Bus Law Ch 16- Contracts: Performance and Discharge

consideration, restitution

if one party has fully performed original contract, agreement to rescind is usually not enforceable unless additional _____________ or ______________ is made

absolute

if one party's performance is substantial, the other party's duty to perform (i.e. make payment) is _______________. in other words, parties must continue performing under the ocntract

reasonable person

most performances to satisfaction need to be performed only to satisfaction of __________ unless they expressly state otherwise.

cost to bring object of the contract in compliance with terms

measure of damages that other party is entitled to when substantial performance is made to compensate for failure to comply with the contract

material breach

only breach that discharges nonbreaching party from the contract

anticipatory repudiation

treated as a breach b/c: 1. nonbreaching party should not be required to remain ready and wiling to perform when other prty has already repudiated the contract 2. nonbreaching party should have the opportunity to seek a similar contract elsewhere

sue for breach of contract

action a party can take when party has made tender and had done everything possible to carry out the terms of the contract and then the other party refuses to perform which indicates to party making tender that the duty is discharged

any

what breach entitles nonbreaching party to sue for damages

material breach, anticipatory repudiations

2 types of breach that warrant discharge of contract

complete, substantial

2 types of performances that warrant discharge of contract

1. party whose personal performance is essential to completion of contract dies or becomes incapacitated prior to performance 2. specific subject matter of the contract is destroyed 3. charge in the law renders performance illegal

3 basic types of situations that may qualify as grounds for the discharge of contractual obligations based on impossibility of performance

mutual rescission, novation, accord and satisfaction

3 types of agreement that warrant discharge of contract

conditions precedent, conditions subsequent, concurrent conditions

3 types of possible conditions within contracts

1. party must have performed in good faith. intentional failure to comply with the contract terms is a breach of the contract 2. performance must not vary greatly from the performance promised in the contract. deviation considered minor if it can easily be remedied by compensation 3. performance must create substantially the same benefits as those promised in the contract

3. basic requirements for performance to be qualified as substantial performance

1. previous valid obligation 2. agreement by all of the parties to a new contract 3. extinguishing the old obligation (discharge of the prior party) 4. new, valid contract

4 requirements of a novation

material alteration, statutes of limitations, bankruptcy, impossibility of performance, commercial impracticability, frustration of purpose

5 types of operations of law that warrant discharge of contract

by performance, by breach, by operation of law, by failure of a condition, by agreement

5 ways contracts can be discharged

commercial impracticability, frustration of purpose

_____________ usually involves an event that increases the cost or difficulty of performance. while ________________ typically involves an event that decreases the value of what a party receives under that contract.

condition precedent

a condition in a contract that must be met before a party's promises warrants and absolute duty to perform. EX: life insurance contract will only cover you until you get a physical exam.

commercial impracticability

a doctrine that may excuse the duty to perform a contract when performance becomes much more difficult or costly due to forces that neither party could control or foresee at the time the contract was formed (EX: party would have to pay ten times more than original estimate to excavate a certain amount of gravel)

impossibility of performance

a doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible or impracticable. can be caused by supervening events, applied only when parties could not have reasonably foreseen events that rendered performance impossible at time contract was formed

condition

a qualification in a contractual agreement, the occurrence or nonoccurrence of which creates, suspends, or terminates the obligations of the parties. can trigger or terminate the performance of an existing legal obligation under a contract

anticipatory repudiation

an assertion or action by a party indicating that he/she will not perform a contractual obligation. when one of the parties refuses to perform her or his contractual obligation before either party to a contract has a duty to perform

satisfy

contracts often state that completed work must personally ___________________ one of the parties or a third person

tender

an unconditional offer to perform an obligation by a person who is ready, willing, and able to do so. can accomplish duty of performance.

agreement

any contract can be discharged by the ___________ of the parties. can be contained in the original contract, or the parties can form a new contract for the express purpose of discharging the original

retract

breaching party can do this by proper notice and restore the parties to their original obligation before the nonbreaching party treats the anticipatory repudiation as a breach

materail

classification of a breach when performance is not at least substantial. allows non-breaching party to be excused form the performance of contractual duties and can sue for damages caused by the breach

condition subsequent

condition in a contract that, if it occurs, operates to terminate a party's absolute promise to perform. condition follows the absolute duty to perform and if it occurs, party need not perform any further. EX: law firm hires employee. and employment contract provides that firm's obligation to continue employing employee is discharged if they fail to pass their bar exam by their second attempt

concurrent conditions

condition when each party's absolute duty to perform is conditioned on the other party's absolute duty to perform. conditions that must occur or be performed at the same time- mutually dependent. no obligations arise until the conditions are simultaneously performed

accord

contract to perform some act to satisfy an existing contractual duty that has not yet been discharge. once made the original obligation is suspended until after the new agreement is fully performed. if not performed, party to whom the performance is owed can bring an action on the original obligation or for breach of the accord

frustration of purpose

court-created doctrine under which a party to a contract will be relieved of her or his duty to perform if supervening circumstanaces make it impossible to attain the purpose both parties had in mind when making the contract (supervening circumstance must not have been forseeable at time contract was created)

