Performance & Breach (CH7) Flashcards
express conditions
= 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
interpretational rules (for express conditions)
= 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
When is a party in breach of the contract?
-they incurred an obligation to perform
- failed to perform in some material respect
or failed to give reasonable basis for non-performance
Constructive Conditions
= 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
Mitigating doctrines (for express / constructive conditions)
= 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
Restatement 244 - CONDITION
= 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)
difference between a condition and a duty
duty = violation amounts to breach of contract
condition = violation of makes contract void (non-performance form other party is justified)
breach of duty
= 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
failure of condition
= failure to perform a condition
Key: does excuse other party from their obligation of performance
“IF AND ONLY IF”
language that is indicative of a condition
Key: words that indicate a limitation
Also:
- subject to
- Is a condition to
forfeiture
= 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
Restatement 229
Excuse a Condition to Avoid Forfeiture
= Allows courts to SET ASIDE an EXPLICIT CONDITION
- unless its occurrence was material
-to avoid “DISPROPORTIONATE FORFEITURE”
If the clause is ambiguous, why does the court read it as a duty and not a condition?
rational = to prevent forfeiture
see, how does the court determine whether the clause is ambiguous?
How does the court determine whether the clause is ambiguous?
Key: Language indicative of a condition
- “if and only if”
- subject to
- Is a condition to
constructive conditions (of exchange)
=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
Holmes on Implied Conditions
you can always imply a condition
? “bc some matters cannot by nature be quantitatively measured - and therefore no exact logical conclusions can be found”
Merger Clause
= provision that states that the terms of a contract are the complete and final agreement between the parties
concurrent conditions
= where 2 concurrent acts are to be done
Tender
= an offer to do/perform an act
- the party offering is bound to perform to the party to whom the offer is made
What happens when a K is clear and there will be an actual forfeiture if the condition is enforced?
Key: “Like nature abhors a vacuums, courts ashore forfeiture”
R229 = the court will set aside an explicit condition to avoid “disproportionate forfeiture”
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?
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?
The Perfect TENDER Rule
= 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”)
How does the perfect tender rule affect the legality of the non-breaching party response to a breach of K?
Restatement 240 - Divisibility
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 …”
Restitution (as a mitigating doctrine)
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”
substantial performance
= 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
Substantial Performance v. Perfect Tender Rule (M)
See where each apply:
SP=/=SoG
PTR=SoG
229 Excuse of a Condition to Avoid Forfeiture (M)
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
What payment is owed when there has been substantial performance? (M)
THE CONTRACT AMOUNT – MINUS – DAMAGES resulting from the failure to completely perform
What is the Perfect Tender Rule? (M)
UCC provision that allows the PURCHASER OF GOODS to insist on strict compliance with the contract
240 Divisibility (M)
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
What payment is owed when restitution applies? (M)
D will be ENTITLED TO = THE REASONABLE VALUE OF THE BENEFIT CONFERRED (NOT THE K RATE) -minus- Damages resulting from the failure to comply
The doctrine of substantial performance deals with one particular type of breach of contract, which is it?
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!”)
Suspending Performance and Terminating the Contract
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
The question becomes what is the non-breaching party entitled to do based on the breach?
Non-breaching party’s options:
IF
- Non-material (partial breach) = complete obligations, sue later
- Material = suspend
- Total = after reasonable opportunity to cure, repudiate
Was the breach Material, Nonmaterial, or Total?
This is a determining factor in what the non-breaching party is entitled to
What does Material Breach afford the non-breaching party?
the ability to suspend his own performance until the other party cures their breach
What does a Nonmaterial Breach afford the non-breaching party?
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
When does total breach occur?
When material breach is not cured after a reasonable opportunity
What does a total breach afford the non-breaching party?
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!”
repudiation
Termination of a contract
When does repudiation of a contract subject the non-breaching party to exposure to a claim?
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”
When should a contract be terminated? (despite express conditions/breach)
When it would be more efficient to breach the K and pay damages, than to enforce the K
Contracts should not be terminated except when…
- upon the nonoccurrence of an express condition
- upon a failure to cure a material breach following a reasonable opportunity to cure
What does a party’s response to breach breach hinge on?
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.
Restatement 241
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
is materiality a question of law or fact?
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.
What is a material breach?
