Performance and Excuse of Nonperformance

Question 1

Condition precedent

Answer 1

A condition is an event, other than the passage of time, the occurrence or nonoccurrence of which creates, limits, or extingusihes the absolute duty to perform in the other party. A party does not have a duty to perform if a condition precedent to that performance has not been met. However, the occurrence of a condition may be excused under a number of different circumstances. Once such circumstancee is where the party having the benefit of the condition indicates by words or conduct that she will not insist upon it. If a party indicates that she is waiving a condition before it happens, and the person affected detrimentally relies on it, a court will hold this to be a binding estoppel waiver. The promise to waive the condition may be retracted at any time before the other party has detrimentally changed his position.

Question 2

Rescission

Answer 2

A party to a contract may not unilaterally rescind it if the contract is valid (i.e., absence of mistake, representation, etc.). However, both parties to a contract may agree to rescind and discharge their contractual duties as long as the duties are still executory on both sides.

Question 3

Impracticability

Answer 3

For performance to be excused because of impracticability, it must have become extremely and unreasonably difficult due to an unanticipated or extraordinary event, the nonoccurrence of which was a basic assumption of the contract. Modern courts recognize that impracticability due to excessive and unreasonable difficulty or expense is a defense to breach of contract for nonperformance.

Question 4

Substantial performance - C/L contracts only

Answer 4

In every contract, the duty of each party to render performance is impliedly conditioned on the other party rendering his performance or making a tender of his performance. In contracts not involving the sale of goods, the condition of complete performance may be excused if the party has rendered substantial performance. The rules for determining whether performance is substantial are the same as those for determining whether a breach is minor or material. If the breach is minor, performance is substantial. If the breach is material, performance is not substantial. To determine whether a breach is material, the court looks at: the amount of benefit received, the adequacy of damages, extent of perfomance, hardship to the breaching party, and whether the breach was negligent or willful.

Question 5

Divisible contracts

Answer 5

If a contract is divisible, a party who has performed one or more parts is entitled to collect the contract price for those parts even if it breaches the other parts. However, the nonbreaching party has a cause of action for each of the unperformed units and may withhold counterperformance for those units. For a contract to be divisible, (i) the performance of each party must be divided into two or more parts under the contract; (ii) the number of parts due from each party must be the same, and (iii) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party. Divisibility questions involve contract interpretation and generally turn on fairness.

Question 6

Adequate assurances

Answer 6

If the party reasonably believes the other party will not perform, he may demand assurances that the performance will be forthcoming at the proper time. A demand for assurances must be made in writing. Until the party so demanding receives adequate assurance, he may suspend his own performance. The other party must give adequate assurances within a reasonable time. If the proper assurances are not given within a reasonable time, not to exceed 30 days, the party demanding assurances may treat the contract as repudiated.