Performance & Breach (CH7)

Question 1

express conditions

Answer 1

= can manipulate the timing of obligations in a contract

• if performance is subject to a condition =/= no obligation to perform until condition is met

Key: when there is an express condition parties can be “nitpick” the terms = must adhere to specific terms - no excuse or alternatives

see, interpretational rules

Question 2

interpretational rules (for express conditions)

Answer 2

= require parties to clarify if express conditions will be invoked

Key: problems arise when one party has performed but the other party’s performance is excused bc of the non-occurrence of a condition

Question 3

When is a party in breach of the contract?

Answer 3

-they incurred an obligation to perform
- failed to perform in some material respect
or failed to give reasonable basis for non-performance

Question 4

Constructive Conditions

Answer 4

= Court made conditions
Key: when K is not written in terms of express conditions
- Courts may imply conditions in order to assure that certain obligations are performed in a particular order or mitigate other factors

Question 5

Mitigating doctrines (for express / constructive conditions)

Answer 5

= alleviate the impact of conditions

Key: generally apply to both express and constructive conditions
except: in the case of Substantial Performance, that only applies to express conditions

• disproportionate forfeiture
• divisibility
• restitution
• Waiver
• Estoppel
• Election
• Substantial Performance (precluding nitpicking, only applies constructive conditions)
• Prevention?

Key: when express/constructive conditions result in harsh results if a party subject to the condition has expended substantial resources and the condition does not occur

Question 6

Restatement 244 - CONDITION

Answer 6

= an event not certain to occur
- which must occur
- unless it is excused
-before an obligation under a contract becomes due

Key: the condition may be an event
- that one of the parties can cause (ex. sending notice) OR
- which is not within the control of either party (ex. getting approved for a loan)

Question 7

difference between a condition and a duty

Answer 7

duty = violation amounts to breach of contract
condition = violation of makes contract void (non-performance form other party is justified)

Question 8

breach of duty

Answer 8

= failure to perform a duty

Key: gives rise to a breach of K cause of action but does not (necessarily) excuse performance

key:
- failure of condition does excuse performance
- material breach will excuse performance too
- minimal breach does not excuse performance

Question 9

failure of condition

Answer 9

= failure to perform a condition

Key: does excuse other party from their obligation of performance

Question 10

“IF AND ONLY IF”

Answer 10

language that is indicative of a condition

Key: words that indicate a limitation

Also:
- subject to
- Is a condition to

Question 11

forfeiture

Answer 11

= when the condition doesn’t occur everything goes to waste

Key: if the clause is ambiguous the ct. will likely rule it a duty and not a condition - to prevent wasted resources

Question 12

Restatement 229
Excuse a Condition to Avoid Forfeiture

Answer 12

= Allows courts to SET ASIDE an EXPLICIT CONDITION
- unless its occurrence was material
-to avoid “DISPROPORTIONATE FORFEITURE”

Question 13

If the clause is ambiguous, why does the court read it as a duty and not a condition?

Answer 13

rational = to prevent forfeiture

see, how does the court determine whether the clause is ambiguous?

Question 14

How does the court determine whether the clause is ambiguous?

Answer 14

Key: Language indicative of a condition

• “if and only if”
• subject to
• Is a condition to

Question 15

constructive conditions (of exchange)

Answer 15

=each party’s promise = “constructive condition” of the other party’s performance

“an exchange of promises renders the promised performances as dependent”

Key: You must perform / be ready, willing, & able to do so before you can prevail in a lawsuit

Question 16

Holmes on Implied Conditions

Answer 16

you can always imply a condition

? “bc some matters cannot by nature be quantitatively measured - and therefore no exact logical conclusions can be found”

Question 17

Merger Clause

Answer 17

= provision that states that the terms of a contract are the complete and final agreement between the parties

Question 18

concurrent conditions

Answer 18

= where 2 concurrent acts are to be done

Question 19

Tender

Answer 19

= an offer to do/perform an act
- the party offering is bound to perform to the party to whom the offer is made

Question 20

What happens when a K is clear and there will be an actual forfeiture if the condition is enforced?

Answer 20

Key: “Like nature abhors a vacuums, courts ashore forfeiture”

R229 = the court will set aside an explicit condition to avoid “disproportionate forfeiture”

Question 21

if an alleged agreement is made before a K is executed, can a party be entitled to withhold performance if not compensated in accordance to the alleged agreement?

What would be the impact of a merger clause?

Question 22

if an alleged agreement was made after the K was entered into, what would be the consideration for that agreement?

What would be the impact of a no oral modification clause?

Question 23

The Perfect TENDER Rule

Answer 23

= if the goods do not match the contract terms exactly, the buyer may
- reject the goods
- & sue for breach

Key: “the substantial performance doctrine does not apply to the sale of goods”

= if a discrepancy does not come to a buyer’s attention until after the goods have been accepted, - the buyer may sue for damages
- resulting form the deviation (“between the goods as promised and the goods as good”)

Question 24

How does the perfect tender rule affect the legality of the non-breaching party response to a breach of K?

