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July Exam - Contracts > Performance - Discharge of Absolute Duty > Flashcards

Performance - Discharge of Absolute Duty Flashcards

1
Q

Discharge by Performance or Tender of Performance

A
  • basically, full + complete performance = most obvious way to discharge
  • also discharge if good faith tender of perf made in accordance w/ contractual terms
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2
Q

List of Discharge Methods

A
  • performance
  • tender of performance
  • occurrence of condition subsequent
    -illegality
  • rescission
  • cancellation
  • release
  • substituted K
  • accord + satisfaction
  • novation
  • impossibility, impracticability or frustration
  • account stated
  • lapse
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3
Q

Mutual Rescission

A
  • express agreement between the parties to rescind
    -> binding K in and of itself supported by consideration (in the form of parties foregoing right of counterperf)
  • contract must be executory (unperformed) on both sides for this to be effective
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4
Q

Mutual Rescission - UnilateralKs

A
  • means only one party owes an absolute duty -> k to mutually rescind where one party still has duty to perform will be ineffective
  • if offeree has already performed, rescission promise must be supported by one of the following:
    -> offer of new consideration by nonperforming party
    -> elements of promissory estoppel (detrimental reliance)
    -> manifestation of an intent by original offeree to make gift of ob owed to them
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5
Q

Mutual Rescission - Partially Performed Bilateral Ks

A
  • can usually enforce mutual rescission agreement when bilateral K partially performed
  • party who partially performed may be entitled to comp -> depends on rescission agreement
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6
Q

Mutual Rescission - Formalities

A
  • agreement may be made orally
    -> unless K to be rescinded is w/in Statute of Frauds
    -> OR unless K to be rescinded is for sale of goods (article 2 requires written rescission or mod if original K expressly required one)
  • for non Art 2 Ks though, can rescind orally even if original K said no oral mods
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7
Q

Mutual Rescission + Third-Party Beneficiaries

A
  • if rights of third-party beneficiaries have already vested, K may NOT be discharged by mutual rescission
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8
Q

Unilateral Rescission

A
  • happens when one party to K desires rescission but other desires performance
  • to get this, party desiring rescission would need adequate legal grounds
    -> commonly mistake, misrepresentation, duress, + failure of consideration
  • if nonassenting party refuses to grant, other party can file action in equity to obtain
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9
Q

Partial Discharge by Modification of Contract

A
  • if K subsequently modified by parties, serves to discharge the terms of original K that were subject to mod
    -> won’t discharge entire K though
  • mod usually requires consideration + mutual assent (though only good faith for Art 2)
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10
Q

Discharge by Cancellation

A
  • if parties manifest intent to have acts like destruction or surrender of written K serve as discharge, it will so serve (if consideration or one of its alts is present)
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11
Q

Discharge By Release

A
  • can discharge contractual duties
  • usually needs to be in writing + supported by new consideration or promissory estoppel elements
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12
Q

Discharge by Substituted Contract

A
  • K may be discharged when parties to a contract enter into second K that immediately revokes first (either expressly or impliedly)
    -> whether immediate revocation occurs depends on intent - substituted K if immediate discharge intended, vs. executory accord if intended 1st K to be discharged only upon performance of second
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13
Q

Accord

A
  • agreement in which one party to existing K agrees to accept, in lieu of performance from other party, some other different, future performance
    -> won’t discharge prior K on its own - just suspends right to enforce it in accordance w/ terms of accord K
    -> would need satisfaction (performance of the accord agreement) to discharge (discharges both og K + accord K)
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14
Q

Accord - Consideration

A
  • accord generally needs to be supported by consideration
  • can be of lesser value of that in prior K
  • can also be of different type or paid to 3rd party
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15
Q

Accord - Debtor’s Offer of Partial Payment

A
  • under majority view, this doesn’t qualify for accord + satisfaction UNLESS there’s some knd of “bona fide dispute” as to the underlying claim or there’s otherwise some alteration (even slight) of the debtor’s consideration
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16
Q

