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
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
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
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
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
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 unless K to be rescinded is w/in Statute of Frauds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 OR unless K to be rescinded is for sale of goods (article 2 requires written rescission or mod if original K expressly required one) - for non Art 2 Ks though, can rescind orally even if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
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
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
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)
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)
11
Q
Discharge By Release
A
- can discharge contractual duties
- usually needs to be in writing + supported by new consideration or promissory estoppel elements
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
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)
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
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
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
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
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
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
