Chapter 17

Requirements of a novation are:

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

Substantial performance

A party who in good faith performs substantially all of the terms of the contract. Good faith is required.

________ occur only when the contract calls for the parties to perform their respective duties simultaneously.

Concurrent conditions

Contract discharge by failure of a condition:

If performance is conditional, duty to perform does not become absolute until that condition occurs.

What effect does a failure to comply with specifications have on the other party's obligation to pay?

The answer is party of the doctrine of substantial performance.

If the condition is not satisfied, ____.

The obligations of the parties are charged.

Contract discharge by operation of law:

- material alteration -statutes of limitations - bankruptcy - impossibility or impracticability of performance

Contract discharge by agreement:

- mutual recission - novation - settlment agreement - accord & satisfaction

Three types of conditions can be present in contracts:

1. precedent 2. subsequent 3. concurrent

Complete performance

When a party performs exactly as agreed, and the performance is perfect. Conditions expressly stated in the contract are fully satisfied.

Carol agrees to buy a particular photograph from Fernando when he delivers the picture to her office. This is known as: a. a condition concurrent. b. a condition subsequent. c. a condition precedent. d. a condition terminate.

a

Coker International contracted with Burlington Industries to purchase 221 used textile looms from Burlington for $1,021,000. Under the contract, Coker was required to make a 10% down payment, which it did, with the balance to be paid prior to the removal of the looms from Burlington's premises. Coker planned to resell the looms to a customer in Peru, but the contract was not conditioned on this resale. Because of actions of the Peruvian government, Coker's plan to resell the equipment to the Peruvian buyer fell through. Coker sought to rescind the contract, asserting that it should be excused from performance under the frustration of purpose doctrine. The court probably: a. did not allow Coker to rescind, because the purpose of the contract was not frustrated. b. did not allow Coker to rescind, because it had been partially performed. c. allowed Coker to rescind, because it was implicitly conditioned on Coker's ability to resell the looms. d. allowed Coker to rescind, because the Peruvian government made it impossible to perform.

a

Fernando owns an Ansel Adams photograph that Karol is interested in buying. Karol knows that Fernando is not quite ready to part with the print, and she is willing to wait until he commits to the sale. She tells him that when he delivers the print to her office, she will pay him for it. Their agreement contains: a. concurrent conditions. b. a condition subsequent. c. a condition precedent. d. a condition terminatus.

a

In the case of a material breach of contract: a. the nonbreaching party has the right to sue for damages resulting from the breach. b. the breaching party has a cause of action to sue for damages resulting from the breach. c. a court must rewrite the terms of the contract to better reflect the parties' intent. d. the parties must cancel the contract and create a new one.

a

Janine has never been happy with the shape of her nose. She contracts with Dr. Mark Angelo to change its shape. She is concerned that she might not be pleased with the result, so Dr. Angelo assures her that she will be completely satisfied with her new nose. After the surgery, Janine is not satisfied with the result. In this situation: a. Janine is not obligated to pay Dr. Angelo. b. Janine is obligated to pay Dr. Angelo only one-half the contract price. c. Janine must pay Dr. Angelo the full contract price or be in breach of contract. d. Dr. Angelo's anticipatory repudiation of the contract terminates Janine's duty to perform (pay for the surgery).

a

Jonah agrees to build a house for Beth. He fails to completely perform the contract, and Beth refuses to pay him. Jonah may be able to recover payment from Beth if he: a. acted in good faith and his performance created substantially the same benefits as those promised in the contract. b. intentionally did not comply with the terms of the contract because he believed it to be oppressive. c. completed whatever he could within the time allowed by the contract. d. anticipatorily repudiated the contract.

a

McLanahan's Lamborghini was stolen, and when it was recovered, it had been extensively damaged. The car was insured by Farmers Insurance under a policy providing comprehensive coverage, including coverage for theft. A provision in the policy stated that the coverage for damages due to theft was subject to certain terms, including the condition that claims under the policy must allow Farmers "to inspect and appraise the damaged vehicle before its repair or disposal." McLanahan, without giving Farmers an opportunity to inspect the vehicle, sold it to a wholesale dealer. Farmers then denied coverage, and McLanahan sued Farmers for the damages caused by the theft. The court most likely held that Farmers: a. could avoid the contract, because the condition precedent to coverage was not met. b. could avoid the contract, because a condition subsequent terminated its obligation to perform. c. could not avoid the contract, because McLanahan performed his side of the contract when he paid his premium. d. could not avoid the contract, because McLanahan had already been compensated when he sold the car.

