Performance and Excuse for Nonperformance

Question 1

What is a party’s basic duty at common law regarding performance?

Answer 1

To substantially perform all that is called for in the contract

Question 2

What is a party’s basic duty under the UCC regarding performance?

Answer 2

Perfect tender: the delivery and condition of the goods must be exactly as promised in the contract

Question 3

What is “good faith” for purposes of the UCC?

Answer 3

Good faith is honest in fact and the observance of reasonable commercial standards of fair dealing. The UCC requires all parties to act in good faith, and this obligation cannot be waived.

Question 4

What are a seller’s obligations regarding tender of delivery?

Answer 4

(1) The seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession.
(2) The seller must give the buyer notice reasonably necessary to enable the buyer to take possession of the goods.
(3) The tender must be at a reasonable hour.

Question 5

What are a seller’s obligations regarding place of delivery?

Answer 5

In the absence of an agreement otherwise, the place of delivery generally is the seller’s place of business, or if he has none, his residence.

Question 6

When is payment due in a noncarrier case? In a carrier case?

Answer 6

In a noncarrier case, payment is due upon tender of delivery.

In a carrier case, if the contract is a shipment contract, payment is due once all the seller’s delivery obligations are met (i.e., when delivered to the carrier). If the contract is a destination contract, payment is due when the goods reach the named destination.

NOTE: Payment is presumed to be due in cash unless otherwise indicated.

Question 7

What is an installment contract? When is payment due in an installment contract?

Answer 7

An installment contract is one that requires or authorizes delivery in separate installments.

The seller may demand payment for each installment if the price can be so apportioned, unless a contrary intent appears.

Question 8

Explain the buyer’s right of inspection.

Answer 8

The buyer has a right to inspect the goods before they pay unless the contract provides for payment C.O.D. (cash on delivery) or otherwise indicates that the buyer has promised to pay without inspecting the goods.

Question 9

What are the effects on the duty to pay if payment is made by check?

Answer 9

If a check is given, the buyer’s duty to pay is suspended until the check is either paid or dishonored (bounces). If the check is paid, the buyer’s duty to pay is discharged. If the check bounces, the seller may sue for the price or recover the goods.

Question 10

If payment by check is offered, but the seller rejects such payment and demands cash, what, if anything, are the seller’s obligations?

Answer 10

The seller must give the buyer time to get cash

Question 11

If a contract provides that a party does not have a duty to perform unless some condition is fulfilled, the party’s failure to perform is _______ if the condition was not fulfilled

Answer 11

justified

Question 12

What is a “promise”? What effect in the event of failure to perform a promise?

Answer 12

A promise is a commitment to do or refrain from doing something. If a promise is unconditional (i.e., absolute), the failure to perform according to its terms is a breach of contract.

Question 13

What is a “condition”? What effect in the failure to perform when conditions are present?

Answer 13

“Condition” normally means either:
(1) An event or state of the world that must occur or fail to occur before a party has a duty to perform; OR

(2) An event or state of the world, the occurrence or nonoccurrence of which releases a party from their duty to perform.

There can be no breach of promise until the promisor is under an immediate duty to perform.

Question 14

True or false: The failure of a contractual provision that is only a condition is not a breach of contract.

Answer 14

True

Question 15

True or false: The failure of a contractual provision discharges the liability of the promisor whose obligations on the conditional promise never mature.

Answer 15

True

Question 16

What determines the interpretation of a provision as a promise or condition?

Answer 16

The intent of the parties

Question 17

In doubtful situations, most courts will hold that a provision that is ambiguous as to whether it is a promise or a condition is _______.

Answer 17

a promise

Question 18

What is an express condition?

Answer 18

An express condition is an explicit contractual provision providing that either:
(1) A party does not have a duty to perform unless some event occurs or fails to occur; OR

(2) If some event occurs or fails to occur, the obligation of a party to perform one or more of his duties under the contract is suspended or terminated.

