Contracts: Conditions

What is the difference between a condition precedent and a condition subsequent? AA condition precedent is one that must occur before the duty of performance will arise; the occurrence of a condition subsequent will cut off an already existing duty of performance. BA condition precedent is one that is explicitly stated in a contract; a condition subsequent is one that is implied by the circumstances surrounding the contract. CA condition precedent is an event that the parties anticipated before entering into a contract; a condition subsequent is a condition that the parties address after entering into the contract.

A A condition precedent is one that must occur before the duty of performance will arise; the occurrence of a condition subsequent will cut off an already existing duty of performance. Both conditions precedent and conditions subsequent are anticipated before entering into a contract since they are often express conditions explicitly stated in a contractual provision. A condition that is implied by the circumstances surrounding the contract is known as a constructive condition

Anticipatory repudiation occurs when: AA party to a contract, prior to the time set for performance, indicates that he will not perform when performance is due BA party to a contract has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due CA party to a contract indicates that she is waiving a condition of the contract and the other party to the contract detrimentally relies on that waver DThe beneficiary of a broken condition of a contract chooses to continue on under the contract despite the broken condition

A Anticipatory repudiation occurs when a party to a contract, prior to the time set for performance, indicates that he will not perform when performance is due. Prospective failure of condition occurs when a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. Prospective inability or unwillingness to perform is not an anticipatory repudiation because such a repudiation must be unequivocal, whereas prospective failure to perform involves conduct or words that merely raise doubts that the party will perform. An estoppel waiver occurs when a party to a contract indicates that she is waiving a condition of the contract and the other party to the contract detrimentally relies on that waiver. An election waiver occurs when the beneficiary of a broken condition chooses to continue on under the contract despite the broken condition A. INTRODUCTIONHaving established that there is a contract and having determined the terms of the contract, the next issue to consider is what performance is due and whether any nonperformance is excused.B. PERFORMANCE AT COMMON LAWA party's basic duty at common law is to substantially perform all that is called for in the contract.C. PERFORMANCE UNDER ARTICLE 2Article 2 generally requires a perfect tender - the delivery and condition of the goods must be exactly as promised in the contract. Note the following: 1. Obligation of Good FaithArticle 2 requires all parties to act in good faith, which is defined as "honesty in fact and the observance of reasonable commercial standards of fair dealing." This obligation cannot be waived by the parties.2. Seller's Obligation of Tender and Delivery a. Noncarrier CasesRecall that a noncarrier case is a sale in which it appears that the parties did not intend that the goods be moved by carrier. (See V.D.2.a., supra.) 1) Tender of DeliveryIn a proper tender of delivery, the seller must put and hold conforming goods at the buyer's disposition for a time sufficient for the buyer to take possession. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods. The tender must be at a reasonable hour.2) Place of DeliveryIn the absence of an agreement otherwise, the place of delivery generally is the seller's place of business, or if he has none, his residence. b. Carrier CasesRecall that a carrier case is a sale in which, due either to the circumstances or to the express terms of the agreement, it appears that the parties intended that a carrier be used to move the goods. (See V.D.2.b., supra.) 1) Shipment Contracts - Where Seller Has Not Agreed to Tender at ParticularDestinationIn the absence of an agreement otherwise, the seller need not see that the goods reach the buyer, but need only: a) Put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer);b) Obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession); andc) Promptly notify the buyer of the shipment. 2) Destination Contracts - Where Seller Has Agreed to Tender at ParticularDestinationIf the contract requires the seller to tender delivery of the goods at a particular destination (e.g., F.O.B. buyer's warehouse), the seller must, at the destination, put and hold conforming goods at the buyer's disposition. 3. Buyer's Obligation to Pay - Right to Inspect a. Delivery and Payment Concurrent ConditionsIn noncarrier cases, unless the contract provides otherwise, a sale is for cash and the price is due concurrently with tender of delivery. However, unless otherwise agreed, when goods are shipped by carrier, the price is due only at the time and place at which the buyer receives the goods. Therefore, in a shipment case the price is due when the goods are put in the hands of the carrier, and in a destination contract the price is due when the goods reach the named destination.b. Payment by CheckTender of payment by check is sufficient unless the seller demands cash and gives the buyer time to get it. If a check is given, the buyer's duty to pay is suspended until the check is either paid or dishonored. If the check is paid, the buyer's duty to pay is discharged. If the check is dishonored, the seller may sue for the price or recover the goods.c. Installment ContractsIn an installment contract (i.e., one that requires or authorizes delivery in separate installments), the seller may demand payment for each installment if the price can be so apportioned, unless a contrary intent appears.d. Buyer's Right of InspectionThe buyer has a right to inspect the goods before she pays unless the contract provides for payment C.O.D. or otherwise indicates that the buyer has promised to pay without inspecting the goods. D. CONDITIONS - HAS THE DUTY TO PERFORM BECOME ABSOLUTE?A contract may provide that a party does not have a duty to perform unless some condition is fulfilled. In that case, the party's failure to perform is justified if the condition was not fulfilled. 1. Distinction Between Promise and ConditionIt is important to understand that there is a difference between whether a party is bound under a contract and whether a party who is bound has come under a duty to perform. A person is bound if there has been an offer, an acceptance, and an exchange of consideration. However, the contract may provide (impliedly or explicitly) that a party who is bound does not come under a duty to perform unless or until some specified condition occurs. In looking at the terms of a contract, a distinction has to be drawn between an absolute promise on the one hand and a condition on the other. a. Definitions 1) PromiseA promise is a commitment to do or refrain from doing something. If a promise is unconditional, the failure to perform according to its terms is a breach of contract.2) Condition"Condition" normally means either: (i) an event or state of the world that must occur or fail to occur before a party has a duty to perform); or (ii) an event or state of the world the occurrence or nonoccurrence of which releases a party from his duty to perform. A condition is a "promise modifier." There can be no breach of promise until the promisor is under an immediate duty to perform. a) Failure of Condition vs. Breach of ContractThe failure of a contractual provision that is only a condition is not a breach of contract, but it discharges the liability of the promisor whose obligations on the conditional promise never mature. EXAM TIPThe distinction between a promise and a condition is important, because the failure of a promise is a breach and gives rise to liability, whereas the failure of a condition relieves a party of the obligation to perform. CHART b. Interpretation of Provision as Promise or ConditionWhat determines whether a contract provision is a promise or a condition is the "intent of the parties." Courts will look at the words and phrases used by the parties, their prior practices, the custom in the business community with respect to the provision, and whether performance is needed from a third party (if performance is to be rendered by a third party, it is more likely to be a condition than an absolute promise). In doubtful situations, most courts will hold that the provision in question is a promise.EXAM TIPWords