Performance and excuse of nonperformance Flashcards
basic performance duty at CL
substantially perform all that is called for in the K = meets the essential purpose of the K
look at K for obligations
NO material breach
basic performance duty under UCC
requires a perfect tender—the delivery and condi- tion of the goods must be exactly as promised in the contract.
absolute duty to perform [unless there is a condition that needs to be fulfilled prior to performance]
perfect goods, at the right place, at the right time
requirements under performance for UCC
– good faith
– seller’s obligation of tender and delivery
– buyer’s obligation to pay - right to inspect
what is the obligation of good faith and who has it
Article 2 requires all parties to act in good faith, which is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” This obligation cannot be waived by the parties.
seller’s obligation of tender and delivery for non carrier cases
TENDER OF DELIVERY
—- seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession.
– The seller must give the buyer notice reasonably necessary to enable the buyer to take posses- sion of the goods.
– The tender must be at a reasonable hour.
PLACE OF DELIVERY
– 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.
seller’s obligation of tender and delivery for carrier cases
SHIPMENT K
Seller must:
a) Put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer
b) Obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession, and
c) Promptly notify the buyer of the shipment
seller need not see that goods reach buyer
DESTINATION K
If the contract requires the seller to tender delivery of the goods at a particular destination (for example, FOB buyer’s warehouse), the seller must, at the destination, put and hold conforming goods at the buyer’s disposition.
what is the buyer’s obligation to pay and right to inspect in carrier and non carrier cases
NONCARRIER CASES
— sale is for cash
– price due concurrently with tender of delivery
CARRIER CASES
— price is due only at the time and place where buyer receives goods
[shipment cases - price due when goods are put in hand of carrier;
destination - price is due when goods reach the named destination]
RIGHT TO INSPECT
buyer has right to inspect goods before they pay unless K provides for payment COD or says buyer cannot inspect
PAYMENT IN GENERAL
– cash is always best
– payment by check is sufficient unless seller demands cash and gives buyer time to get it
– if check is given, buyer’s duty to pay is suspended till check is either paid (buyer’s duty completed) or dishonored (seller can sue for goods)
effect of condition of performance never occurring
not a breach of K but discharges liability of th promisor whose obligations on the conditional promise never occur
a condition ≠ a promise, so a failure of a condition is not a breach of K
how to discharge duty of performance
- Performance
- Impossibility
- Impracticability
- Frustration of purpose - Mutual rescission
- Release
- Modification
- Accord and satisfaction - Novation or
- Lapse
condition vs. promise and their triggers
PROMISE
promise = K = absolute duty to perform
“promise” and “agree” usually indicate a promise.
CONDITION
condition = conditional performance on an event that must occur OR conditional release based on occurrence or nonoccurrence (not an absolute PRESENT duty to perform)
— does not create independent obligation
Words such as “provided,” “if,” and “when” usually indicate a condition, “provided that,” “on the condition that,” “as long as”
…………………………
“When” can be tricky.
If the event following “when” is NOT within the obligee’s control, courts prefer to interpret it as indicating a time for performance, not a condition of performance.
In a common situation the contract states that a subcontractor will get paid “when” the general contractor is paid by the landowner. This is not considered a condition, and the general contractor must pay the subcontractor within a reasonable time.
interpreting provisions as promises or conditions
when in doubt, courts choose promise
but they look at intent of the parties and their prior dealings etc.
what is an express condition
explicit contractual provision that states
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 obliga- tion of a party to perform one or more of his duties under the contract is suspended or terminated.
common express conditions
(1) promisor’s satisfaction as condition precedent
(2) satisfaction of third parties as condition
implied/constructive conditions
(1) constructive conditions of performance
(2) constructive conditions of cooperation and notice
(3) implied conditions relating to time for performance under the K
how to recover if contract is not enforceable due to the failure or occurrence of a condition, and one of the parties has fully or partially performed
unjust enrichment
when does duty of immediate performance with respect to a conditional promise become absolute?
doesn’t become absolute until the conditions (1) have been performed or (2) legally excused
types of excuse
(1) excuse by hindrance or failure to cooperate
(2) excuse by waiver or estoppel
(3) excuse by actual breach
(4) excuse by anticipatory repudiation
(5) excuse by prospective inability or unwillingness to perform
(6) excuse of condition by substantial performance
(7) excuse by divisibility of K
(8) excuse by impossibility, impracticability, or frustration
methods of discharge of duty to perform
(1) actually perform or tender performance
(2) discharge by occurrence of condition subsequent
(3) discharge by illegality
(4) discharge by rescission
(5) partial discharge by modification of K
(6) discharge by cancellation
(7) discharge by release
(8) discharge by substituted K
(9) discharge by Accord and satisfaction
(10) discharge by novation
(11) discharge by impossibility, impracticability, or frustration
(12) discharge by account stated
(13) discharge by lapse
Duty of buyer to pay for installment contracts
seller may demand payment for each installment if the price can be so apportioned
whats the performance duty for installment K
substantial impairment
requires or authorizes delivery of goods in separate installments over specified period
what indicates a buyer’s acceptance
keeping the goods after a reasonable time after having time to inspect
NOT merely paying for goods up front
is it ok if you pay by check on the last day possible
yes – check is fine but you get time to cash it if seller demands cash
rule of compliance for express conditions
strict compliance [perfect performance]
if you fail to meet condition, no obligation
“on the condition of my personal satisfaction” – how to judge this condition
satisfaction measured by reasonable person standard unless dealing with art or personal taste
express condition precedent – how does it affect performance duty
must occur before performance duty arises
condition subsequent - how does it affect performance duty
when it occurs, it cuts off an already existing absolute duty
excusing conditions by failure to cooperate
conditions may be excused by action or inaction of person protected by condition
the other party needs to cooperate in good faith
waiving conditions
One having the benefit of a condition under a contract may indicate by words or conduct that they will not insist on that condition’s being met. Consideration is not required for a valid waiver of condition.