substantial performance

doctrine that allows party who in good faith performs substantially all the terms of a contract to enforce the contract against the other party. must be substantially performed in good faith and cannot intentionally fail to comply

objectively

impossibility must constitute as this for doctrine of impossibility of performance to discharge contract. must be impossible for anyone to perform, not impossible for individual party to perform

lapse of time/change in circumstances

in case of temporary impossibility, if these occurrences cause substantial burden for parties to perform the contracts can be discharged instead of needing to be performed at later time. EX: person is in contract with movie company and is drafted to army and contract is suspended until his return, but at his return purchasing power of dollar had declined so much that performing contract would have been substantially burdensome

statutes of limitations

limit the period during which a party can sue on a particular cause of action after period has passed, suit can no longer be brought. period for bringing suit for breach of oral contracts usually 2-3 years and 4-5 for written. when for sale of goods must be within 4 years. applies unless parties agree to reduce period in original contract (cannot extend)

difference in value between performance rendered and performance that would have been rendered if contract performed completely

measure of damages in substantial performance when the cost to bring object of the contract in compliance with the contract's terms is unreasonable

temporary impossibility

occurrence or event that makes performance impossible at a time operates to suspend performance until the impossibility ceases. once event ends, parties ordinarily must perform the contract as originally planned (EX: house is under contract for sale, before closing natural disaster hits and invokes repair damages, seller cannot claim impossibility of performance as discharging contractual duties, natural disaster would only have caused temporary impossibility and seller would have to pay for repairs and sell house as originally agreed to fulfill contract.

anticipatory repudiation

occurs often when market prices fluctuate and performance of the contract would be extremely unfavorable to one of the parties b/c of the sharp fluctuation in prices

complete performance

occurs when a party performs exactly as agreed and there is no question as to whether the contract has been performed. when a party's performance is perfect conditions expressly stated in contract must fully occur in all aspects any deviation breaches contract and discharges other party's duties to perform. if specifications made in contract are conditions, complete performance is required and other party has duty to fulfill their obligation upon performance. if parties to contract did not expressly make the specifications a condition and party fails to meet specifications, performance not complete.

mutual recession

occurs when parties cancel the contract and are returned to the positions they occupied prior to contract's formation. requires parties to make another agreement that satisfies the legal requirements for a contract: 1. offer, 2. acceptance, 3. consideration if parties agree to rescind, promise to not perform the acts in original contract serves as legal consideration for second contract

accord and satisfaction

parties agree to accept performance different from the performance originally promised. both components must be present to discharge original contract

satisfaction

performance of the accord agreement

bankruptcy

proceeding in this attempt to allocate the debtor's assets to the creditor's in a fair and equitable fashion. once assets have been allocated, debtor receives a discharge. ordinarily this prevents the creditors from enforcing most of the debtor's contracts. partial payment after discharge will not revive the debt

novation

process that substitutes a third party for one of the original parties. the substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated

condition precedent, personal, reasonable person

question on satisfaction is whether it becomes a ______________ _____________, requiring actual _________ satisfaction, or whether the test of satisfaction is performance that would satisfy a ________________

material alteration

the allows an innocent party to be discharged from a contract that has gone through this. if one party engages in this without the knowledge or consent of the other party, party who was unaware can treat contract as discharged or terminated

breach of contract

the failure, without legal excuse, of a promisor to perform the obligations of a contract. nonperformance of a contractual duty

performance

the fulfillment of one's duties under a contract. the normal way of discharging one's contractual obligations. promises to do this are usually not expressly conditioned are qualified, are absolute instead

performance

the most common way to discharge/terminate one's contractual duties

discharge

the termination of a contractual obligation

material breach

type of breach that repudiation is considered to be. nonbreaching party is permitted to bring an action for damages immediately even though scheduled time for performance under the contract may still be in the future

failure of a condition

type of contract discharged that encompasses idea that if performance is conditional, duty to perform does not become absolute until that condition occurs

writing/electronic record

type of contract required to rescind a contract of the sale of goods and transfer of realty

oral

types of contracts that rescind most executory contracts (neither party has performed) even if original contract was in writing

expressly

way that parties involved can state the revocation and discharge of prior contract. if this is not done contract will be __________ discharged if the new contract's terms are inconsistent with the old contract's terms

minor

when this breach occurs the nonbreaching party's duty to perform may sometimes be suspended until the breach is remedied, but the duty is not entirely excused. once breach is cured (corrected) the nonbreaching party must resume performance of the contractual obligation

discharged

what happens to obligation of parties when condition in contract is not satisfied

material breach

what occurs if performance is not substantial and nonbreaching party is excused from further performance

third person

when contracts are required to be performed to satisfaction of this party, then courts are divided. majority will require work to be satisfactory to a reasonable person, some require personal satisfaction of the party

personal

when subject matter of the contract is _________, a contract to be performed to the satisfaction of one of the parties is conditioned and performance must actually satisfy that party (EX: contracts for portraits or works of art). applies only if the court finds the party is not expressing dissatisfaction to avoid payment or not acting in good faith