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Contracts > Has Absolute Duty to Perform Been Discharged? > Flashcards

Has Absolute Duty to Perform Been Discharged? Flashcards

1
Q

What is the general rule re: discharge of duty?

A

Once it is determined that a party is under an immediate duty to perform, the duty must be “discharged”.

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2
Q

What are the ways to discharge duty (13)?

A
  1. performance
  2. occurrence of condition subsequent
  3. illegality
  4. impossibility, impracticability, frustration
  5. rescission
  6. partial discharge of modification of K
  7. discharge by novation
  8. cancellation
  9. release
  10. substituted K
  11. accord and satisfaction
  12. lapse
  13. statute of limitations
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3
Q

What is the rule re: discharge by performance?

A

K is discharged by fill and complete performance.

Good faith tender of performances made in accordance w contractual terms will also discharge performance

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4
Q

What is the rule re: discharge by occurrence of condition subsequent?

A

Occurrence of condition subsequent will discharge contractual duties

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5
Q

What is the rule re: discharge by illegality?

A

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

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6
Q

What is the rule re: discharge by impossibility?

A

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
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7
Q

What is the effect of discharge due to impossibility?

A

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

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8
Q

What is the rule re: partial impossibility?

A

If performance becomes only partially impossible, duty may be discharged only to that extent

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9
Q

What is the rule re: temporary impossibility?

A

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

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10
Q

What is the rule re: death or physical incapacity and discharge (impossibility)?

A

Death or physical incapacity of person NECESSARY to effectuate K discharges.

HOWEVER –> if services can be delegated, it is not discharged

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11
Q

What is the rule re: supervening illegality? (impossibility)

A

supervening illegality may serve to discharge K (most courts consider this a form of impossibility)

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12
Q

What is the rule re: discharge and “subsequent destruction of K’s subject matter or means of performance” (impossibility)?

A

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.
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13
Q

What is the rule re: discharge for impracticability?

A

Party to perform has encountered:

  1. extreme and unreasonable difficulty and/or expense; AND
  2. non-occurence was a basic assumption of the parties
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14
Q

What is the rule for SOG and discharge by impossibility/impracticability?

A

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

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15
Q

What is the rule re: discharge by “frustration”?

A

Frustration exists if the purpose of the K has become valueless by a supervening event not the fault of party seeking discharge

  1. supervening event
  2. at time of entering into K, parties die not reasonably foresee event;
  3. purpose of K has been destroyed;
  4. purpose of K was realized by both parties at time of making the K

Example –> venue destroyed by storm, or death

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16
Q

What is the rule re: discharge by mutual rescission?

A

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)

17
Q

What is the rule re: discharge by mutual rescission and 3rd party beneficiaries?

A

If rights of 3rd party beneficiary have already vested, it cannot be rescinded

18
Q

What is the rule re: unilateral rescission?

A

Party must have adequate legal grounds:

mistake, misrepresentation, duress, failure of consideration.

(must file suit in equity)

19
Q

What is the rule re: discharge by partial modification?

A

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:

  1. mutual assent
  2. 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
20
Q

What is a novation?

A

“novation” - new contract substitutes a new party to receive benefits and assume duties

21
Q

What is the rule re: discharge by novation?

A

Novation will discharge old K.

Elements are:

  1. previous valid K
  2. agreement among ALL parties (including new party)
  3. immediate extinguishment of K duties between original parties
  4. valid and enforceable new k
22
Q

What is an accord?

A

“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
23
Q

What is the effect of an accord?

A
  • 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
24
Q

What is the difference btwn “accord” and “modification”?

A

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
25
Q

What is a typical situation where an accord will be involved?

A
  • 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)

26
Q

With regards to an accord, what is the effect of breach of the accord before satisfaction?

A

If breach by debtor –> creditor may sue either on original undischarged K OR on the accord K

If breach by creditor –>

  1. raise accord as equitable defense;
  2. wait until she is damages, and sue for breach of accord
27
Q

What is the rule re: accord and check tendered as “payment in full”?

A

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

28
Q

What is the rule re: discharge by lapse?

A

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

29
Q

What is the effect of running of the Statute of Limitations?

A
  • 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

30
Q

What is the difference btwn running of SOL and lapse?

A

lapse –> discharges K

running of SOL –> renders K unenforceable

Contracts (25 decks)

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