Excuses to Nonperformance

Question 1

lim

conditions

Answer 1

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)

Question 2

words indicating a condition

Answer 2

• if
• provided that
• subject to
• as long as
• until
• unless
• when
• on the condition that

Question 3

conditions v. promise

Answer 3

• failure of promise: breach
• failure of condition: relieves a party’s performance obligation

Conditions are NOT promises –> no breach

Question 4

express condition

Answer 4

NOT met: can grant excuse to innocent party
- must be perfectly satisfied

NO substantial performance rule for express condition (strict compliance)

Question 5

types of conditions

Answer 5

1. condition precedent
2. condition subsequent

Question 6

condition precedent

Answer 6

condition must occur before performance due
- non-occurrence excuses performance

Question 7

condition subsequent

Answer 7

condition that occurs after performance has begun and excuses duty to perform/pay

Question 8

satisfaction condition

Answer 8

measured by reasonable person standard UNLESS k deals w/ art or personal taste

eg, A will paint B’s fence to B’s satisfaction

Question 9

condition’s purpose controls interpretation

Answer 9

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

Question 10

excuse

Answer 10

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

Question 11

waiver of condition

Answer 11

voluntary giving up condition’s protect
- can be retracted before reliance

Question 12

insecurity

Answer 12

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

Question 13

demand for adequate assurances

Answer 13

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

Question 14

suspension of performance

Answer 14

a justifiably insecure party may suspend performance until adequate assurances are provided

Question 15

adequate assurances

Answer 15

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

Question 16

insecurity v. anticipatory repudiation

Answer 16

• Insecurity: mere uncertainty regarding other party’s performance
• anticipatory repudiation: clear indication the other party will NOT perform

Question 17

anticipatory repudiation

Answer 17

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

Question 18

anticipatory repudiation requirements

Answer 18

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

Question 19

withdrawal of anticipatory repudiation

Answer 19

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

Question 20

non-repudiating party’s options

Answer 20

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

Question 21

impossibility/impracticability

Answer 21

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

Question 22

impossibility/impracticability requirements

Answer 22

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

Question 23

common unforeseen events

Answer 23

1. substantial damage/destruction of K’s subject matter: damage or destruction must not have been either party’s fault
2. subsequent law or regulation (eg, supervening illegality): if performance becomes illegal, excuse by impossibility
3. death

Question 24

death (impossibility/impracticability)

Answer 24

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)

Question 25

frustration of purpose

Answer 25

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

Question 26

frustration of purpose requirements

Answer 26

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

Question 27

frustration of purpose v. impossibility

Answer 27

• 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