a

Miguel owns property on which a gasoline station once stood. Clayton agrees to buy the land so that he can build an office on it. They include language in the contract making the purchase contingent on a determination that there are no environmental problems with the property. The contingency represents: a. a condition precedent. b. a condition subsequent. c. a concurrent condition. d. an implied condition.

a

A doctrine uner which a seller may be excused from performaing a contract when: - contingency occurs - makes performance impracticable - nonoccurrence of the contingency was a basic assumption on which the contract was made

commercial impracticability

Conditions precedent are _____, conditions of subsequent are ____.

common rare

There are two basic types of performance ___ and ___ performance.

complete and substantial

When each party's performance is conditioned on the other party's performance or tender of performance (offer to perform), there are ________ conditions.

concurrent

A condition that must be fulfilled before a party's performance can be required is called a ______.

condition

________ is a possible future event, the occurence or nonoccurrence of wich will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

condition

When a condition operates to terminate a party's absolute promise to perform, it is called a _________.

condition subsequent

The Restatement (Second) of Contracts does not use the terms condition ____ and condition ____ but refers to both simply as conditions.

condition subsequent condition precedent

Case 17.3, Merry Homes, Inc. v. Chi Hung Luu, concerned the issue of: a. the reasonableness of the time for performance. b. the permissibility of a work stoppage. c. whether the contract was discharged by bankruptcy. d. whether the contract was void.

d

Cole and Lindsay agree that Cole will paint the exterior of Lindsay's house. Neither of them ever mentions when Cole is to do the work. Cole now: a. has no obligation to paint the house, because without a time set for performance Cole and Lindsay do not have a valid contract. b. must complete the painting within thirty days. c. must begin the work immediately. d. must perform under the contract within a reasonable time.

d

Grane, a homeowner, contracted with Butkovich & Sons to enlarge Grane's basement and build a new room there. Butkovich was also to lay a new garage floor and construct a patio. The parties agreed to a price of $19,290. Grane made partial payments throughout the construction. When the construction was complete, Grane refused to pay the $9,290 balance, claiming Butkovich failed to install water stops and reinforcing wire in one concrete floor, although Grane's specifications had included these features. Grane also contended that the main floor was nearly nine inches lower than the height the plans had specified. Butkovich sued to recover the $9,290, claiming that he had substantially performed the contract. Grane claimed he did not have to pay Butkovich the remaining amounts, because performance was of poor quality and Butkovich's failure to follow the contract specifications constituted a material breach. The court most likely found that Butkovich had: a. substantially performed the contract, because the work was nearly what had been promised in the contract and was worth more than the money Grane was refusing to pay. b. substantially performed the contract, because the contract did not state that Grane had to be satisfied with the performance. c. not substantially performed the contract, because he had not performed the work within a reasonable time. d. not substantially performed the contract, because the work was of poor quality and contained too many omissions to be considered substantial performance.

d

Refer to the hypothetical scenario Reviewing--Performance and Discharge. Then answer the following question. Suppose that Sun Farms sells its operations to Happy Valley Farms. As part of the sale, all three parties agree that Happy Valley will provide the basil as stated under the original contract. What is this type of agreement called? a. Contract alteration b. Discharge by rescission c. Anticipatory repudiation d. Discharge by novation

d

Review Extended Case 17.1 Jacob & Youngs v. Kent, and then answer the following question. Which of the following statements best describes the court's conclusion in this case? a. The court concluded that the owner's failure to comply with the contract's payment provisions was a material breach of contract and could justify the contractor's suspension of performance. b. The court concluded that the contractor's failure to use the right pipe was a material breach of contract and could excuse the owner's further payment. c. The court concluded that the contractor's failure to fulfill an unexpected, unreasonably expensive condition was not a material breach of contract and could not justify the contract's rescission. d. The court, finding the difference in pipe was trivial, held the contractor had substantially performed and was therefore entitled to compensation.

d

The duty to perform under a contract: a. may be conditioned only. b. may only be absolute. c. may be absolute but only if the subject matter is constitutional. d. may be either conditioned or absolute.