such as "provided," "if," and "when" usually indicate a condition, whereas "promise" and "agree" usually indicate a promise. "When" can be tricky. If the event following "when" is not within the obligee's control, courts prefer to interpret it as indicating a time for performance, not a condition of performance. In a common situation the contract states that a subcontractor will get paid "when" the general contractor is paid by the landowner. This is not considered a condition, and the general contractor must pay the subcontractor within a reasonable time. 2. Classification of Conditions a. Condition PrecedentA condition precedent is one that must occur before an absolute duty of immediate performance arises in the other party.b. Conditions ConcurrentConditions concurrent are those that are capable of occurring together, and that the parties are bound to perform at the same time (e.g., tender of deed for cash). Thus, in effect, each is a condition "precedent" to the other.c. Condition SubsequentA condition subsequent is one that, when it occurs, cuts off an already existing absolute duty of performance. CHART 3. Express Conditions"Express condition" normally refers to an explicit contractual provision. It is an express statement in the contract providing that either (i) a party does not have a duty to perform unless some event occurs or fails to occur); or (ii) if some event occurs or fails to occur, the obligation of a party to perform one or more of his duties under the contract is suspended or terminated. Conditions of satisfaction are common express conditions. a. Promisor's Satisfaction as Condition PrecedentMany contracts include an express condition that a party will pay only if "satisfied" with the other party's performance. Because it is a condition, the promisor is under no duty to pay unless she is satisfied. 1) Mechanical Fitness, Utility, or MarketabilityIn contracts involving mechanical fitness, utility, or marketability (e.g., construction or manufacturing contracts), a condition of satisfaction is fulfilled by a performance that would satisfy a reasonable person. It is therefore immaterial that the promisor was not personally satisfied if a reasonable person would have accepted and approved the performance tendered.2) Personal Taste or JudgmentIf the contract involves personal taste or personal judgment (e.g., portraits, dental work), a condition of satisfaction is fulfilled only if the promisor is personally satisfied. But note: Even if a condition requires personal satisfaction, a promisor's lack of satisfaction must be honest and in good faith. Thus, if the promisor refuses to examine the promisee's performance, or otherwise rejects the performance in bad faith, the condition of satisfaction will be excused. b. Satisfaction of Third Person as ConditionConstruction contracts often include a condition requiring the satisfaction of the owner's architect or engineer. When the satisfaction of a third person is a condition, most courts require the actual personal satisfaction of that person. However, the condition will be excused if the third person's dissatisfaction is not honest and in good faith.b. When Purpose of Condition Is to Benefit One PartyWhen it is clear that the purpose of a condition is to protect or benefit only one of the parties, the other party's duty will not be subject to the condition. 4. Constructive (Implied) Conditions a. Constructive Conditions of PerformanceThe most important and common implied condition is that the duty of each party to render performance is conditioned on the other party either rendering his performance or making a tender of his performance.b. Constructive Conditions of Cooperation and NoticeConstructive conditions of cooperation and notice are common. Under a constructive condition of cooperation, the obligation of one party to render performance is impliedly conditioned on the other party's cooperation in that performance. Also, it is often a condition to one party's performance that the other party give him notice that the performance is due. A condition of notice is most commonly applied where a party could not reasonably be expected to know a fact (e.g., need for repair) that triggered the duty to perform unless such notice was given.c. Order of PerformanceThe courts will sometimes imply constructive conditions relating to the time for performing under the contract. 1) Simultaneous Performance Possible - Conditions ConcurrentIf both performances can be rendered at the same time, they are constructively concurrent); thus, each is a condition "precedent" to the other. Hence, absent excuse, each party must first tender his own performance if he wishes to put the other under a duty of immediate performance resulting in breach if he fails to perform.2) One Performance Take Time - Conditions PrecedentIf one performance will take a period of time to complete while the other can be rendered in an instant, completion of the longer performance is a constructive condition precedent to execution of the shorter performance. 5. Effect of Condition - Equitable RemedyIf a contract is not enforceable due to the failure or occurrence of a condition, and one of the parties has fully or partially performed, he can usually recover under unjust enrichment theories (see VIII.C., infra), although the measure of damages in that case may be less advantageous than the contract price.6. Have the Conditions Been Excused?A duty of immediate performance with respect to a conditional promise does not become absolute until the conditions (i) have been performed, or (ii) have been legally excused. Thus, in analyzing a question, if the facts do not reveal performance of the applicable condition precedent or concurrent, look to see whether the condition has been excused. Excuse of conditions can arise in a variety of ways. a. Excuse of Condition by Hindrance or Failure to CooperateIf a party having a duty of performance that is subject to a condition (i.e., she is the party protected by the condition) prevents the condition from occurring, the condition will be excused if the prevention is wrongful (i.e., the other party would not have reasonably contemplated or assumed the risk of this type of conduct).b. Excuse of Condition by Actual BreachAn actual breach of the contract when performance is due will excuse the duty of counterperformance. Note, however, that counterperformance will be excused at common law only if the breach is material. A minor breach may suspend this duty, but it will not excuse it.c. Excuse of Condition by Anticipatory RepudiationAnticipatory repudiation occurs if a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes. If the requirements set forth below are met, this anticipatory repudiation will serve to excuse conditions. 1) Executory Bilateral Contract RequirementAnticipatory repudiation applies only if there is a bilateral contract with executory (unperformed) duties on both sides.2) Requirement that Anticipatory Repudiation Be UnequivocalAn anticipatory repudiation stems from the words or conduct of the promisor unequivocally indicating that he cannot or will not perform when the time comes.3) Effect of Anticipatory RepudiationIn the case of an anticipatory repudiation, the nonrepudiating party has four alternatives: a) Treat the anticipatory repudiation as a total repudiation and sue immediately);b) Suspend his own performance and wait to sue until the performance date);c) Treat the repudiation as an offer to rescind and treat the contract as discharged); ord) Ignore the repudiation and urge the promisor to perform (but note that by urging the promisor to perform, the nonrepudiating party is not waiving the repudiation - she can still sue for breach and is excused from performing unless the promisor retracts the repudiation). 4) Retraction of RepudiationA repudiating party may at any time before his next performance is due withdraw his repudiation unless the other party has canceled, materially changed her position in reliance on the repudiation, or otherwise indicated that she considers the repudiation final. Withdrawal of the repudiation may be in any manner that clearly indicates the intention to perform, but must include any assurances justifiably demanded. d. Excuse of Condition by Prospective Inability or Unwillingness to PerformProspective failure of condition occurs when a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. 