so, if homeowner tells buyer that the written agreement to buy his house will not become binding unless buyer comes up with the financing by May 1, and the buyer comes up with financing on May 3, but then homeowner is like “ok thats fine,” that is a waiver of the conditions and buyer may continue performance under the contract
waiver of condition analysis
who is protected by the condition
did the person protected by the condition do anything to give up the protection? [such as waiving right]?
if yes, condition is waived
to what extent can you retract waiver of condition?
can retract waiver if other party has not relied on waiver
how does anticipatory repudiation work
early statement of nonperformance that provides an excuse unless repudiation has been retracted and unless it hasn’t been relied upon yet
effect of anticipatory repudiation
- excuses party from performing K
- gives rise to immediate breach so other party can sue immediately
to what extent can repudiations be retracted
repudiations can be retracted as long as they have not been relied upon yet
explain failure to give adequate assurance as grounds for excusal of performance
a party with reasonable ground for being insecure about other party’s performance may in writing request adequate assurance that the other party will perform in acc with the K
if assurance not received, you can treat that lack of assurance as anticipatory repudiation
since it is an anticipatory repudiation, you are excused from performance
difference between requesting adequate assurance and asking for other provisions
you can only request adequate assurance
you cannot demand that contract terms be re-written
rescission
a mutual agreement to cancel a contract
it will excuse both parties from their obligations under the K
BUT if there is a third-party beneficiary whose rights have already vested, the K cannot be discharged by mutual rescission by the promisor and promisee
requirements for excusal / discharge by rescission
K must be executory
– each party must have some performance remaining
excusal by modification agreements
If a contract is subsequently modified by the parties, this will serve to discharge those terms of the original contract that are the subject of the modification.
NEEDS CONSIDERATION if CL but not if UCC, just needs good faith
if someone fails to go through with the deal, you can only go after them for the modified deal
debt excused immediately
Discharge by accord and satisfaction
ACCORD - agreement to accept a different performance in lieu of the original performance they agreed to accept under an existing K
SATISFACTION - performance of the accord agreement; discharges the original K and the accord K
the debt is excused later
if someone fails to satisfy the accord, the party does not get excused from the original K
only excuse if accord is satisfied
“if….then” triggers this
novation
agreement to substitute a new party for an existing one
effect: discharge the old contract
elements
(1) previous valid K
(2) agreement among all parties to the new K
(3) immediate extinguishment of contractual duties as between original parties
AND
(4) valid and enforceable new K
delegation
does not excuse performance under original K
replacing parties to the K with someone else without getting consent of all the parties to the original K
impossibility vs. impracticability as excuse
later, unforeseen event that makes party’s performance impossible
impracticability = the party obligated to perform has encountered extreme and unreasonable difficulty and or expense and its nonoccurrence was a basic assumption of the parties
types of impossibility or impracticability that excuses K
(1) death or incapacity of essential person to K – someone special
usually buyer’s estate still has to pay if buyer dies or buyer bears risk of loss
(2) destruction of subject matter or means of performance [common law]
(3) destruction of subject matter under article 2 are same as common law EXCEPT
[a] no discharge if the risk of loss has already passed to the buyer = no excuse needed
[b] increase in cost is NOT an excuse unless extreme and unreasonable
(4) frustration of purpose —
requires that both parties understood central purpose and central purpose was undermined, if those are satisfied, performance is excused
NOT IMPOSSIBLE — there is no excuse for impossibility if only D is unable to perform. Impossibility requires that NOBODY can perform what D promised. So, if D agreed to fly a plane in front of P’s agency on Tuesday, and does not because the plane wouldn’t work, that is not impossibility excuse because D could have gotten another plane. If there were a severe weather storm on Tuesday, and NOBODy could fly the plane, that would have render D’s performance excused due to impossibility.
what is performance duty of construction contractor ?
A contractor’s duty to construct a building is not discharged by destruction of the work in progress.
Rationale: 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.
damages for construction K vs K to repair or remodel in case of destruction
When a building under construction is de- stroyed, the contractor is still obligated to build and is not entitled to anything other than the contract price.
By contrast, a contract to repair or remodel a building that is destroyed after work has begun is discharged (there is nothing left to repair), and to the extent the contractor has already performed, the contrac- tor is entitled to recover in restitution (see 8.3) for the value of the work done prior to the building’s destruction.
if a service contract is excused due to a supervening event, but the contractor already did a bit of work, assuming this is not a construction K, can the contractor recover for work already done?
yes under quasi contract theory of unjust enrichment
grounds for a buyer’s nonperformance on a requirements contract for lack of orders
good faith
there is no market of the good AT ALL [not simply a shift in market conditions]