d

The two basic types of performance are: a. remote and local. b. future and past. c. established and disestablished. d. complete and substantial.

d

What are the two basic types of performance? a. Remote and local performance b. Future and past performance c. Established and disestablished performance d. Complete and substantial performance

d

William and Laverne enter into a contract for William to paint Laverne's house. William and Laverne fail to specify a time for performance. After two weeks, William and Laverne both decide that their contract does not meet their needs. They decide to cancel the agreement. This is known as: a. performance. b. novation. c. restitution. d. rescission.

d

The breach is material when performance is ______.

not at least substantial

The ________ does not use the terms condition subsequent and condition precedent but refers to both simply as conditions.

Restatement (Second) of Contracts

Radhika agrees to paint Aaron's warehouse for $5,000. The work is to be completed within 30 days after they sign the contract. The day before the painting is to begin, the warehouse burns to the ground. The contract is discharged by: a. operation of law. b. bankruptcy. c. performance. d. alteration of the contract.

a

Review Extended Case 17.1 Jacob & Youngs v. Kent, and then answer the following question. The main issue in this case was whether: a. a contractor substantially performed a contract despite installing a brand of pipe different from what was specified. b. a contractor materially breached a contract by failing to comply with its time requirements. c. a seller could rescind a contract when compliance with a condition for its completion proved to be unexpectedly and unreasonably costly. d. a subcontractor was justified in suspending performance when a contractor failed to make payments as the work progressed.

a

The duty to perform under a contract: a. may be conditional. b. can never be conditional. c. must always be absolute. d. can never be absolute.

a

When a breach of contract is material, this means that: a. the non-breaching party has a cause of action to sue for damages caused by the breach. b. the breaching party has a cause of action to sue for damages caused by the breach. c. the court must rewrite the terms of the contract to better reflect the parties' intent. d. the non-breaching party must perform his or her contractual duties in order to have a cause of action to sue for damages.

a

eview Extended Case 17.1 Jacob & Youngs v. Kent, and then answer the following question. How did the court apply the rule of law to the facts of this case? a. The court balanced the "trivial" difference between a promise in the contract and the work as performed. b. The court compared the "reasonableness" of the contracting parties' expectations with respect to the timing of payment. c. The court considered the "impracticable" cost of a contract's performance to the contracting parties and to the public. d. The court weighed the "materiality" of the difference between the contracting parties' expectations and exchange of performance.

a

Before either party to a contract has a duty to perform, one of the parties may refuse to carry out his or her contractual obligations,. this is called ____-_.

anticipatory repudiation

Aidan and Oscar form a contract under which Oscar is to perform gardening services for Aidan for one year. For six months, Oscar performs the services, and Aidan pays him. Aidan's mother, Mary, becomes ill and is unable to care for her garden. The three agree that Oscar will no longer care for Aidan's garden but instead will care for Mary's garden for the remainder of the year. The new contract: a. has been substantially performed. b. is a novation. c. is a reformation. d. is not valid.

b

Assume that three weeks before you and Lester are supposed to close your deal for the sale a twenty-acre tract of land, Lester calls you and says, "The deal is off!" In this situation, Lester's actions constitute: a. substantial performance of the contract. b. an anticipatory repudiation of the contract. c. a reformation of the contract. d. a discharge of the contract by novation.

b

David hires Lena to work with him as a pediatrician, on the condition that she passes the medical board exams within three months after she begins work. Their contract contains a: a. concurrent condition. b. condition subsequent. c. condition precedent. d. condition terminatus.

b

If a person who has signed a contract to provide a service dies before the service can be performed, the: a. buyer can sue the estate of the deceased to recover the cost of obtaining a replacement or for other particular costs incurred. b. buyer is out of luck, because the contract is discharged by objective impossibility. c. estate (or successor) of the service provider must make a good faith effort to provide a timely replacement. d. estate (or successor) of the service provider may sue for the profits that would have been earned had the contract been fulfilled.