1) Distinguish from Actual and Anticipatory RepudiationProspective inability or unwillingness to perform is not an anticipatory repudiation because such a repudiation must be unequivocal, whereas prospective failure to perform involves conduct or words that merely raise doubts that the party will perform.2) Effect of Prospective FailureThe effect of prospective failure is to allow the innocent party to suspend further performance on her side until she receives adequate assurances that performance will be forthcoming. If the other party fails to provide adequate assurances, the innocent party may be excused from her own performance and may treat the failure to provide assurances as a repudiation.3) Retraction of RepudiationAs with anticipatory repudiation, retraction is possible if the defaulting party regains his ability or willingness to perform. However, this fact must be communicated to the innocent party in order to be effective. e. Excuse of Condition by Substantial PerformanceGenerally, the condition of complete performance may be excused if the party has rendered substantial performance. In this case, the other party's duty of counterperformance becomes absolute. It should be noted, however, that courts generally apply this doctrine only if a constructive (implied in law) condition is involved. They will not apply it when there is an express condition for fear this would defeat the express intent of the parties. 1) Substantial Performance Arises If Breach Is MinorThe rules for determining substantiality of performance are the same as those for determining materiality of breach. (See VII.B.2., infra.)2) Inapplicable Where Breach "Willful"Most courts will not apply the substantial performance doctrine if the breach was "willful."3) Damages OffsetEven though the party who has substantially performed is able to enforce the contract, the other party will be able to mitigate by deducting damages suffered due to the first party's incomplete performance.4) Generally Inapplicable to Contracts for the Sale of GoodsThe doctrine of substantial performance generally is not applicable in contracts for the sale of goods. (See VII.C., infra.) f. Excuse of Condition by "Divisibility" of ContractIf a contract is divisible (see below) and a party performs one of the units of the contract, he is entitled to the agreed-on equivalent for that unit even if he fails to perform the other units. It is not a condition precedent to the other party's liability that the whole contract be performed. However, the other party has a cause of action for failure to perform the other units and may withhold his counterperformance for those units. 1) What Is a "Divisible" Contract?Three tests must be concurrently satisfied to make a contract divisible: a) The performance of each party is divided into two or more parts under the contract);b) The number of parts due from each party is the same); andc) The performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party, i.e., each performance is the quid pro quo of the other.EXAM TIP:Whenever you see a common law contract that contains a price per unit, you should immediately consider divisibility as an issue. Usually, a statement in a contract that payment is to be made only on completion of all of the units is construed as merely stating a time for payment, rather than as a condition making the contract indivisible. Divisibility is a question of contract interpretation, and the underlying consideration is fairness. 2) Sales of Goods - Installment ContractsLike the common law, Article 2 assumes that a contract is not divisible unless it authorizes deliveries in several lots, in which case the contract is called an installment contract. In installment contracts, the price, if it can be apportioned, may be demanded for each lot unless a contrary intent appears. g. Excuse of Condition by Waiver or EstoppelOne having the benefit of a condition under a contract may indicate by words or conduct that she will not insist on that condition's being met. Consideration is not required for a valid waiver of condition. 1) Estoppel WaiverWhenever a party indicates that she is "waiving" a condition before it is to happen, or she is "waiving" some performance before it is to be rendered, and the person addressed detrimentally relies on the waiver, the courts will hold this to be a binding (estoppel) waiver. Note, however, that the promise to waive a condition may be retracted at any time before the other party has changed his position to his detriment.2) Election WaiverWhen a condition does not occur or a duty of performance is broken, the beneficiary of the condition or duty must make an election); she may: (i) terminate her liability, or (ii) continue under the contract. If she chooses to continue, she will be deemed to have waived the condition or duty. An election waiver requires neither consideration nor estoppel (although estoppel elements are often present). Note that an election waiver cannot be withdrawn-even if the other party has not relied on it.3) Conditions that May Be WaivedIf no consideration is given for the waiver, the condition must be ancillary or collateral to the main subject and purpose of the contract for the waiver to be effective. In other words, one cannot "waive" entitlement to the entire or substantially entire return performance.4) Waiver in Installment ContractsIn an installment contract, if a waiver is not supported by consideration, the beneficiary of the waived condition can insist on strict compliance with the terms of the contract for future installments (so long as there has been no detrimental reliance on the waiver) by giving notice that he is revoking the waiver.5) Right to Damages for Failure of ConditionIt is important to note that a waiver severs only the right to treat the failure of the condition as a total breach excusing counterperformance. However, the waiving party does not thereby waive her right to damages. h. Excuse of Condition by Impossibility, Impracticability, or FrustrationConditions may be excused by impossibility, impracticability, or frustration of purpose. (See E.4., infra.) E. HAS THE ABSOLUTE DUTY TO PERFORM BEEN DISCHARGED?Once it is determined that a party is under an immediate duty to perform, the duty to perform must be discharged. 1. Discharge by Performance or Tender of PerformanceThe most obvious way to discharge a contractual duty is, of course, by full and complete performance. Good faith tender of performance made in accordance with contractual terms will also discharge contractual duties.2. Discharge by Occurrence of Condition SubsequentThe occurrence of a condition subsequent will serve to discharge contractual duties.3. Discharge by IllegalityIf the subject matter of the contract has become illegal due to a subsequently enacted law or other governmental act, performance will be discharged. This is often referred to as "supervening illegality."Note: If the illegality existed at the time the agreement was made, no contract was formed because of the illegality. (See IV.D., supra.)4. Discharge by Impossibility, Impracticability, or FrustrationThe occurrence of an unanticipated or extraordinary event may make contractual duties impossible or impracticable to perform or may frustrate the purpose of the contract. Where the nonoccurrence of the event was a basic assumption of the parties in making the contract and neither party has expressly or impliedly assumed the risk of the event occurring, contractual duties may be discharged. Note that, for MBE purposes, the term "impracticability" includes both impossibility and impracticability. a. Discharge by ImpossibilityContractual duties will be discharged if it has become impossible to perform them. 1) Impossibility Must Be "Objective"For this rule to operate, the impossibility must be "objective"); i.e., the duties could not be performed by anyone. "Subjective" impossibility will not suffice, i.e., where the duties could be performed by someone but not the promisor.2) Timing of ImpossibilityThe impossibility must arise after the contract has been entered into. If the facts giving rise to impossibility already existed when the contract was formed, the question is not really one of "discharge of contractual duties." Rather, it is a "contract formation" problem, namely, whether the contract is voidable because of mistake.3) Effect of ImpossibilityIf a contract is discharged because of impossibility, each party is excused from duties arising under the contract that are yet to be fulfilled. Either party may sue for rescission and receive restitution of any goods delivered, payments made, etc.4) Partial ImpossibilityIf the performance to be rendered under the contract becomes only partially impossible, the duty may be discharged only to that extent. The remainder of the performance may be required according to the contractual terms. This is so even though this remaining performance might involve added expense or difficulty.5) Temporary ImpossibilityTemporary impossibility suspends contractual duties); it does not discharge them. When performance