Question 19

In a contract involving mechanical fitness, utility, or marketability where a party’s payment is contingent upon the party’s satisfaction, what standard is used to determine the party’s satisfaction?

Answer 19

Objective - “reasonable person”

Question 20

In a contract involving personal taste or personal judgment where a party’s payment is contingent upon the party’s satisfaction, what standard is used to determine the party’s satisfaction?

Answer 20

Subjective - personal satisfaction

Question 21

True or false: In a contract involving personal taste or personal judgment where a party’s payment is contingent upon the party’s satisfaction, the party may claim they are dissatisfied for any reason and avoid their duty to pay.

Answer 21

False. The party’s lack of satisfaction must be honest and in good faith.

Question 22

When the satisfaction of a third party is a condition, what standard applies?

Answer 22

Subjective - actual personal satisfaction of the third party

Question 23

When it is clear that the purpose of a condition is to protect or benefit only one of the parties, the other party’s duty [will / will not] be subject to the condition.

Answer 23

will not

Question 24

What is a condition precedent?

Answer 24

One that must occur BEFORE an absolute duty of immediate performance arises in the other party

Question 25

What are conditions concurrent?

Answer 25

Those that are capable of occurring TOGETHER, and that the parties are bound to perform at the same time. In effect, each is a condition “precedent” to the other.

Question 26

What is a condition subsequent?

Answer 26

One that, when it occurs, CUTS OFF an already existing absolute duty of performance

Question 27

True or false: Express conditions need not be perfectly satisfied to trigger an obligation under the contract.

Answer 27

False

Question 28

A duty of immediate performance with respect to a conditional promise does not become absolute until the conditions have been: (2 things)

Answer 28

(1) performed, OR

(2) legally excused

Question 29

What are constructive conditions?

Answer 29

Constructive conditions are those which are not expressly provided in the contract but that courts will consider implied in the contract

Question 30

What is a constructive condition of performance?

Answer 30

The duty of each party to render performance is conditioned on the other party either rendering their performance or making a tender of their performance

Question 31

What is a constructive condition of cooperation and notice?

Answer 31

The obligation of one party to render performance is impliedly conditioned on the other party’s cooperation in that performance.

It is also often a condition to one party’s performance that the other party give notice that performance is due. This is most commonly applied when a party cannot be reasonably expected to know a fact that triggered the duty to perform (e.g., need for repair).

Question 32

For purposes of constructive conditions, if both performances can be rendered at the same time, they are constructively _______.

Answer 32

concurrent

Question 33

For purposes of constructive conditions, if one performance will take a period of time to complete while the other can be rendered in an instant, completion of the longer performance is a constructive _______ to execution of the shorter performance.

Answer 33

condition precedent

Question 34

If a contract is not enforceable due to the failure or occurrence of a condition, and one of the parties has fully or partially performed, they can usually recover under _______ theories.

Answer 34

unjust enrichment

Question 35

If a party having a duty of performance that is subject to a condition (i.e., the party protected by the condition) wrongfully prevents the condition from occurring, the condition will be _______.

Answer 35

excused by hindrance or failure to cooperate.

Question 36

May a condition be waived? How?

Answer 36

Yes. A party with the benefit of a condition under a contract may indicate by words or conduct that they will not insist on that condition being met. Consideration is not required, and the party is estopped from denying the waiver.

Question 37

What is the legal effect of estoppel waiver?

Answer 37

Whenever a party indicates they are waiving a condition before it is to happen, or they are waiving some performance before it is to be rendered, and the person addressed detrimentally relies on the waiver, courts will hold this to be a binding waiver.

Note: The promise to waive a condition may be retracted at any time before the other party has changed their position to their detriment.

Question 38

When a condition doesn’t occur or a duty of performance is broken, what must the beneficiary of the condition or duty do? What legal effect?

Answer 38

(1) Terminate their liability, OR
(2) Continue under the contract.

If they choose to terminate liability (1), they are no longer liable under the contract for any duty that would have arisen had the condition been met or had the performance not been broken.