b

John Agosta and his brother Sal formed a corporation, but disagreements caused them to dissolve the firm. According to the initial agreement, the assets of the corporation, which included a warehouse and inventory, would be split between the brothers. John then agreed to buy Sal's half share of the company for $500,000. The contract was approved by the court, but before John was to make the payment, a fire destroyed the warehouse and inventory. John refused to pay Sal the $500,000, claiming that the company no longer had any assets. Sal sued John to compel performance of the contract. The court most likely found that John: a. could avoid the contract, because a condition precedent had not occurred. b. could avoid the contract, because it was discharged by operation of law. c. could not avoid the contract, because he had agreed to buy Sal's shares in the company. d. could not avoid the contract, because Sal had rescinded it.

b

Lester agrees to buy 20 acres of land from Tina. Three weeks before the deal is to close, Lester calls Tina and says, "The deal is off!" In this situation, Lester's actions constitute: a. substantial performance of the contract. b. anticipatory repudiation of the contract. c. a reformation of the contract. d. a discharge of the contract by novation.

b

Refer to the hypothetical scenario Reviewing--Performance and Discharge. Then answer the following question. Suppose that the basil does not pass the chemical-residue inspection. Which concept discussed in the chapter might allow Val's to refuse to perform the contract in this situation? a. Conditions subsequent b. Conditions precedent c. Substantial performance d. Discharge by novation

b

Stacy owned a farm in Arkansas. The Olsen family agreed to buy the farm for $882,000. The parties used a preprinted contract form on which Stacy's real estate agent typed, "Buyers to pledge approximately 900 acres of land in Tallahatchie County in Mississippi together with lands herein described for loan to pay purchase price." The Olsen family then tried to get loans against the properties listed on the contract. They were unable to do so, because the Tallahatchie property was subject to a long-term lease and the lands were worth less than they had previously believed. The Olsens notified the real estate agent and Stacy of this and asked to rescind the contract. Several months later, Stacy sold the farm to another party for $630,000. He sued the Olsens for breach of contract, seeking $252,000, the difference between the $882,000 offered and the amount paid by the buyer. The Olsens argued that their ability to obtain financing was a condition precedent to their obligation to perform the contract. The court most likely held that the Olsens' ability to obtain a loan: a. was a condition precedent that had been partially performed. b. was a condition precedent, because it could be inferred from the phrase added to the contract that the Olsens had to borrow to complete the deal. c. was a condition subsequent, because it arose after the contract was originally signed. d. was not a condition precedent, because the contract did not expressly say that it was.

b

Suppose that Jon agrees to build a house for Beth. John substantially performs the contract in good faith. If Beth refuses to pay him, Jon may be able to recover payment from Beth if: a. his failure to completely perform the contract was willful. b. his failure to completely perform the contract was not willful. c. his failure to completely perform the contract was a condition precedent. d. his failure to completely perform the contract was done out of malice.

b

The contract comes to an end when:

both parties fulfill their respective duties by performing the acts they have promised.

______ is the nonperformance of a contractual duty.

breach of contract

Intentional failure to comply with the terms of a contract under the doctrine of substantial performance is a ___________.

breach of the contract.

Anticipatory repudiation can occur when: a. one party to the contract dies. b. one party experiences a sudden increase in business that makes it worthwhile to drop an existing, valid contract. c. sharp fluctuations in market prices make it extremely difficult to perform as promised. d. a discharge by agreement is fully accepted.

c

Case 17.2, Wisconsin Electric Power Co. v. Union Pacific Railroad Co., involved contract with a duty of good faith. The main issue before the court was whether there had been: a. a mutual rescission of the contract. b. a discharge of the contract by impossibility of performance. c. a substantial performance contract by Union Pacific. d. an anticipatory repudiation of the contract by Wisconsin Power.

c

In contract law, tender is defined as: a. having kind feelings for others in a contractual relationship. b. the revision of a contract by the substitution of one contract party for another. c. an unconditional offer to perform by one who is ready, willing, and able to do so. d. a contract condition.

c

Refer to the hypothetical scenario Reviewing--Performance and Discharge. Then answer the following question. Suppose that Sun Farms contracts with every basil grower in the country and buys the last remaining chemical-free basil anywhere. Nevertheless, Sun Farms is able to ship only 1,475 pounds to Val's. Would this fulfill Sun Farms' obligation to Val's? a. No, because Sun Farms did not perform the terms of the contract completely. b. Yes, because it was objectively impossible for Sun Farms to ship more basil. c. Yes, because Sun Farms performed the terms of the contract substantially. d. No, because Sun Farms' performance was not to the satisfaction of Val's.