once more becomes possible, the duty "springs back" into existence unless the burden on either party to the contract would be substantially increased or different from that originally contemplated.6) Part Performance Prior to Impossibility - Quasi-Contractual RecoveryIf a party partially performed before the impossibility arose, that party will have a right to recover in quasi-contract at the contract rate or for the reasonable value of his performance if that is a more convenient mode of valuation.7) Specific Situations a) Death or Physical IncapacityDeath or the physical incapacity of a person necessary to effectuate the contract serves to discharge it.EXAM TIPA contract is not discharged by the death or incapacity of the person who was to perform the services if the services are of a kind that can be delegated (see IX.C.2.a., infra). Thus, if the contract was for personal services of a unique kind (e.g., the painting of a portrait by a famous artist), the death or incapacity of that person could make performance impossible, but if the services are not unique (e.g., the painting of a farmer's barn), the death or incapacity of that person would not make performance impossible.b) Supervening IllegalitySupervening illegality may serve to discharge a contract. Many courts treat such supervening illegality as a form of impossibility.c) Subsequent Destruction of Contract's Subject Matter or Means of PerformanceIf the contract's subject matter is destroyed or the designated means for performing the contract are destroyed, contractual duties will be discharged. (1) Compare - Contracts to BuildA contractor's duty to construct a building is not discharged by destruction of the work in progress. Rationale: Construction is not rendered impossible); the contractor can still rebuild. However, if the destruction was not caused by the contractor, most courts will excuse the contractor from meeting the original deadline.EXAM TIPRemember when a building under construction is destroyed, the contractor is still obligated to build and is not entitled to anything other than the contract price. By contrast, a contract to repair or remodel a building that is destroyed after work has begun is discharged (there is nothing left to repair), and to the extent the contractor has already performed, the contractor is entitled to recover in restitution (see VIII.C., infra) for the value of the work done prior to the building's destruction.(2) Specificity Required (a) Subject MatterNote that destruction of the subject matter will render a contract impossible only if the very thing destroyed is necessary to fulfill the contract. If the thing destroyed is not actually necessary, impossibility is not a defense.(b) Specificity of SourceAs with the destruction of the subject matter, destruction of a source for fulfilling the contract will render the contract impossible only if the source is the one source specified by the parties. (3) If Risk of Loss Has Already Passed to BuyerThe rules relating to discharge because of destruction of the subject matter will not apply if the risk of loss has already passed to the buyer. b. Discharge by ImpracticabilityModern courts will also discharge contractual duties where performance has become impracticable. 1) Test for ImpracticabilityThe test for a finding of impracticability is that the party to perform has encountered: a) Extreme and unreasonable difficulty and/or expense); andb) Its nonoccurrence was a basic assumption of the parties. 2) Contracts for the Sale of GoodsArticle 2 generally follows the above rules for impossibility and impracticability. If performance has become impossible or commercially impracticable, the seller will be discharged to the extent of the impossibility or impracticability. a) Allocation of RiskGenerally, the seller assumes the risk of the occurrence of such unforeseen events and must continue to perform. However, if it is fair to say that the parties would not have placed on the seller the risk of the extraordinary occurrence, the seller will be discharged.b) Events Sufficient for DischargeEvents sufficient to excuse performance include a shortage of raw materials or the inability to convert them into the seller's product because of contingencies such as war, strike, embargo, or unforeseen shutdown of a major supplier. Catastrophic local crop failure (as opposed to a mere shortage) also is sufficient for discharge. However, mere increases in costs are rarely sufficient for discharge unless they change the nature of the contract.Note: There is no bright line test for determining when a rise in price changes the nature of the contract, but an increase in costs of more than 50% has been held to be insufficient.c) Seller's Partial Inability to PerformIf the seller's inability to perform as a result of the unforeseen circumstance is only partial, he must allocate deliveries among his customers and, at his option, may include in the allocation regular customers not then under contract. c. Discharge by FrustrationFrustration will exist if the purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking discharge. If the purpose has been frustrated, a number of courts will discharge contractual duties even though performance of these duties is still possible. The elements necessary to establish frustration are as follows: 1) There is some supervening act or event leading to the frustration);2) At the time of entering into the contract, the parties did not reasonably foresee the act or event occurring);3) The purpose of the contract has been completely or almost completely destroyed by this act or event); and4) The purpose of the contract was realized by both parties at the time of making the contract.EXAM TIPYou will likely encounter the doctrine of frustration on your exam. Watch for facts showing that a person has rented a venue for a specific purpose known to the owner and a subsequent event (e.g., a storm, a death) that was not reasonably foreseeable renders the purpose for renting the place moot. d. Distinguish Uses of Defenses of Impossibility/Impracticability and FrustrationA seller of land, goods, or services will raise impossibility or impracticability as a defense that discharges performance. By contrast, the party who is supposed to pay (usually the buyer) will raise frustration of purpose as a defense discharging performance. Paying money is never impracticable. 5. Discharge by RescissionRescission will serve to discharge contractual duties. Rescission may be either mutual or unilateral. a. Mutual RescissionThe contract may be discharged by an express agreement between the parties to rescind. The agreement to rescind is itself a binding contract supported by consideration, namely, the giving up by each party of her right to counterperformance from the other.EXAM TIPAlthough mutual rescission generally discharges the parties to a contract, watch out for a third-party beneficiary case. If the rights of a third-party beneficiary have already vested, the contract cannot be discharged by mutual rescission by the promisor and promisee. (See IX.B.2.a., infra.) 1) Contract Must Be ExecutoryFor a contract to be effectively discharged by rescission, the duties must be executory on both sides. a) Unilateral ContractsIf the contract is unilateral (i.e., only one party owes an absolute duty), a contract to mutually rescind where one party still has a duty to perform will be ineffective. For an effective rescission in a unilateral contract situation where the offeree has already performed, the rescission promise must be supported by one of the following: (1) An offer of new consideration by the nonperforming party);(2) Elements of promissory estoppel, i.e., detrimental reliance); or(3) Manifestation of an intent by the original offeree to make a gift of the obligation owed her. b) Partially Performed Bilateral ContractsA mutual agreement to rescind will usually be enforced when a bilateral contract has been partially performed. Whether the party who has partially performed will be entitled to compensation depends on the terms of the rescission agreement. 