Performance and Excuse of Nonperformance

Question 1

Performance at Common Law

Answer 1

A party’s basic duty is to substantially perform all that is called for in the contract

Question 2

Performance under Article II

Answer 2

Art. II generally requires a perfect tender, i.e., the delivery and condition of the goods must be exactly as promised in the contract

Question 3

Obligation of Good Faith under Art. II

Answer 3

Art. II 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”

Question 4

Seller’s Obligation of Tender and Delivery

Answer 4

1. Noncarrier cases, i.e. sale in which the parties did not intend that the goods be moved by carrier:
   - tender of delivery: notice and reasonable hour
   - place of delivery: generally seller’s place of business
2. Carrier cases: appears parties intended that a carrier be used to move the good
   - shipment contracts (where seller has not agreed to tender at particular destination): seller need not see that goods reach buyer but need only put in hands of reasonable carrier and tender documents required and promptly notify buyer of shipment
   - if contract requires particular destination, must put and hold conforming goods at buyer’s disposition

Question 5

Buyer’s Obligation to Pay: Right to Inspect

Answer 5

Buyer has the right to inspect the goods before they pay unless the contract provides for payment C.O.D. or otherwise indicate that buyer has promised to pay without inspecting the goods

Question 6

Conditions: Has the duty to perform become absolute?

Answer 6

A contract may provide that a party has not have a duty to perform unless some condition is fulfilled. In that case, the party’s failure to perform is justified if the condition was not fulfilled

Question 7

Distinction between Promise and Condition

Answer 7

Promise: commitment to do or refrain from doing something

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.

A condition is a PROMISE MODIFIER… there can be no breach of promise until the promisor is under an immediate duty to perform

Question 8

Failure of Condition versus Breach of Contract

Answer 8

Failure of Condition: NOT A BREACH OF CONTRACT!

But, it discharges the liability of the promisor whose obligations on the conditional promise never mature

Question 9

Interpretation of Provision as Promise or Condition

Answer 9

Courts will look at the words and phrases used by the parties, their prior practices, industry custom, and whether performance is needed from a third party

When in doubt, most courts will hold that the provision in question is a promise

Question 10

Express Conditions

Answer 10

Normally refers to an explicit contractual provision. It is an express statement in the contract 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 11

Express Conditions Examples

Answer 11

Promisor’s Satisfaction as Condition Precedent
- Mechanical Fitness, Utility, or Marketability: reasonable person standard
- Personal Taste or Judgment: personally satisfied standard
- Satisfaction of Third Person as Condition: requires actual personal satisfaction, however will be excused if dissatisfaction is not honest/not in good faith

Question 12

Classification of Conditions

Answer 12

1. Condition Precedent: before absolute duty of immediate performance
2. Conditions Concurrent: capable of occuring together and that the parties are bound to perform at the same time
3. Condition Subsequent: when it occurs, it cuts off an already existing absolute duty of performance

Question 13

Constructive (Implied) Conditions

Answer 13

1. Performance
2. Cooperation and Notice
3. Order of Performance (either simultaeneous or precedent)

Question 14

Effect of Condition- Equitable Remedy

Answer 14

Usually unjust enrichment

Question 15

Excuse of Condition?

Answer 15

1. By hindrance or failure to cooperate
2. By waiver or estoppel
3. By substantial performance
4. By “divisibility” of contract (performance of each party divided in 2 or more parts, number of parts due from each party is equivalent, performance of each part is agreed on as equivalent)
5. By impossibility, impracticability, or frustration

Question 16

Ways to Discharge Duty to Perform

Answer 16

1. By performance or tender of performance
2. By occurrence of condition subsequent
3. By illegality
4. By recission (unilateral or mutual)
5. (Partial) by modification of contract
6. By cancellation
7. By release
8. By substituted contract
9. By accord and satisfaction (accepting alternative in lieu of existing contract)
10. By novation (new contract substitutes a new party to receive benefits and assume duties)
11. By impossibility, impracticability, or frustration
    - Impossibility: objectively impossible to perform
    - impracticability: party has encountered extreme and unreasonable difficulty and/or expense and its nonoccurrence was a basic assumption of the parties
    - frustration: elements are:
    (a) supervening act
    (b) parties did not reasonable foresee the act or event occurring
    (c) purpose of the contract has been completely or almost completely destroyed by this act or event
    (d) purpose of the contract was realized by both parties at the time of making the contract
12. Discharge by Account Stated
13. DIscharge by Lapse