ie, if party seeking adequate assurances is unreasonably insecure)
Only entitled to adequate assurance NOT rewrite k or demand certain assurance
suspension of performance
a justifiably insecure party may suspend performance until adequate assurances are provided
adequate assurances
commercially reasonable commitment from a party that it will perform under K
- Not provided: anticipatory repudiation = insecure party may treat K as repudiated
- Provided: formerly insecure party must perform (otherwise in breach)
NOTE: failure to respond to unreasonable demand is NOT repudiation
insecurity v. anticipatory repudiation
- Insecurity: mere uncertainty regarding other party’s performance
- anticipatory repudiation: clear indication the other party will NOT perform
anticipatory repudiation
early statement of non-performance
- arises when one party to a k makes it clear that he will NOT perform under k
Effect: excuses innocent party’s performance + gives rise for immediate claim for damages for breach unless retracted
anticipatory repudiation requirements
arises when one party to K:
1. unambiguous act: makes an unambiguous statement or conduct;
2. prior to full performance: prior to time performance is due;
3. indicating non-performance: which indicates he will not perform
eg, A hires B to remodel A’s kitchen, B is almost finished when A tells 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
withdrawal of anticipatory repudiation
can be withdrawn unless other party has:
1. materially changed position in reliance on repudiation,
2. cancelled the k in response to repudiation, or
3. indicated they consider the repudiation to be final
If successfully retracted, reimposes k obligations on innocent party
non-repudiating party’s options
she may either:
1. treat the anticipatory repudiation as a total repudiation and sue,
2. suspend performance until performance date is dues and wait to sue,
3. treat repudiation as an offer to rescind and treat k as discharged, or
4. ignore repudiation and urge promisor to perform
impossibility/impracticability
later unforeseen event makes party’s performance impossible/impractical
NOTE: unforeseen event occurs after k formation but before full performance
ET: MBE uses term “impractiability” to encompass both impossibility and impracticability
impossibility/impracticability requirements
an unforeseen event, which neither party assumed would occur, must make completing performance either:
1. impossible: performance is objectively impossible, or
2. impracticable: performance is only possible w/ extreme and unreasonable difficulty or expense
common unforeseen events
- substantial damage/destruction of K’s subject matter: damage or destruction must not have been either party’s fault
- subsequent law or regulation (eg, supervening illegality): if performance becomes illegal, excuse by impossibility
- death
death (impossibility/impracticability)
K obligations generally survive the death of a party (estate is liable)
- UNLESS deceased party’s k obligations are non-delegable (death or incapacity of essential person) –> then performance is excused
ET: usually only unique personal services are non-delegable (unique skill)
frustration of purpose
party’s duty to perform under k may be discharged if an unforeseen event occurs that undermines (ie frustrates) one or both party’s prinicipal purpose for entering K
- both parties understood the central purpose
frustration of purpose 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 event is irrelevant (issue is whether performance after unforeseen event nullifies one or both party’s OG purpose for 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
frustration of purpose v. impossibility
- impossibility: concerns duties specified in k
- frustration of purpose: concerns the reasons party entered into k
eg, a landlord rents space to B restaurateur to open ice cream parlor; if the property is destroyed by an earthquake, A & B are excused from performing due to impossibility
- however, if the city passes an ordinance banning the sale of sweetened food, the k’s purpose is frustrated b/c A knew B intended to open an ice cream parlor