2) FormalitiesMutual rescission may be made orally. This is so even though the contract to be rescinded expressly states that it can be rescinded only by a written document, unless the subject matter of the contract to be rescinded falls within the Statute of Frauds (e.g., transfer of land) or the contract is for the sale of goods (Article 2 requires a written rescission or modification if the original contract to be rescinded or modified expressly requires a written rescission).3) Contracts Involving Third-Party Beneficiary RightsIf the rights of third-party beneficiaries have already vested (see IX.B.2., infra), the contract may not be discharged by mutual rescission. b. Unilateral RescissionUnilateral rescission results when one of the parties to the contract desires to rescind it but the other party desires that the contract be performed according to its terms. For unilateral rescission to be granted, the party desiring rescission must have adequate legal grounds. Most common among these are mistake, misrepresentation, duress, and failure of consideration. If the nonassenting party refuses to voluntarily grant rescission, the other party may file an action in equity to obtain it. 6. Partial Discharge by Modification of ContractIf a contract is subsequently modified by the parties, this will serve to discharge those terms of the original contract that are the subject of the modification. It will not serve to discharge the entire contract. To have such a partial discharge, the following requirements must usually be met. a. Mutual AssentThe modifying agreement must have been mutually assented to. Note, however, that under the doctrine of reformation, either of the parties to the contract may bring an equity action to have a contract's terms modified if the writing, through mistake or misrepresentation, does not incorporate the terms orally agreed on.b. ConsiderationGenerally, consideration is necessary to modify a contract. However, the courts usually find consideration to be present because each party has limited his right to enforce the original contract as is. No consideration is necessary if the effect of the modification is merely to correct an error in the original contract. 1) Not Required for Contracts for the Sale of GoodsNo consideration is needed for the modification of a contract for the sale of goods under Article 2, as long as the modification is sought in good faith. 7. Discharge by NovationA novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract. A novation will serve to discharge the old contract. The elements for a valid novation are: (i) a previous valid contract); (ii) an agreement among all parties, including the new party (or parties) to the new contract); (iii) the immediate extinguishment of contractual duties as between the original contracting parties); and (iv) a valid and enforceable new contract.8. Discharge by CancellationThe destruction or surrender of a written contract will not usually, by itself, discharge the contract. If, however, the parties manifest their intent to have these acts serve as a discharge, it will usually have this effect if consideration or one of its alternatives is present.9. Discharge by ReleaseA release and/or contract not to sue will serve to discharge contractual duties. The release or contract not to sue usually must be in writing and supported by new consideration or promissory estoppel elements.10. Discharge by Substituted ContractA contract may be discharged by a substituted contract. This occurs when the parties to a contract enter into a second contract that immediately revokes the first contract expressly or impliedly. a. Intent GovernsWhether a second contract will constitute a substituted contract depends on whether the parties intend an immediate discharge or a discharge only after performance of the second contract. If an immediate discharge is intended, there is a substituted contract. If the parties intend the first contract to be discharged only after performance of the second contract, there is an executory accord (see 11.a., infra) rather than a substituted contract. 11. Discharge by Accord and SatisfactionA contract may be discharged by an accord and satisfaction. a. AccordAn accord is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that she is supposed to receive from the other party to the existing contract, some other, different performance. 1) Requirement of ConsiderationIn general, an accord must be supported by consideration. When the consideration is of a lesser value than the originally bargained-for consideration in the prior contract, it will be sufficient if the new consideration is of a different type or if the claim is to be paid to a third party. a) Partial Payment of Original DebtOne often-encountered problem involves the offer of a smaller amount than the amount due under an existing obligation in satisfaction of the claim, i.e., partial payment of an original debt. The majority view is that this will suffice for an accord and satisfaction if there is a "bona fide dispute" as to the claim or there is otherwise some alteration, even if slight, in the debtor's consideration. (See discussion of the preexisting legal duty rule, III.B.2.c.1), supra.) 2) Effect of AccordThe accord, taken alone, will not discharge the prior contract. It merely suspends the right to enforce it in accordance with the terms of the accord contract.2) Distinguish ModificationAn accord is an agreement by parties to accept a different future performance, whereas a modification is an agreement to enter a different agreement. If the accord is satisfied, the original contract is discharged); but if it isn't satisfied, the original contract remains intact and enforceable. A modification, on the other hand, changes the duties of the parties immediately, and the original terms are no longer effective. An accord typically arises when payment or performance is overdue or there is a dispute as to the performance due, whereas a modification typically occurs before performance is due.EXAM TIPOn the MBE, it is unlikely that you will have to choose between an accord and a modification answer choice. Identifying the issue in an essay question is a bit trickier. Accord and satisfaction is usually triggered by a dispute of an amount due. If there is no dispute, you should be considering modification rather than accord. Also, look to see if the party offering the "accord" is looking to discharge the contract. If, instead, the parties intend the contract to continue (e.g., change sought for terms of a multi-year contract or one installment of an installment contract), the parties are modifying the contract. Because many of the elements are the same (offer, acceptance, consideration) under both a modification and accord, you will likely receive a number of points on the exam even if you mislabel the issue. b. SatisfactionSatisfaction is the performance of the accord agreement. Its effect is to discharge not only the original contract, but also the accord contract as well.c. Effect of Breach of Accord Agreement Before Satisfaction 1) Breach by DebtorIf the debtor breaches an accord agreement, the creditor may sue either on the original undischarged contract or for breach of the accord agreement.2) Breach by CreditorIf a creditor breaches an accord agreement (i.e., he sues on the original contract), the debtor has two courses of action available: (i) raise the accord agreement as an equitable defense and ask that the contract action be dismissed); or (ii) wait until she is damaged (i.e., the creditor is successful in his action on the original contract) and then bring an action at law for damages for breach of the accord contract. d. Checks Tendered as "Payment in Full"If a monetary claim is uncertain or is subject to a bona fide dispute, an accord and satisfaction may be accomplished by a good faith tender and acceptance of a check when that check (or an accompanying document) conspicuously states that the check is tendered in full satisfaction of the debt. 12. Discharge by Account StatedAn account stated is a contract between parties whereby they agree to an amount as a final balance due from one to the other. This final balance encompasses a number of transactions between the parties and serves to merge all of these transactions by discharging all claims owed.13. Discharge by LapseIf the duty of each party is a condition concurrent to the other's duty, it is possible that on the day set for performance, neither party is in breach and their contractual obligations lapse. If the contract states that time is "of the essence," the lapse will occur immediately); otherwise the contract will lapse after a reasonable time.14. Effect of Running of Statute of LimitationsIf the statute of limitations on an action has run, it is generally held that an action for breach of contract may be barred. Note, however, that only judicial remedies are barred); the running of the statute does not discharge the duties. (Hence, if the party who has the advantage of the statute of limitations subsequently agrees to perform, new consideration will not be required.)EXAM TIPNote the difference between a discharge by lapse and the effect of a statute of limitations. Although both have to do with time and the end result may be similar, technically, lapse discharges a contract while the statute of limitations merely makes it unenforceable in court.

