Performance + Excuses for Nonperformance

Question 1

What performance is required at common law? Under the UCC?

Answer 1

c/l requires substantial performance. UCC requires perfect tender - goods must be exactly as promised.

Question 2

May obligation of good faith be waived?

Answer 2

No

Question 3

What performance is required by seller in UCC K’s

Answer 3

1. Noncarrier cases - seller must give buyer notice to enable buyer to take possession of goods + tender at reasonable hour; absent agreement otherwise, delivery place = seller place of biz/home
2. Carrier cases:
   a. shipment K – seller must put goods in hands of reasonable carrier, make reasonable K with carrier, obtain and give over any docs buyer needs to accept goods, promptly notify buyer of shipment
   b. destination K - seller must put/hold goods at specified location

Question 4

What performance is required on the part of the buyer in UCC K’s?

Answer 4

1. noncarrier cases - price due at tender of delivery + cash
2. carrier cases - price due at time/place buyer receives goods (hands of carrier for shipment K; goods at destination in destination K)

Question 5

What is legal effect of a condition vs. absolute promise?

Answer 5

A condition indicates that a party has no obligation to perform until a certain condition comes into existence. An absolute promise means that the promise to perform is unconditional.

Failure of condition to occur doesnt breach K, it discharges party from liability/duty to perform.

Note: if K says “when xyz occurs” and xyz is not within the obligees control, then courts typically interpret this as time for performance NOT condition for performance - e.g. x will be paid when y is paid – still needs to pay X if Y never gets paid.

Question 6

When a K indicates a party need only pay if satisfied, what standard do we apply to assess whether they can refuse payment? What if third party is one to be satisfied?

Answer 6

• if K involves mechanical fitness, utitlity, or marketability - apply objective, reasonable person standard - i.e., if reasonable person would be satisfied then buyer must pay
• if K involves personal taste or judgment (portraits, dental work) - then must be actually, subjectively satisfied
• if K requires third party to be satisfied (e.g. architect), must be actually satisfied as well

Question 7

What legal recourse does a party have if they have fully/partially performed but other person’s duty is discharged due to failure of condition?

Answer 7

Can sue under unjust enrichment to get restitution.

Question 8

In what ways does one’s duty of performance become immediate if it is dependent on a condition occurring? (e.g. ways to excuse condition/counterperformance)

Answer 8

1. occurrence of the condition
2. Excuse of the condition:
   
   • hindrance of condition - i.e. party refuses/stops condition from occuring
     - waiver, or waiver + detrimental reliance
     - actual breach of K (but must be material, not minor)
     - anticipatory repudiation
     - prospective inability - i.e. party has reason to think other won’t perform
     - other party has substantially performed
     - divisible K + performance on one unit
     - impossibility, impracticability, frustration of purpose

Question 9

When party A must perform after a certain condition and the condition doesn’t occur, what must party B (beneficiary of performance) do?

Answer 9

They can either (a) terminate their own liability to perform or (b) continue with K. If they continue this functions as waiver of condition that can not be withdrawn (“election waiver”).

Question 10

Can you waive duty of performance under any condition?

Answer 10

Only if consideration is given for the waiver. If no consideration is given, then you can only waive duty of party performance if the condition is ancillary/collateral.

Question 11

What is the legal effect of waiving a condition?

Answer 11

Party waiving can no longer treat failure of a condition as breach of K excusing counterperformance. But still has right to damages in general.

Question 12

What is anticipatory repudiation? When may it excuse a condition for a K?

Answer 12

Anticipatory repudiation occurs when a promisor indicates –prior to performance being due – that they will not perform. (e.g. you say you will pay A once house is completely painted, then tell them you won’t pay before completion)

For anticipatory repudiation to excuse counterperformance:

• K must be bilateral - mutual promises unperformed on both sides
• party must unequivocally indicate failure to perform

Note: party may withdraw repudiation at any time before next performance due UNLESS there is detrimental reliance on repudiation/indicated they thought it was final

Question 13

What is prospective inability to perform? How does it differ from anticipatory repudiation? What are the legal effects of it?

Answer 13

Prospective inability to perform occurs when a party indicates by words or conduct that they may not be able to perform (but it is not clear/unequivocal as it is with anticipatory repudiation).