If they choose to continue (2), they will be deemed to have waived the condition or duty (election waiver).

Note: an election waiver CANNOT be withdrawn, even if the other party has not relied on it.

Question 39

What kinds of conditions may be waived if no consideration is given for the waiver?

Answer 39

Any condition that is ancillary or collateral to the main subject and purpose of the contract.

Waiver of a material condition (i.e., related to the main subject and purpose of the contract) requires consideration, since it is a material change to the contract’s terms.

Question 40

In an installment contract, if a waiver isn’t supported by consideration, the beneficiary of the waived condition can:

Answer 40

(1) Insist on strict compliance with the terms of the contract for future installments (absent detrimental reliance) by
(2) giving notice that he is revoking the waiver.

Question 41

Waiver severs only the right to treat the failure of a condition as a _______ excusing counterperformance. The waiving party does not thereby waive her right to _______.

Answer 41

(1) total breach

(2) damages

Question 42

The duty of counterperformance will be excused due to breach at common law only if _______.

Answer 42

the breach is material

Question 43

Anticipatory repudiation occurs if:

Answer 43

A promisor, prior to the time set for performance of their promise, indicates that they won’t perform when the time comes.

Question 44

Anticipatory repudiation will serve to excuse conditions if: (2 things)

Answer 44

(1) There is a bilateral contract with executory (unperformed) duties on both sides; AND
(2) The repudiation is unequivocal (i.e. stems from words or conduct of the promisor leaving no doubt that the promisor cannot or will not perform)

Question 45

In the case of an anticipatory repudiation, the nonrepudiating party has 4 options:

Answer 45

(1) Treat the anticipatory repudiation as a total repudiation and sue immediately
(2) Suspend their own performance and wait to sue until the performance date
(3) Treat the repudiation as an offer to rescind and treat the contract as discharged
(4) Ignore the repudiation and urge the promisor to perform (urging the promisor to perform prevents waiver from attaching, so they may still sue for breach and are excused from performing until the promisor retracts the repudiation or actually breaches)

Question 46

A repudiating party may withdraw their repudiation at any time before their next performance is due, unless the other party has:

Answer 46

(1) Canceled,
(2) Materially changed their position in reliance on the repudiation, or
(3) Otherwise indicated that they consider the repudiation final

Question 47

Prospective failure of a condition occurs when a party has _______.

Answer 47

reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due

Question 48

Prospective inability or unwillingness to perform is not an anticipatory repudiation because such a repudiation must be _______, whereas prospective failure to perform involves _______.

Answer 48

(1) equivocal

(2) words or conduct that merely raise doubts that the party will perform

Question 49

What is the legal effect of prospective failure?

Answer 49

It allows the innocent party to suspend further performance on their side until they receive adequate assurances that performance will be forthcoming.

Question 50

In the event of prospective failure, if the party who owes performance fails to provide adequate assurances to the innocent party, the innocent party may:

Answer 50

(1) Be excused from their own performance, AND

(2) Treat the failure to provide assurances as a repudiation

Question 51

Three tests must be concurrently satisfied to make a contract divisible:

Answer 51

(1) The performance of each party is divided into two or more parts under the contract
(2) The number of parts due from each party is the same
(3) The performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party

Question 52

What is rescission?

Answer 52

Rescission serves to discharge contractual duties

Question 53

What is mutual rescission?

Answer 53

An express agreement between the parties to discharge contractual obligations between them.

Question 54

For a contract to be effectively discharged by rescission, at least some of the duties must be _______ on both sides.

Answer 54

executory (unperformed)

Question 55

Under common law, may a rescission agreement be made orally if the contract to be rescinded expressly requires a written document for rescission?

Answer 55

Yes, unless the subject matter of the contract to be rescinded:
(1) Falls within the Statute of Frauds, OR

(2) Is for the sale of goods (under the UCC, rescission agreements must be in writing if the contract to be rescinded requires it)

Question 56

If the rights of third-party beneficiaries have already vested, the contract [may / may not] be discharged by mutual rescission.