How can a repudiating party retract an anticipatory repudiation? AOnly in the same manner as the repudiation BOnly by offering new consideration CIn any manner that clearly indicates an intention to perform

C A repudiating party may at any time before his next performance is due withdraw his repudiation unless the other party has canceled, materially changed her position in reliance on the repudiation, or otherwise indicated that she considers the repudiation final. Withdrawal of the repudiation may be in any manner that clearly indicates intention to perform. Because the withdrawal may be in any manner, it is not necessary that it be in the same manner as the repudiation. Generally, consideration is necessary to modify a contract. It is not needed to repudiate an anticipatory repudiation.

The performance of one contractual promise is usually a condition precedent to the duty of immediate performance of the return promise. Less than complete performance is a breach of contract. A court will apply the doctrine of "substantial performance" to excuse the condition of complete performance in the case of: AA constructive condition and a minor breach BAn express condition and a minor breach CA constructive condition and a material breach DAn express condition and a material breach

A A court will apply the doctrine of substantial performance to excuse the condition of complete performance in the case of a minor breach and a constructive condition. The condition of complete performance may be excused if the party has rendered substantial performance. Courts generally apply this doctrine only where a constructive condition is involved. The doctrine of substantial performance will not apply to excuse an express condition, as this would likely defeat the express intent of the parties. If there is a material breach, then performance has not been substantial, and thus the doctrine would not apply.

At common law, which of the following generally would not legally excuse a condition? AA minor breach of contract BWaiver CFailure to cooperate by the other party DDivisibility of a contract

A An actual breach of the contract might excuse a condition, but only if the breach is material. A minor breach may at best suspend the duty, but it will not excuse it. Divisibility of a contract is a concept designed to avoid the harsh result of forfeiture. If a contract can be divided into parts and one party performs some but not all of the parts, the condition precedent that the whole contract be performed before the other party has a duty to perform is excused. If a party having a duty of performance that is subject to a condition prevents the condition from occurring through failure to cooperate, the condition will be excused if such prevention is wrongful. One having the benefit of a condition under a contract may grant a waiver of the condition, or in other words, indicate by words or conduct that she will not insist on that condition's being met.

At common law, ______________ will excuse a contract condition. AAn estoppel waiver BCooperation CA demand for assurances DA minor breach

A At common law an estoppel waiver will excuse a contract condition. Whenever a party indicates that he is waiving a condition before it is to happen and the person addressed detrimentally relies on the waiver, courts will find a binding estoppel waiver. A demand for assurances, in and of itself, will not excuse a condition. However, a party may suspend his performance and make a demand for assurances if he has a reasonable belief that the other party will be unable or unwilling to perform. If he does not receive adequate assurances, his performance may be excused, and he may treat the failure as a repudiation. At common law, an actual breach of the contract will excuse a condition, but only if the breach is material. A minor breach may at best suspend the duty to perform, but it will not excuse it. Cooperation does not excuse a contract condition. The rule is the opposite. Noncooperation will excuse a contract condition.

Nonfulfillment of a condition __________. Awill excuse a duty to perform that was subject to the condition Bwill result in a breach of contract Cgives rise to liability for nonperformance Ddoes not excuse the other party's duty to perform under the contract

A Nonfulfillment of a condition normally will excuse a duty to perform that was subject to the condition. A condition is a provision the fulfillment of which creates or extinguishes a duty to perform under a contract, thus nonfulfillment of a condition will excuse the other party's duty to perform under the contract. Nonfulfillment of a condition is not a breach of contract and does not give rise to liability for nonperformance

Under the doctrine of substantial performance, can one party recover damages for the other party's incomplete performance? AYes, that party will be able to deduct any damages suffered due to the incomplete performance BNo, because the doctrine of substantial performance was adopted to avoid the harsh result that could occur if complete performance was required CYes, but only if the breach was material DNo, unless the other party's breach was willful

A Under the doctrine of substantial performance, even though the party who has substantially performed is able to enforce the contract, the other party will be able to mitigate by deducting damages suffered due to the first party's incomplete performance. The doctrine of substantial performance applies only if the breach is minor. If the breach is material, the performance is not considered substantial, and the party is in breach. Damages could be recovered for a material breach—but not under the doctrine of substantial performance. Similarly, if the performing party's breach was willful, most courts will not apply the substantial performance doctrine. A willful breach would be considered a standard breach of contract, and the regular damages rules would apply. While it is true that the doctrine of substantial performance was adopted to avoid the harsh result that could occur if complete performance were required, this does not preclude the nonbreaching party from also recovering any damages suffered due to the other party's incomplete performance. It just means that the nonbreaching party has a duty to perform in spite of the incomplete performance. QUESTION ID: K0085B

A condition read into a contract by the court is also known as: Aa constructive condition Ban anticipatory condition Ca condition precedent Dan express condition

A Where it is implied that the duty to render performance under a contract is conditional upon the occurrence of some event or state of the world, a constructive condition will be read into a contract by the court. A condition precedent is one that must occur before and absolute duty of immediate performance arises in the other party.An express condition is the opposite of a constructive condition. An express condition is an explicit contractual provision that either: a party does not have a duty to perform unless some event occurs (or fails to occur) or, if some event occurs (or fails to occur), the obligation of a party to perform is suspended or terminated.There is no anticipatory condition. Anticipatory repudiation may excuse a condition. It occurs when a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes.

An anticipatory repudiation __________. AShould be in writing to satisfy the Statute of Frauds BMust be unequivocal CCan be based on positive statements or expressions of doubt or fear

B An anticipatory repudiation stems from the words or conduct of the promisor indicating that he cannot or will not perform when the time comes. An anticipatory repudiation must be unequivocal. An anticipatory repudiation must be a positive statement that the repudiating party will not perform when performance is due. It cannot be based on expressions of doubt or fear, although those statements could establish a prospective inability to perform. There is no requirement that an anticipatory repudiation should be in writing. An anticipatory repudiation can stem from the words or conduct of the promisor. QUESTION ID: K0081B

The doctrine of "substantial performance" generally does not apply to __________. Aconstructive conditions Bcontracts for the sale of goods Cconstruction contracts Dwillful, but trivial, defects

B The doctrine of "substantial performance" generally does not apply to contracts for the sale of goods due to the U.C.C. "perfect tender rule." The doctrine of substantial performance was developed in construction contracts cases, so it certainly applies to such contracts. Courts generally apply the doctrine only where constructive conditions are involved. They will not apply it to express conditions for fear this would defeat the express intent of the parties. Most courts will not apply the substantial performance doctrine if the breach was "willful," however, trivial defects, even if willful, will be ignored by the courts as de minimis.

In some cases, the condition of complete performance may be excused if a party has rendered __________. APartial performance BSubstantial performance CAlternative performance

B The performance of one contractual promise is usually a condition precedent to the duty of immediate performance of the return promise. Generally, the condition of complete performance may be excused if the party has rendered substantial performance. The rules for determining substantiality of performance are the same as those for determining materiality of breach. The test is whether the breach of contract by the performing party is material or minor. If it is material, then performance has not been substantial; if it is minor, performance has been substantial. Partial performance that did not rise to the level of substantial performance would not be enough to excuse the condition of complete performance. Whether an alternative performance would be acceptable would depend on the terms of the contract. If an alternative performance is allowed, this would still be a form of complete performance, not a way to excuse the condition of performance.