The legal effect: If Party A indicates to Party B that they may not be able to perform, then party B may suspend duty to perform until they get adequate assurances from A that A can perform. if they do not get those assurances, then Party B is excused from performance.

Question 14

When will substantial performance excuse a condition/require counterperformance?

Answer 14

ONLY when the condition is implicit NOT explicit. Also will not apply to UCC K’s (requires perfect tender).

Note: damages for substantially performing party will be full K minus value lost from lack of full performance

Question 15

What is required for a K to be deemed divisible?

Answer 15

(a) performance of each party is divided into 2+ parts
(b) number of parts due from each party is the same
(c) performance by one party is equivalent to corresponding part (quid pro quo)

Note: If K states time for payment of all units is due at end this doesnt make K indivisible if there is still a price per unit.

Question 16

In what ways may a duty to perform be discharged?

Answer 16

• performance/good faith tender of performance
• supervening illegality (subject matter has become illegal)
• rescission
• partial discharge by K modification
• cancellation, release
• substitute K (revoking first K)
• accord & satisfaction (agreement for different performance + completion)
• novation (new K substitutes new party)
• impossibility, impracticability, frustration of purpose
• lapse (if both parties have concurrent duties + reasonable time lapses)

Question 17

When can a K be rescinded?

Answer 17

A. mutual rescission - express agreement by both parties; rescission is a valid K itself (consideration is both giving up duties)

 - can NOT be rescinded if rights of third parties have vested 
- in unilateral K, if nonperforming party wants to rescind also needs to (a) offer new consideration (b) have detrimentally relied, or (c) manifested intent that this was a gift 

Note: can be made orally even if K says not unless in SoF

B. unilateral rescission - party rescinding must have other legal grounds (mistake, misrepresentation, duress, etc)

Question 18

What type of consideration is required for an accord?

Answer 18

An accord - or agreement to accept different peformance – requires consideration. However, the consideration can be of lesser value than what was originally owed IF there is some difference in the way it is paid (e.g. earlier, with different form) OR if it is to be paid to a third party.

ALSO, offer to make partial payment on existing debt is valid consideration IF there is some bona fide dispute wrt to the underlying debt.

Question 19

What happens when a creditor or debtor breaches an accord agreement?

Answer 19

• breach by debtor - creditor may sue on original or accord K
• breach by creditor (i.e. sues on original K), debtor can (a) raise accord as defense to dismiss K, or (b) wait until creditor wins action then bring own suit for breach of accord

Question 20

What is the difference between an accord and a modification?

Answer 20

In an accord, parties agree to accept different future performance in substitute. The accord isn’t a valid K/original K is still enforceable UNTIL the new performance is complete.

In a modification, parties agree to different agreement and the obligations change immediately.

Note: on exam, accord is usually triggered by a dispute re an amount due

Question 21

What do you need for a novation to be valid?

Answer 21

Novation is when a new K substitutes a a new party to receive benefits of K - this discharges duties of old K.

Reqs:

(1) previous valid K
(2) agreement among all parties including new one
(3) immediate extinguishment of old K duties
(4) valid new K

Question 22

What is required to discharge a K by impossibility, impractability, or frustration of purpose?

Answer 22

Occurence of an unanticipated event, the nonoccurence of which was a basic assumption of the parties in making the K and neither party has expressly assumed the risk of the event.

A. Impossibility - event makes performance impossible under objective standard
Note: temporary impossibility merely suspends duties
Examples: death or physical incapacity (only if person is neccessary); supervening illegality, destruction of subject matter/means of performance
Note: a constructors duty to construct a building is NOT discharged by destruction of work in progress, but if not at fault can have new deadline; constructor only gets original $

B. Impracticability - event adds extreme or unreasonable difficulty/expense in performance
- e.g. shortage of raw materials, war, strike, embargo, catastrophy (mere increases in price NOT)

C. Frustration of purpose - purpose of K becomes valueless
req’s: (a) supervening act (b) not reasonably foreseabble (c) purpose of K almost/completely destroyed (d) both parties realized purpose of K

Question 23

What is the difference in legal effect of lapse vs statute of limitations?

Answer 23

Lapse of time discharges duties, Statute of limitations merely makes it unenforceable in court (technically doesn’t discharge duties).