Accords - Checks Tendered as Payment in Full

A
  • if monetary claim is uncertain or subject to a bona fide dispute, an accord + satisfaction may be accomplished by good faith tender + acceptance of check when that check (or an accompanying doc) conspicuously states that the check is tendered in full satisfaction of the debt
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17
Q

Breach of Accord Agreement Before Satisfaction - By Debtor

A
  • if debtor breaches accord agreement, creditor can sue either on original undischarged K OR for breach of accord agreement
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18
Q

Breach of Accord Agreement Before Satisfaction - By - Creditor

A
  • if creditor breaches accord agreement by suing on the ORIGINAL K, debtor has two options:
    1) raise the accord agreement as an equitable defense + ask that the contract action be dismissed OR
    2) wait until they’re damaged (meaning creditor is successful in their action on the original K) + then bring an action at law for damages for breach of accord K
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19
Q

Accords vs. Modification

A
  • accord is when parties agree to accept a different future performance in satisfaction of og ob
    -> most often happens when payment overdue or there’s a dispute re perf due + parties looking for a resolution
    -> og K enforceable if accord-‘s agreed-to perf is not carried out
  • vs. mod, looking to agree to a different agreement -> duties change immediately
    -> can no longer enforce original terms
    -> usually occurs BEFORE perf due
20
Q

Tips for Determining Accord vs. Mod

A
  • accord usually triggered by dispute of an amount due
    -> if no dispute, consider mod
  • also look to see if party offering accord is looking to discharge the K
    -> vs. if intend K to continue (ex: multi-yr K or installment K), then more likely mod
21
Q

Novation

A
  • occurs when new K substitutes a new party to receive benefits + assume duties that originally belonged to one of the original parties under terms of old K
  • serves to discharge old K
22
Q

Elements of a Valid Novation

A

1) previous valid K
2) agreement among all parties, including the new party (or parties) to the new K
3) immediate extinguishment of contractual duties as between the original contracting parties AND
4) valid and enforceable new K

23
Q

Discharge by Impossibility/Impracticability/Frustration - Basic Concept

A
  • occurrence of unanticipated/extraordinary event may make contractual duties impossible or impracticable to perform or frustrate purpose of K
  • where nonoccurrence of the event was a basic assumption of the contracting parties + neither has expressly or impliedly assumed the risk of the event occurring, contractual duties may be discharged
24
Q

Discharge by Impossibility - Details

A
  • impossibility needs to be “objective” (duties couldn’t have been performed by anyone)
    -> subjective not enough (would be if duties could be performed by someone but not the promisor)
  • must arise after K entered into (if before, it’s more of a formation issue - voidable b/c mistake)
25
Q

Discharge - Effect of Impossibility

A
  • if K discharged b/c of impossibility, each party is excused from duties arising under k that are yet to be fulfilled
  • either party can sue for rescission + receive restitution of any goods delivered, payments made, etc
26
Q

Partial Impossibility

A
  • if performance to be rendered under K becomes only partially impossible, duty may be discharged only to that extent
  • remainder of performance may be required according to K terms, even if remaining perf might involve added expense or difficulty
27
Q

Temporary Impossibility

A
  • suspends K duties
  • does NOT discharge them
  • duty springs back into existence once K becomes possible again unless burden on either party would be substantially increased or different from that originally contemplated
28
Q

Part Performance Prior to Impossibility

A
  • party that partially performed gets right to recover in quasi-contract at the contract rate or for reasonable value of performance if that’s a more convenient mode of valuation
29
Q

Discharge - Death or Physical Incapacity

A
  • discharges K IF the person whose death or physical incapacity has occurred is NECESSARY to effectuate the K
    -> doesn’t apply in a services K if the services are of a kind that can be delegated (applies if services of a unique kind, but not if not unique)
30
Q

Supervening Illegality

A
  • can discharge K
  • most cts treat as form of impossibility
31
Q

Subsequent Destruction of K’s Subject Matter or Means of Performance

A
  • if K’s subject matter destroyed or designated means for performing are destroyed, contractual duties may be discharged
  • thing or source destroyed needs to be NECESSARY (specificity required)
32
Q