A condition __________ is one that must occur before the duty of performance will arise; the occurrence of a condition __________ will cut off an already existing duty of performance. ASubsequent; precedent BPrecedent; concurrent CPrecedent; subsequent DConcurrent; precedent

C A condition precedent is one that must occur before the duty of performance will arise; the occurrence of a condition subsequent will cut off an already existing duty of performance. Conditions concurrent are those that are capable of occurring together, and that the parties are bound to perform at the same time. Thus, in effect, each is a condition "precedent" to the other.

What is a "constructive" condition? AA contractual provision providing that the contract is not effective unless some event occurs or fails to occur BA condition commonly found in construction contracts stating that the condition of complete performance may be excused if the party has rendered substantial performance CA condition that is implied by a court even though it is not explicitly stated in the contract DA contractual provision providing that a party does not have a duty to perform unless some event occurs or fails to occur

C A constructive condition is a condition that is implied by a court even though it is not explicitly stated in the contract. Common examples of constructive conditions are the conditions of cooperation and notice. Constructive conditions are also known as implied conditions. In contrast, an express condition precedent is an explicit contractual provision providing that a party does not have a duty to perform unless some event occurs or fails to occur. When an entire contract is not effective unless some event occurs or fails to occur, the contract is subject to an express condition precedent, not a constructive condition. The concept of substantial performance was developed in construction cases to avoid the harsh results that could occur when complete performance is required. Under the doctrine of substantial performance, the condition of complete performance may be excused if the party has rendered substantial performance. QUESTION ID: K0079B

Can a repudiating party retract his anticipatory repudiation before his performance is due? AYes, if there has been a material change in circumstances since the repudiation. BNo, unless the other party agrees to the retraction. CYes, unless the other party has materially changed her position in reliance on the repudiation. DNo, an anticipatory repudiation is considered final.

C A repudiating party may at any time before his next performance is due withdraw his repudiation, unless the other party has canceled, materially changed her position in reliance on the repudiation, or otherwise indicated that she considers the repudiation final. Withdrawal of the repudiation may be in any manner that clearly indicates intention to perform, but must include any assurances justifiably demanded. It is not necessary that there has been a material change in circumstances since the repudiation. If anything, such a change would make it more likely that the repudiating party would not be allowed to withdraw the repudiation, because the other party is likely to have also materially changed her position in reliance on the repudiation. If the other party has not so relied, the repudiation is not considered final, and it is not necessary for the other party to agree to the retraction

In a case of anticipatory repudiation, how long does the repudiating party have to retract the repudiation? ANo amount of time, because by definition an anticipatory repudiation is final and cannot be retracted BUntil performance is due, regardless of the other party's actions CUntil performance is due, unless the other party has materially changed position in reliance on the repudiation D10 days

C A repudiating party may retract his repudiation at any time until performance is due, unless the other party has materially changed position in reliance on the repudiation, or otherwise indicated that she considers the repudiation final. Withdrawal of the repudiation may be in any manner that clearly indicates intention to perform, but must include any assurances justifiably demanded. The other party's actions in response to the anticipatory repudiation are important. If the other party has not changed position in reliance on the repudiation, the repudiation is not final and can be retracted until the time performance is due. There is no set period of time, such as 10 days, within which the repudiating party must retract the repudiation. The time for retraction depends on the terms of the contract.

In the case of an anticipatory repudiation, the nonrepudiating party: AMust immediately either sue or urge the promisor to perform, or else will be deemed to have waived the repudiation BMust sue immediately or else will be deemed to have waived the repudiation CMay sue immediately or choose to wait until the performance date to sue DMust wait until the performance date to sue because before that time no breach has occurred

C Anticipatory repudiation occurs if a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes. In the case of an anticipatory repudiation, the nonrepudiating party may sue immediately or choose to wait until the performance date to sue. In fact, the nonrepudiating party has four basic alternatives: (i) treat the anticipatory repudiation as a total repudiation and sue immediately; (ii) suspend his own performance and wait to sue until the performance date; (iii) treat the repudiation as an offer to rescind and treat the contract as discharged; or (iv) ignore the repudiation and urge the promisor to perform. By urging the promisor to perform, the nonrepudiating party will not be deemed to have waived the repudiation. He can still sue for breach and is excused from performing unless the promisor retracts the repudiation. QUESTION ID: K0082B

Which of the following is a key distinction between an anticipatory repudiation and a prospective failure to perform? ARepudiation may be retracted, whereas prospective failure to perform is a breach and cannot be retracted. BRepudiation is final, whereas prospective failure to perform may be retracted. CRepudiation must be unequivocal, whereas prospective failure to perform involves mere doubts. DRepudiation must be unequivocal, whereas prospective failure to perform is determined by the subjective beliefs of the other party.

C Prospective inability or unwillingness to perform differs from anticipatory repudiation because repudiation must be unequivocal, whereas prospective failure to perform involves conduct or words that merely raise doubts that the party will perform. Repudiation must be unequivocal. However, a prospective failure to perform is not based on the subjective beliefs of the other party, but rather is judged on a reasonable person standard. Both repudiation and prospective failure to perform may be retracted, provided the other party has not yet changed position in reliance on the repudiation or prospective failure. The effect of a prospective failure is to allow the innocent party to suspend performance until she receives adequate assurances. She may treat this situation as a breach only if the assurances are not given. If a defaulting party regains his ability or willingness to perform, he must communicate that to the other party.

__________ best describes the primary difference between excuse of condition by prospective unwillingness to perform and excuse of condition by anticipatory repudiation because _____________. ANothing; the terms can be used interchangeably. BFinality; prospective unwillingness to perform can be retracted if at any time prior to performance the defaulting party regains his ability or willingness to perform, whereas anticipatory repudiation is final and automatically serves to excuse the condition. CDegree of certainty; prospective unwillingness to perform is based on the other party's perception that a party will be unwilling or unable to perform when performance is due, whereas anticipatory repudiation occurs when a party clearly indicates his own unwillingness to perform before performance is due. DTiming; prospective unwillingness to perform occurs when a party refuses to perform when performance is due, whereas anticipatory repudiation occurs when a party indicates an unwillingness to perform before performance is actually due.