Question 25

Restatement 240 - Divisibility

Answer 25

Key: when Substantial Performance fails, Divisibility may work as a mitigating doctrine

= if performances can be apportioned into corresponding pairs of equivalent part performances
- the court me treat a party’s performance of one part of such a pair is having the same effect on the other parties duties to render performance of the agreed upon equivalent
- just as if the parties had only contracted for that pair of performances’

“so that the parts of each pair …”

Question 26

Restitution (as a mitigating doctrine)

Answer 26

Can be applied to constructive conditions that have been breached by one party to enforce the non-breaching party’s duty
- equivalent

• try to find a better definition and to clarify the distinction between restitution as a mitigating doctrine and divisibility

Key: “you don’t get your mark up”

Question 27

substantial performance

Answer 27

= when “essence” or essential purpose of K is met
- breach is minimal not material
- not subject to a precise formula / depends on the context

Key: look to the essential purpose of the contract
- NOT applicable to the sale of goods

For Hybrids Consider: what is predominant (the service or the good?) (ex, in case of installation of a good)
- could be a hybrid = argue both sides

Question 28

Substantial Performance v. Perfect Tender Rule (M)

Answer 28

See where each apply:

SP=/=SoG

PTR=SoG

Question 29

229 Excuse of a Condition to Avoid Forfeiture (M)

Answer 29

To the extent that the non-occurrence of a condition would cause DISPROPORTIONATE FORFEITURE, a court may EXCUSE the non-occurrence of that condition unless ITS OCCURRENCE WAS A MATERIAL part of the agreed exchange

Question 30

What payment is owed when there has been substantial performance? (M)

Answer 30

THE CONTRACT AMOUNT – MINUS – DAMAGES resulting from the failure to completely perform

Question 31

What is the Perfect Tender Rule? (M)

Answer 31

UCC provision that allows the PURCHASER OF GOODS to insist on strict compliance with the contract

Question 32

240 Divisibility (M)

Answer 32

Whether the performance can be apportioned into corresponding pairs of part performances SO THAT THE PARTS OF EACH PAIR ARE PROPERLY REGARDED AS AGREED EQUIVALENTS

Question 33

What payment is owed when restitution applies? (M)

Answer 33

D will be ENTITLED TO = THE REASONABLE VALUE OF THE BENEFIT CONFERRED (NOT THE K RATE) -minus- Damages resulting from the failure to comply

Question 34

The doctrine of substantial performance deals with one particular type of breach of contract, which is it?

Answer 34

It is the breach associated with failure to complete the performance contracted for and the injured party’s response to such failure
(ex. P breaches K , D “I’m not paying!”)

Question 35

Suspending Performance and Terminating the Contract

Answer 35

occurs when during the performance of the K a party either
- fails to fulfill one of a series of obligations required under the K or
- deviates from such obligation in some manner

Key: breaches that occur at some stage earlier than at the end of the K

Question 36

The question becomes what is the non-breaching party entitled to do based on the breach?

Answer 36

Non-breaching party’s options:
IF
- Non-material (partial breach) = complete obligations, sue later
- Material = suspend
- Total = after reasonable opportunity to cure, repudiate

Question 37

Was the breach Material, Nonmaterial, or Total?

Answer 37

This is a determining factor in what the non-breaching party is entitled to

Question 38

What does Material Breach afford the non-breaching party?

Answer 38

the ability to suspend his own performance until the other party cures their breach

Question 39

What does a Nonmaterial Breach afford the non-breaching party?

Answer 39

relief from the obligation to complete performance
- non-breaching party’s remedy would be to sue for partial breach
Key: does not allow the non-breaching party to suspend their performance

Question 40

When does total breach occur?

Answer 40

When material breach is not cured after a reasonable opportunity

Question 41

What does a total breach afford the non-breaching party?

Answer 41

allows repudiation of the K

the non-breaching party can take more drastic measures: “Not only do I suspend performance, I declare the contract terminated.” a.k.a. “I repudiate!”

Question 42

repudiation

Answer 42

Termination of a contract

Question 43

When does repudiation of a contract subject the non-breaching party to exposure to a claim?

Answer 43

When there are no express conditions in the K,
non-breaching party would be exposed to a breach of K claim IF
- breach was not material
- reasonable opportunity to cure the material breach has not been allowed

Key: Should be last resort, goal is to never employ this option “It might blow up in your own face”

Question 44

When should a contract be terminated? (despite express conditions/breach)

Answer 44

When it would be more efficient to breach the K and pay damages, than to enforce the K

Question 45

Contracts should not be terminated except when…

Answer 45

• upon the nonoccurrence of an express condition
• upon a failure to cure a material breach following a reasonable opportunity to cure

Question 46

What does a party’s response to breach breach hinge on?

Answer 46

Whether the breach material

Key: the concept of a material breach is derived from constructive conditions, it is basically the nonoccurence of a constructive condition.

Question 47

Restatement 241

Answer 47

Factors that go into determining whether a breach is material or not
- (a) the extent to which the injured party will be DEPRIVED OF THE BENEFIT he reasonably expected;

(b) the extent to which the injured party CAN BE ADEQUATELY COMPENSATED for the part of that benefit of which he will be deprived;

(c) the extent to which the party failing to perform or to offer to perform will suffer FORFEITURE;

(d) the likelihood that the party failing to perform or to offer to perform will CURE his failure, taking account of all the circumstances including any reasonable assurances;

(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with STANDARDS OF GOOD FAITH AND FAIR DEALIGN

Question 48

is materiality a question of law or fact?

Answer 48

materiality is a question of fact

Key: the concept of a material breach is derived from constructive conditions, it is basically the nonoccurence of a constructive condition.

Question 49

What is a material breach?