Answer 56

may not

Question 57

What is unilateral rescission?

Answer 57

Unilateral rescission results when one of the parties to the contract desires to rescind it, but the other party desires that the contract be performed according to its terms.

Question 58

For unilateral rescission to be granted, the party desiring rescission must have adequate legal grounds, such as:

Answer 58

(1) Mistake
(2) Misrepresentation
(3) Duress
(4) Failure of consideration

Question 59

What is an accord and satisfaction?

Answer 59

An accord is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that they are supposed to receive from the other party, some other, different future performance.

The accord, taken alone, does not discharge the prior contract; it merely suspends the right to enforce it in accordance with the terms of the accord contract.

Satisfaction is the performance of the accord agreement. Its effect is to discharge not only the original contract but also the accord contract.

Question 60

What is a novation? What is a novation’s legal effect?

Answer 60

A novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract.

A novation will serve to discharge the old contract.

Question 61

The elements for a valid novation are:

Answer 61

(1) A previous valid contract;
(2) An agreement among all parties, including the new party (or parties) to the new contract;
(3) The immediate extinguishment of contractual duties as between the original contracting parties; AND
(4) A valid and enforceable new contract

Question 62

Under what circumstances will a contract be discharged due to impossibility, impracticability, or frustration?

Answer 62

If the occurrence of an unanticipated or extraordinary event makes contractual duties impossible or impractical to perform or frustrates the purpose of the contract.

Duties under the contract will only be discharged if:
(1) The nonoccurrence of the event was a basic assumption of the parties in making the contract; AND

(2) Neither party has expressly or impliedly assumed the risk of the event occurring

Question 63

What are the characteristics of impossibility sufficient to discharge a contract?

Answer 63

(1) The impossibility must be “objective” (i.e., the duties could not be performed by ANYONE, not just the promisor)
(2) The impossibility must arise AFTER the contract has been entered into

Question 64

What is the legal effect of discharge due to impossibility?

Answer 64

Each party is excused from duties arising under the contract that are yet to be fulfilled. Either party may sue for rescission and receive restitution of any goods delivered, payments made, etc.

Question 65

Explain the following specific situations in the context of discharging a contract:

(1) Death or physical incapacity of a party
(2) Supervening illegality
(3) Subsequent destruction of contract’s subject matter or means of performance

Answer 65

(1) Death or the physical incapacity of a person necessary to effectuate the contract serves to discharge it.
(2) If performance of some aspect of the contract becomes illegal after the contract is formed, the contract will be discharged due to impossibility.
(3) If the contract’s subject matter is destroyed or the designated means for performing the contract are destroyed, contractual obligations will be discharged.

Question 66

True or false: A contractor’s duty to construct a building is discharged by destruction of the work in progress. Explain.

Answer 66

False. Construction is not rendered impossible; the contractor can still rebuild. However, if the destruction was not caused by the contractor, most courts will excuse the contractor from meeting the original deadline.

Question 67

What is the test for impracticability?

Answer 67

The party to perform has encountered:
(1) Extreme and unreasonable difficulty and/or expense, and

(2) Its nonoccurrence was a basic assumption of the parties

Question 68

A contract will be held frustrated if:

Answer 68

The purpose of the contract has become valueless by virtue of some supervening event that is not the fault of the party seeking discharge

Question 69

The elements of frustration are:

Answer 69

(1) There is some supervening act or event leading to the frustration
(2) At the time of entering the contract, the parties did not reasonably foresee the act or event occurring
(3) The purpose of the contract has been completely or almost completely destroyed by this act or event
(4) The purpose of the contract was realized by BOTH PARTIES at the time of making the contract

Question 70

A seller of land, goods, or services will raise _______ or _______ as a defense that discharges performance.

The party who is supposed to pay (usually the buyer) will raise _______ as a defense discharging performance.

Answer 70

(1) impossibility or impracticability

(2) frustration of purpose