c

Refer to the hypothetical scenario Reviewing--Performance and Discharge. Then answer the following question. Under which legal theory or theories might Sun Farms claim that its obligation under the contract has been discharged by operation of law? a. Objective impossibility b. Discharge by rescission c. Commercial impracticability d. Assignments

c

Review Extended Case 17.1 Jacob & Youngs v. Kent, and then answer the following question. Which of the following statements best describes the rule of law that the court applied in this case? a. If a party can complete a contract only at excessive, unbargained-for expense, the contract can be rescinded. b. If a party fails to make "progress" payments under a contract, the other party may be justified in suspending performance. c. If a party fulfills a contract with performance that does not vary greatly from the terms, the other party is obligated to perform. d. If a party materially breaches a contract, the other party is excused from further performance.

c

Suppose that Lou agrees to build a shopping center on a certain parcel of land contingent on a determination that there are no environmental problems, such as contaminated soil, with the property. In this case, the contingency represents: a. a vested interest. b. a condition subsequent. c. a condition precedent. d. a full and complete discharge.

c

The most common way to discharge, or terminate, contractual duties is by: a. rescission. b. novation. c. performance. d. breaching the contract.

c

Zoe agrees to purchase Antonia's land so that she can build a golf course. They write a contract, and Zoe transfers the deed to Antonia. Antonia pays Zoe the entire purchase price. Zoe and Antonia have discharged their contract by: a. breach. b. lapse of time. c. performance. d. concurrence.

c

William and Laverne enter into a contract for William to paint Laverne's house. William and Laverne fail to specify a time for performance. In this case: a. performance must take place within fourteen days. b. performance must take place within seven days. c. performance must take place immediately. d. performance must take place within a reasonable time.

d

With respect to a contract, a condition is: a. the legal language in which the contract is written. b. the discharge of a nonbreaching party from performance of the original contract. c. the substitution of a third party for one of the original contract parties. d. a possible future event that triggers or ends a contractual obligation.

d

If the cost is unreasonable, the measure of damages is the ________.

difference in value between the performance that was rendered and the performance that would have been rendered if the contract had been performed conpletely.

The release of a debtor from all debts that are provable, except those specifiecally excepted from discharge by statute.

discharge in bankruptcy

In the condition subsequent, if the condition occurs, the party's duty to perform is ____.

discharged.

Although no particular words are necessary, _______ are normally prefaced by the words if, provided, after, or when.

expressed conditions

_____ are provided for by the parties' agreement.

expressed conditions

Conditions are also classified as ____ or ________.

expressed or implied

A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond the party's control).

frustration of purpose

When can a party making a tender sue for breach of contract?

if the other party refuses to perform

Conditions are often ______ when they are necessarily inherent in the actual performance of the contract.

implied

______ are understood to be part of the agreement, but they are not found in the expressed language of the agreement.

implied conditions

A doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party). Also known as Implied contract

impossibility of performance

If there is a _______ breach, then the nonbreaching party is excused from the performance of contractual duties and can sue for damages resulting form the breach.

material

When an anticipatory repudiation occurs, it is trated as a ______ breach of contract.

material

_____ discharges the non-breaching party from the contract.

material breach

If the breach is _____, the non-breaching party's duty to perform can sometimes be suspended until the breach has been remedied, but the duty to perform is not entirely excused.

minor

An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occcupied had no contract ever been formed.

mutual rescission

The substitution, by agreement, of a new contract for an old one, with the rights under the onld one being terminated. Typically there is a substitution of a new person who is responsible for the contract and the removal of an original party's rights and duties untder the contract.

novation

When must the non-breaching party resume performance of the contractual obligations following a breach?

once the minor breach has been cured

When the 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 perty.

personal

The condition _______, precedes the absolute duty to perform.

precedent

The process by which a contract is cancelled or terminated and the parties are returned to the positions they occupied prior to forming it.

recission

The condition ______ follows the time that the absolute duty to perform arose.

subsequent

Performance can also be accomplished by ____.

tender

_____ is an unconditional offer to perform by a person who is ready, willing, and able to do so.

tender

A seller who places goods at the disposal of a buyer has _____ and can ____.

tendered payment demand delivery of the goods

When the party has done everything possible to carry out the terms of the contract, the party is considered to have _____.

tendered their performance