Has Absolute Duty to Perform Been Discharged? Flashcards
What is the general rule re: discharge of duty?
Once it is determined that a party is under an immediate duty to perform, the duty must be “discharged”.
What are the ways to discharge duty (13)?
- performance
- occurrence of condition subsequent
- illegality
- impossibility, impracticability, frustration
- rescission
- partial discharge of modification of K
- discharge by novation
- cancellation
- release
- substituted K
- accord and satisfaction
- lapse
- statute of limitations
What is the rule re: discharge by performance?
K is discharged by fill and complete performance.
Good faith tender of performances made in accordance w contractual terms will also discharge performance
What is the rule re: discharge by occurrence of condition subsequent?
Occurrence of condition subsequent will discharge contractual duties
What is the rule re: discharge by illegality?
If subject matter of K becomes illegal, performance = discharged (aka “supervening illegality”)
NOTE: if the illegality existed at the time the agreement was made, no K was formed bc of the illegality
What is the rule re: discharge by impossibility?
Duties will be discharged if it has become impossible to perform them.
- impossibility must be “objective” (no person can do it)
- impossibility must arise AFTER K
What is the effect of discharge due to impossibility?
If K is discharged due to impossibility, each party is excused from performing.
Either party may sue for rescission and receive restitution of any goods delivered, payments made etc
What is the rule re: partial impossibility?
If performance becomes only partially impossible, duty may be discharged only to that extent
What is the rule re: temporary impossibility?
Temporary impossibility SUSPENDS contractual duties, it does NOT discharge them.
When performance becomes possible, duty “springs back” UNLESS:
- burden on either party would be substantially increased or different than originally contemplated
What is the rule re: death or physical incapacity and discharge (impossibility)?
Death or physical incapacity of person NECESSARY to effectuate K discharges.
HOWEVER –> if services can be delegated, it is not discharged
What is the rule re: supervening illegality? (impossibility)
supervening illegality may serve to discharge K (most courts consider this a form of impossibility)
What is the rule re: discharge and “subsequent destruction of K’s subject matter or means of performance” (impossibility)?
If contract’s subject matter is destroyed, or designated means for performing K is destroyed, it will be discharged only if:
- the thing/source destroyed is necessary to fulfill K; AND
- ROL has not already passed to buyer
- NOTE: specificity is required.
What is the rule re: discharge for impracticability?
Party to perform has encountered:
- extreme and unreasonable difficulty and/or expense; AND
- non-occurence was a basic assumption of the parties
What is the rule for SOG and discharge by impossibility/impracticability?
Under art 2 UCC:
If performance has become impossible or commercially impracticable, seller will be discharged to the extent of the impracticability.
Sufficient events:
- shortage of raw materials;
- inability to convert due to war, strike, embargo, other unforeseen circumstance, catastrophic crop failure
Not sufficient:
- in general, price increases.
If Seller has partial inability to perform —> must allocate deliveries among customers, may include regular customers not then under K
What is the rule re: discharge by “frustration”?
Frustration exists if the purpose of the K has become valueless by a supervening event not the fault of party seeking discharge
- supervening event
- at time of entering into K, parties die not reasonably foresee event;
- purpose of K has been destroyed;
- purpose of K was realized by both parties at time of making the K
Example –> venue destroyed by storm, or death
What is the rule re: discharge by mutual rescission?
mutual rescission = express agreement btwn parties to rescind
- the agreement to rescind is itself a binding K supported by consideration (release of performance)
Requirements:
- Contract must be EXECUTORY on both sides
- Rescission can be made orally, EVEN IF K says it can only be made by written agreement UNLESS:
1. contract to be rescinded falls within SOF; or
2. if its for SOG and original K requires written rescission
(See limitation re: 3rd party beneficiaries)
What is the rule re: discharge by mutual rescission and 3rd party beneficiaries?
If rights of 3rd party beneficiary have already vested, it cannot be rescinded
What is the rule re: unilateral rescission?
Party must have adequate legal grounds:
mistake, misrepresentation, duress, failure of consideration.
(must file suit in equity)
What is the rule re: discharge by partial modification?
If K is subsequently modified by parties, this will serve to discharge those terms in original K subject to the modification.
- it will NOT serve to discharge entire contract
REQUIREMENTS:
- mutual assent
- consideration (unless UCC)
BUT NOTE:
- courts will usually find consideration bc both parties have limited their rights under previous K
- Consideration is not needed to correct errors
- if UCC, no consideration needed if mod is sought in good faith
What is a novation?
“novation” - new contract substitutes a new party to receive benefits and assume duties
What is the rule re: discharge by novation?
Novation will discharge old K.
Elements are:
- previous valid K
- agreement among ALL parties (including new party)
- immediate extinguishment of K duties between original parties
- valid and enforceable new k
What is an accord?
“accord” = an agreement in which 1 party to an existing K agrees to accept, in lieu of performance, some other different performance
- must be supported by consideration. If consideration of lesser value than that originally bargained for, it is OK if its:
1. a different type; or
2. paid to 3rd party
What is the effect of an accord?
- An accord, taken alone, will NOT discharge prior K.
- It merely SUSPENDS right to enforce it in accordance w terms of accord K
- Once there is “satisfaction” (performance of accord) - it discharges both the original K and the accord K
- If accord is NOT satisfied, the original K remains enforceable
What is the difference btwn “accord” and “modification”?
Accord =
- agreement by the parties to accept different PERFORMANCE
- if accord is not satisfied, original K remains enforceable
- typically arises when payment or performance is overdue, or there is a dispute as to the performance due
Modification =
- agreement by the parties to enter into a different AGREEMENT
- the parties duties are changed immediately, and original terms are no longer effective
- typically occurs before performance is due
What is a typical situation where an accord will be involved?
- one party offers a smaller amount than the amount due under an existing obligation in satisfaction of the claim
(usually triggered by dispute as to amount due)
With regards to an accord, what is the effect of breach of the accord before satisfaction?
If breach by debtor –> creditor may sue either on original undischarged K OR on the accord K
If breach by creditor –>
- raise accord as equitable defense;
- wait until she is damages, and sue for breach of accord
What is the rule re: accord and check tendered as “payment in full”?
If monetary claim is uncertain or subject to bona fide dispute, then acceptance of a check that conspicuously states “full satisfaction” may count as accord and satisfaction
What is the rule re: discharge by lapse?
If duty of each party is a condition concurrent to other’s duty, it’s possible that on day of performance neither party is in breach and their obligations lapse.
If K states “time is of the essence” —> lapse is immediate
If it does not –> lapse occurs after reasonable time
What is the effect of running of the Statute of Limitations?
- If SOL has run, action for breach of K is barred
HOWEVER –> only judicial remedies are barred, this does not mean that duties are discharged
HENCE –> if party subsequently agrees to perform, no consideration is needed
What is the difference btwn running of SOL and lapse?
lapse –> discharges K
running of SOL –> renders K unenforceable