Destruction + Contracts to Build

A
  • contractor’s duty to construct building NOT discharged by destruction of work in progress
  • rationale: construction not technically impossible, can still rebuild
  • most cts will excuse from meeting og deadline though, if destruction not caused by contractor
  • vs. discharge would occur w/ a repair/remodel K, and contractor would get restitution for value of work done
33
Q

Destruction - Where Risk Has Already Passed to Buyer

A
  • rules re discharge don’t apply -> buyer would still need to perform (b/c by this point buyer is responsible for risk of loss)
34
Q

Discharge by Impracticability

A
  • modern cts will discharge where performance impracticable
35
Q

Test for Impracticability

A

Party to perform has encountered:
- extreme and unreasonable difficulty and/or expense, AND
- its nonoccurrence was a basic assumption of the parties

36
Q

Contracts for Sale of Goods - Impossibility + Impracticability

A
  • Art 2 generally follows above rules -> seller discharged to extent of impossibility or impracticability
37
Q

Contracts for Sale of Goods - Allocation of Risk

A
  • seller generally assumes risk of occurrence of unforeseen events + must continue to perform
  • BUT if fair to say parties wouldn’t have placed on seller risk of the extraordinary occurrence, seller will be discharged
38
Q

Sales of Goods - Impossibility/Impracticability + Events Sufficient for Discharge

A

Include:
- shortage of raw materials
- inability to convert raw materials into seller’s product b/c of contingencies like strike, war, embargo, or unforeseen shutdown of major supplier
- catastrophic local crop failure (as opposed to mere shortage)

  • BUT mere increases in costs rarely sufficient unless they change the nature of the contract
    -> no bright line, but even an increase of more than 50% has been held to be insufficient
39
Q

Article 2 - Seller’s Partial Inability to Perform

A
  • if seller’s inability = only partial, must allocate deliveries among their customers and, at their option, may include in the allocation regular customers not then under K
40
Q

Frustration

A
  • exists if the purpose of K has become valueless by virtue of some supervening event not the fault of the party seeking discharge
  • number of courts will discharge under such circs even though technically possible to perform
41
Q

Elements Necessary for Frustration

A
  • supervening act or event leading to the frustration
  • at t of entering into K, the parties did not reasonably foresee the act or event occurring
  • purpose of K has been completely or almost completely destroyed by this act or event
  • purpose of K was realized by both parties at t of making K
42
Q

Exam Tip - Frustration + Rentals

A
  • frustration likely to come up on exam
  • look out for facts showing person rented venue for specific purpose known to owner + subsequent event (including storm, death) that wasn’t reasonably foreseeable renders the purpose for renting the place moot
43
Q

Exam Tip - When Impossibility/Impracticability Likely vs. Frustration

A
  • seller of lands/goods/services will raise impossibility/impracticability as defense to discharge performance
  • vs. a party who’s supposed to pay (usually buyer) will raise frustration of purpose to discharge performance (since paying $ never really impracticable)
44
Q

Discharge by Account Stated

A
  • account stated = K between parties whereby they agree to an amount as a final balance due from one to the other
  • final balance encompasses a number of transactions between the parties + serves to merge all of these transactions by discharging all claims owed
45
Q

Discharge by Lapse

A
  • if duty of each party = condition concurrent to other’s duty, it’s possible that on day set for performance, neither party is in breach + their contractual obs lapse
  • if K states that time is “of the essence”, lapse will occur immediately
    -> otherwise, lapses after a reasonable time
46
Q

Effect of Running Statute of Limitations

A
  • if stat of lim on an action has run, it’s generally held that an action for breach of K may be barred
  • only judicial remedies are barred -> running doesn’t discharge the duties -> if party w/ advantage of stat of lim subsequently agrees to perform, new consideration not required
  • lapse discharges, vs. stat of lim just makes K unenforceable in court

July Exam - Contracts (14 decks)

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