BLAW 243- EXAM 2 PowerPoint 21
Non-Personal Subject Matter
- Discharge occurs if work would satisfy a reasonable person, unless contract states 'must satisfy x'
Effect of Anticipatory Repudiation
- Treated as a material breach - Non-breaching party may sue for damages - Breaching party may RETRACT the repudiation
Personal Subject Matter
- X's satisfaction is a condition precedent - discharge occurs if work subjectively satisfies X - good faith is required by X
Bankruptcy
- court will allocate debtor;s assets to creditors - debtor's debts are discharged
Court must be convinced that Party who has "substantially" but not "completely" performed has
1. Acted in GOOD FAITH 2. Performed in a manner that does not vary considerably from the contractual promise work 3. Created substantially the same benefits as those promised under the contract.
Discharge of Contract
1. By Performance 2. By Breach 3. By Agreement 4. By Failure of a Condition 5. By Operation of Law
A contract is discharged when both parties complete performance:
1. Complete Performance 2. Substantial Performance
Types of Discharge by Operation of Law
1. Material Alteration 2. Statutes of Limitations 3. Bankruptcy 4. Impossibility of Performance 5. Commercial Impracticability 6. Frustration of Purpose
Effect of Substantial Performance
1. May enforce the contract against the other party 2. May still be liable for monetary damages for difference between actual and expected performance
Contract must SPECIFY:
A. Any conditions that apply B. The consequences of that condition - creates a duty - suspends a duty - terminates a duty
Val's Foods signs a contract to buy 1500 pounds of basil from Sun Farms, a small organic herb grower, as long as an independent organization inspects the crop and certifies it contains no pesticide or herbicide residue. A. Condition Precedent B. Condition Subsequent C. Concurrent Condition
A. Condition Precedent
Effects of a Minor Breach
A. Continue performance, and ask breaching party for monetary damages B. Suspend performance while party in breach cures the breach (may also ask for monetary damages), and continue performance after breach is cured
Effects of a Material's Breach
A. Continue performance, and ask breaching party for monetary damages B. Suspend performance while party in breach cures the breach (may also ask for monetary damages), and continue performance after breach is cured C. Treat breach as a total breach
Types of Discharge by Agreement
A. Discharge by Mutual Rescission B. Discharge by Novation C. Discharge by Accord and Satisfaction
Breach can be:
A. Material (major breach) or B. Minor
In 2013 Val's Foods signed a five year contract to buy 1500 pounds of basil per year from Sun Farms, a small organic herb grower. In 2014 Sun Farms agreed to sell its operations to Happy Valley Farms. As part of the sale, Sun Farms, Happy Valley Farms, and Val's Foods agreed that Happy Valley Farms would provide the basil as stated in the original Val's Foods/Sun Farms contract. What is this type of agreement called? A. Novation B. Accord and Satisfaction C. Substitution D. Nomination
A. Novation
IF contract requires that work personally satisfy another contract party or a third party ("X"), standard for determining discharge depends on the subject matter of the contract:
A. Personal subject matter B. Non-Personal subject matter
A party can discharge his/her contractual obligations through
A. Tender of performance B. Performance
Bobby agrees to rebuild an air conditioning unit in Cassie's office building, and Cassie agrees to pay for the rebuild "if the work is done to Cassie's satisfaction." An independent inspector concluded that Bobby did an excellent job, but Cassie is super picky and not satisfied. If Cassie fails to pay for the work and Bobby sues Cassie, which of the following statements would be the outcome in the MAJORITY of jurisdictions? A. The court will apply a reasonable person standard and likely conclude that Bobby discharged his contractual duties—Cassie must pay; B. The court will apply a subjective standard and conclude that Cassie's personal dissatisfaction means that Bobby did not discharge his duties under the contract—Cassie does not have to pay Bobby.
A. The court will apply a reasonable person standard and likely conclude that Bobby discharged his contractual duties—Cassie must pay;
Tim promises to fully restore Jane's antique car. The car includes a flat spare tire. In exchange, Jane agrees to pay $12,000. Tim restores and delivers the antique car, but fails to fix the spare tire. The cost of repair to the spare tire is $25. If Jane sues Tim for breach of contract, is it likely that a court will determine that Tim substantially performed his duties under the contract? A. Yes, the breach was likely not material, and Tim substantially performed his obligations imposed by the contract; B. No, the breach was likely material, and substantial performance cannot be invoked in the event of a material breach.
A. Yes, the breach was likely not material, and Tim substantially performed his obligations imposed by the contract;
Anticipatory Repudiation Definition
An assertion or action by a party indicating that he or she will not perform a contractual obligation
Tender
An unconditional OFFER to perform by a person who is ready, willing, and able to perform.