C The primary distinction between anticipatory repudiation and prospective inability to perform is one of degree of certainty. Anticipatory repudiation occurs when a party to a contract, prior to the time set for performance, indicates that he will not perform when performance is due. Prospective unwillingness to perform occurs when a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. Hence, the terms are not interchangeable; prospective inability or unwillingness to perform is not an anticipatory repudiation because such a repudiation must be unequivocal, whereas prospective failure to perform involves conduct or words that merely raise doubts that the party will perform. Both excuse of condition by prospective unwillingness to perform and excuse of condition by anticipatory repudiation involve similar timing, because both occur before the time of performance. Generally speaking, neither excuse of condition by prospective unwillingness to perform nor excuse of condition by anticipatory repudiation is final. Both can be retracted before the time of performance so long as the other party has not changed position in reliance on the prospective failure or anticipatory repudiation. QUESTION ID: K0084A

A condition that cuts off an already existing absolute duty of performance is also known as __________. Aa condition concurrent Ba condition by hindrance Ca condition precedent Da condition subsequent

D A condition subsequent is one the occurrence of which cuts off an already existing absolute duty of performance. A condition precedent is one that must occur before an absolute duty of immediate performance arises in the other party. Conditions concurrent are those that are capable of occurring together, and that the parties are bound to perform at the same time. There is no condition by hindrance. A hindrance occurs when a party having a duty of performance that is subject to a condition prevents the condition from occurring. In such a case the condition will be excused if such prevention is wrongful.

In contract law, which of the following best summarizes the distinction between the terms "promise" and "condition"? AThe failure to fulfill a promise has no legal significance; the failure to fulfill a condition is a breach of contract. BA promise is a party's commitment to do something; a condition restrains a party from acting. CThere is no real distinction; the terms can be used interchangeably. DA promise binds a party to perform under a contract; a condition creates or extinguishes a duty to perform under the contract.

D A promise is a commitment to do or refrain from doing something. A promise binds a party to perform under a contract. A condition creates or extinguishes a duty to perform under the contract. A condition is a provision the fulfillment of which creates or extinguishes a duty to perform under a contract. A condition is normally either an event that must occur or fail to occur before a party has a duty to perform under a contract or an event the occurrence or nonoccurrence of which releases a party from the duty to perform under a contract. The distinction between the terms "promise" and "condition" is important in understanding that there is a difference between whether a party is bound under a contract and whether a party who is bound has come under a duty to perform. Thus the terms should not be used interchangeably. The failure to fulfill a promise has legal significance in that it results in a breach of contract. The failure to fulfill a condition is not a breach of contract, but it discharges the liability of the promisor whose obligations on the conditional promise never mature. Either a promise or a condition can be based on positive actions or restraints. A promise can be a commitment to do something or refrain from doing something. A condition is a promise modifier, which could restrain a party from acting or prompt a party to act. The fulfillment of the condition creates or extinguishes a duty to perform under a contract.

If, prior to the time set for performance, the promisor indicates that he will not perform when the time comes, this is known as: AElection waiver BRetraction CEstoppel waiver DAnticipatory repudiation

D Anticipatory repudiation occurs if a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes. A repudiating party may at any time before his next performance is due withdraw his repudiation unless the other party has canceled, materially changed her position in reliance on the repudiation, or otherwise indicated that she considers the repudiation final. This known as a retraction. The one having the benefit of a condition may waive that condition. An estoppel waiver occurs when a party indicates that she is waiving a condition and the other party detrimentally relies on the waver. An election waiver occurs when the beneficiary of a broken condition chooses to continue on under the contract.

In the case of an anticipatory repudiation, the nonrepudiating party __________. Amust continue his own performance until the date of performance and then may sue Bmust sue immediately or the repudiation is deemed waived Cmay suspend his own performance, but must wait until the date performance is due to sue Dmay sue immediately or wait until the date performance is due to sue

D In the case of an anticipatory repudiation, the nonrepudiating party has several alternatives. He may sue immediately or wait until the date performance is due to sue.The nonrepudiating party may choose to suspend his own performance, but he need not wait until the date performance is due to sue.Even if the nonrepudiating party does not sue immediately, the repudiation is not deemed waived, because the nonrepudiating party can choose to wait until the date performance is due to sue.The nonrepudiating party may choose to suspend his performance immediately. There is no need for him to continue his own performance until the date of performance and then sue.QUESTION ID: K0082

When a condition is not satisfied or a duty of performance is broken, and the beneficiary of the condition or duty nevertheless chooses to continue under the contract, a court will hold this to be __________. AAn estoppel waiver BAn anticipatory repudiation CA prospective unwillingness to perform DAn election waiver

D When a condition or a duty of performance is broken, and the beneficiary of the condition or duty nevertheless chooses to continue under the contract, a court will hold this to be an election waiver. An election waiver does not require estoppel (although estoppel elements are often present). When a party indicates that she is "waiving" a condition before it is to happen, and the person addressed detrimentally relies on the waiver, a court will hold this to be an estoppel waiver. A prospective unwillingness to perform occurs when one party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. The effect of this prospective failure would be to allow the seller to suspend further performance until she receives adequate assurances that the buyer's performance will be forthcoming. If the buyer does not provide adequate assurances, the seller can treat this as a repudiation of the contract. Anticipatory repudiation occurs when a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes.

When a party having the benefit of an ancillary condition under a contract indicates by words or conduct (and without receiving any additional consideration) that she will not insist on that condition being met, this is called __________. Aa discharge Ban excuse Ca gift Da waiver

D When a party having the benefit of an ancillary condition under a contract indicates by words or conduct that she will not insist on that condition being met, courts, in certain circumstances, will enforce that party's decision, despite the lack of additional consideration, as a waiver of the condition. No consideration is generally required for the waiver of an ancillary, or collateral, condition. In contrast, one cannot simply waive a condition regarding the main subject of a contract without receiving additional consideration. This would amount to a new undertaking that is really a gift in the disguise of a waiver. Without a waiver of the condition, nonfulfillment of the condition normally will excuse the other party's duty to perform that was subject to the condition. When a party is under an immediate duty to perform, the duty to perform must then be discharged, normally by performance. QUESTION ID: K0086C

When a party indicates that she is "waiving" a condition before it is to happen, and the person addressed detrimentally relies on the waiver, a court will hold this to be __________. AAn anticipatory repudiation BA prospective unwillingness to perform CAn election waiver DAn estoppel waiver

D When a party indicates that she is "waiving" a condition before it is to happen, and the person addressed detrimentally relies on the waiver, a court will hold this to be an estoppel waiver. When a condition is not satisfied or a duty of performance is broken, and the beneficiary of the condition or duty nevertheless chooses to continue under the contract, a court will hold this to be an election waiver. An election waiver does not require estoppel (although estoppel elements are often present). A prospective unwillingness to perform occurs when one party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. The effect of this prospective failure would be to allow the seller to suspend further performance until she receives adequate assurances that the buyer's performance will be forthcoming. If the buyer does not provide adequate assurances, the seller can treat this as a repudiation of the contract. Anticipatory repudiation occurs when a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes.