Performance, Breach, & Discharge Flashcards
Condition Precedent
Makes performance conditional upon the completion of the condition.
BUT, the condition is excused when:
a) the protected party fails to make a good faith
effort to satisfy the condition; OR
b) waiver (voluntarily giving up protection) – but
can retract the waiver if the other party has not relied on it.
Obligation of Good Faith & Fair Dealing
Every contract contains an implied obligation of good faith and fair dealing to act honestly and fairly.
Obligation of Good Faith & Fair Dealing - UCC
requires (1) honesty in fact, AND (2) observance of reasonable commercial standards of fair dealing.
Impossibility
Performance is discharged when it’s objectively impossible to perform because of:
a) death or incapacity of a person necessary to effectuate the contract;
b) unanticipated destruction of the subject matter of the contract; OR
c) a new, unanticipated law/regulation making performance extremely and unreasonably difficult/expensive.
Impracticability
Performance is discharged when:
1) an event occurs after contract formation,
2) that is unanticipated by both parties,
3) making performance extremely and
unreasonably difficult/expensive.
Frustration of Purpose
Discharges performance when the purpose of the contract no longer exists.
Occurs when:
1) a party’s principal purpose is substantially frustrated,
2) by an unforeseeable superseding event outside their control, AND
3) both parties knew the purpose at the time of formation.
Material Breach (Substantial Performance Doctrine)
Occurs when a party DOES NOT render substantial performance.
A material breach excuses the non-breaching party’s performance. To determine if the breach is material, courts analyze:
1) Extent of performance;
2) Adequacy of compensation for loss to the non-
breaching party;
3) Hardship;
4) Likelihood the breaching party will cure; and
5) Whether the breach was intentional.
Minor Breach
DOES NOT excuse performance.
− But, the non-breaching party may bring a separate action for damages resulting from the breach.
Divisible Performance
Treated as multiple contracts. − Performance of each part entitles a party to pay for that part of the contract.
UCC Perfect Tender Rule
Seller MUST deliver conforming goods.
− The smallest non-conformity is a breach, and buyer may reject all or a portion of the goods. A rejection of goods must be made within a reasonable time.
UCC Perfect Tender Exceptions
Two Exceptions:
Right to Cure and Installment Contract
Right to Cure
A seller has a right to cure when:
a) Time for performance has not yet expired; OR
b) The seller will have further reasonable time to cure if seller had reasonable grounds that
substitute goods would be accepted (i.e. same type of non-conforming goods had been accepted by the buyer in the past).
Installment Contract
− May only be cancelled when an installment is so defective that it substantially impairs the value of the entire contract.
− Buyer can reject an installment only if the non- conformity substantially impairs that installment and the time to cure has past.
UCC Revocation of Acceptance - Rejection of Goods
If a buyer fails to reject goods after a reasonable opportunity to inspect the goods, the goods are deemed accepted.
UCC Revocation of Acceptance
After acceptance, a buyer may later revoke that acceptance of goods only if:
1) the non-conformity substantially impairs the value of the goods; AND
2) the defect was difficult to discover (a latent defect) or the buyer had a reasonable assumption the defect would be cured.
Revocation of acceptance MUST occur within:
a reasonable time after the buyer discovers or should have discovered the nonconformity.
− Not effective until buyer notifies the seller.
− Must occur before there is any substantial
change in the goods (not caused by their own defects).
Anticipatory Repudiation
Occurs when a party unequivocally communicates that they are unable or unwilling to perform under the contract.
If occurs, the non-breaching party may:
a) treat the contract as repudiated and sue for
damages before the time of performance is due;
b) treat the contract as discharged;
c) wait until performance is due and then sue; OR
d) urge the other party to perform.
A party can retract its repudiation and restore the contract UNLESS:
the non-breaching party has:
a) Cancelled;
b) Materially changed its position; OR
c) Indicated that they consider the repudiation final.
Demand for Adequate Assurances
if there are reasonable grounds for being insecure about performance, a party may make a written request for adequate assurances from the other party that it will perform.
− If the other party DOES NOT give assurances after asked to do so, the requesting party may treat that as an anticipatory repudiation.
Accord & Satisfaction
Accord – Agreement to accept new performance in lieu of old performance.
Satisfaction – Upon satisfaction of the accord (the new act), the party is excused from further performance under the original contract.
If the party fails to satisfy the accord, the other party may sue either under:
a) the original contract; OR
b) the accord terms.