Val's Foods signs a contract to buy 1500 pounds of basil from Sun Farms, a small organic herb grower. (Sun Farms entire crop was estimated at 1500 pounds.) The contract did not specify where the basil must be cultivated. The day before Sun Farms was to begin the harvest, a giant hailstorm destroyed half the Sun Farms' crop. Sun Farms attempted to purchase additional basil from other farms, but this late in the season the cost was 4 times the normal market price. If Val's Foods sues Sun Farms in court for full performance of the contract, which of the following arguments might Sun Farms assert to claim its duties have been discharged by operation of law? A. Novation B. Commercial Impracticability C. Impossibility of Performance
B. Commercial Impracticability
Dana has a homeowner's insurance policy with Geico. The policy states that the homeowner has 12 months from the date of any loss to make a claim against Geico. Dana's house is destroyed by fire. 13 months later, Dana makes a claim against the Geico. Which of the following correctly characterizes the type of condition that appears in this contract? A. Condition Precedent B. Condition Subsequent C. Concurrent Condition
B. Condition Subsequent
Shasta Corp. manufactures computers. Shasta enters into a contract with New Age retailers to manufacture and sell 100,000 computers to New Age. Delivery is to occur in two months. One month passes, and several of Shasta's part suppliers have dramatically raised prices. Shasta knows it will lose $500,000 on the contract with New Age, so Shasta writes to New Age and states that is cannot deliver the computers at the current contract price. Which of the following is correct A. If New Age want to sue Shasta, New Age must wait until the original delivery date passes to give Shasta time to cure the breach B. New Age may immediately sue Shasta
B. New Age may immediately sue Shasta
Andy agrees to paint a portrait of Brooke for $1500. The terms of the agreement state that Brooke is only obligated to pay if she is entirely satisfied with the portrait. Andy paints a portrait that is highly acclaimed as a masterpiece by art critics, but Brooke does not like the painting. Must Brooke accept and pay for the painting? A. Yes, Brooke must accept and pay for the painting because the approval of art critics means that the painting satisfies the objective "reasonable person" standard and Andy's duties have been discharged. B. No, Brooke is not required to accept and pay for the painting because the subject matter of the contract is personal and under the terms of the contract Brooke may reject the painting if she is subjectively not satisfied.
B. No, Brooke is not required to accept and pay for the painting because the subject matter of the contract is personal and under the terms of the contract Brooke may reject the painting if she is subjectively not satisfied.
Tim promises to fully restore Jane's antique car. The car includes a flat spare tire. In exchange, Jane agrees to pay $12,000. Tim restores and delivers the antique car, but fails to fix the spare tire. The cost of repair to the spare tire is $25. If Jane sues Tim for breach of contract and the court determines Tim substantially performed his obligations under the contract, what damages is Jane likely to be awarded? A. None. Tim substantially performed, so Jane is not entitled to damages; B. The cost of fixing the spare tire; C. $12,000;
B. The cost of fixing the spare tire.
Breach Of Contract
Breach = Non Performance
Peter agrees to sell his textbook to Eve for $20. Eve agrees to buy the book for $20 on Friday when Peter delivers the book. Which of the following options correctly characterizes the type of condition that appears in this contract? A. Condition Precedent B. Condition Subsequent C. Concurrent Condition
C. Concurrent Condition
Val's Foods signs a contract to buy 1500 pounds of basil from Sun Farms, a small organic herb grower. (Sun Farms entire crop was estimated at 1500 pounds.) The contract specified that the basil crop must have been grown on Sun Farms' land. The day before Sun Farms was to begin the harvest, a giant hailstorm destroyed half the crop. If Val's Foods sues Sun Farms in court for full performance of the contract, which of the following arguments might Sun Farms assert to claim its duties have been discharged by operation of law? A. Novation B. Commercial Impracticability C. Impossibility of Performance
C. Impossibility of Performance
Conditions Subsequent
Conditions that occurs AFTER absolute duty of performance arises - terminate's a party's absolute promise EX: Lawyer's contract with law firm states that firm's obligation to continue employing lawyer is discharged if lawyer fails to maintains a law license to practice
Concurrent Conditions
Conditions that occurs AT SAME TIME AS absolute duty of performance arises - neither can sue Ex: Contracts for the sale of goods where the buyer promises to pay for goods when seller delivers the foods
Conditions Precent
Conditions that occurs BEFORE a contract becomes binding - duties of both parties are discharged Ex: Alice will buy Ernie;s racehorse for $200,000 IF the horse passes a physical exam
Complete Performance
Strict Performance - once a party performs EXACTLY as agreed, his obligations have been discharged
Discharge by Novation
Substitution of a "new" party all parties must - agree to substitution - form a new, valid contract
Statutes of Limitations
Time
Substantial Performance
a doctrine the court can invoke to determine a party's obligations are discharged when a party substantially performs all terms of the contract - used when contract does NOT expressly/explicitly state x performance as a formal condition that must be met.
Duty to Perform may be either
a. Absolute b. Conditioned (qualified)
Damages are:
available for ANY breach
Frustration of Purpose
Doctrine that excuse performance in the event of - supervening forces makes it impossible - supervening forces have been unknown/unforeseeable
Commercial Impracticability
Doctrine that excuses performance in the event of 1. extreme difficulty or costliness 2. problem that arose was unforeseeable
Material Alteration
If a party alters a material term in a written contract without the knowledge or consent of the innocent party, the innocent party may treat the contract as terminated or discharged.
Doctrine of Substantial Performance will ONLY be invoked when the breach is
Not Material
Impossibility of Performance
Occurs if performance becomes objectively impossible OR totally impractical - only if could not have 'reasonably foreseen' the events that made performance impossible Ex: death occurred - destruction of subject matter - change in law
Discharge by Accord and Satisfaction
Parties agree to accept performance that is different from performance promised in original contract
Discharge by Mutual Rescission
Parties must enter into a contract to RESCIND the original contract
