Business Law: Chapter 17

Unlike promises to pay or partial payment of a debt barred by limitations, promises to pay or partial payment of a debt following discharge_______ _____ ____ ____ _____

Does not revive the debt

If _____ _____ not _______ _____ _____, Failure to perform by the time specified in the contract is not a material breach

"Time, Is, Of, The, Essence"

Examples of Impossibility/Impracticability

1. a party obliged to perform personal services dies or become incapacitated prior to performance 2. the subject matter of the contract is destroyed prior to performance 3. an unforeseen change in application law makes performance illegal 4. unforeseen changes in market conditions make performance commercially impracticable

Novation requires:

1. a valid, prior agreement, for which 2. all parties agree to substitute a new contract 3. discharge of the prior obligation; a valid, new agreement

Discharge: the termination of a party's obligations arising under a contract. Discharge occurs either when:

1. both parties have fully performed their contractual obligations; or 2. events, conduct of the parties, or operation of law release a party from its obligation to perform

Temporary vs. Permanent:

A change in circumstances that makes performance temporarily impossible or impracticable, or that temporarily frustrates a party's contractual purpose, will suspend, but not excuse, performance

Condition Precedent:

A condition that must be satisfied before a party's contractual obligation to perform becomes absolute (e.g., Bob promises to hire Terry as a driver as soon as Terry gets his driver's license)

Condition Subsequent:

A condition the occurrence or nonoccurrence of which will terminate a party's absolute obligation to perform (e.g., Mary agrees to let Sue in Mary's spare room for as long as Sue remains unmarried)

Discharge by Performance:

A contract terminates when both parties perform or tender performance of the acts have promised

Condition:

A contractual qualification, provisions, or clause which creates, suspends, or terminates the obligations of one or both parties to the contract, depending on the occurrence or nonoccurrence of some event

Bankruptcy:

A discharge in bankruptcy, afforded to a debtor after its liquidation or reorganization plan is approved, bars subsequent enforcement against the debtor of any contracts that pre-date the discharge

Impossibility/Impracticability:

A party may be excused when performance become either impossible or impracticable through no fault of wither party

Material Breach:

A party's failure, without legal excuse, to substantially perform her contractual obligations

Statutes of Limitations:

A plaintiff suing for breach of contract must file suit within the time permitted by applicable law. Failure to do so does not technically discharge the parties, but it prevents the wronged party from seeking judicial remedies

Anticipatory Repudiation:

A statement or action by a party to a contract indicating that she will not or cannot perform a contractual obligation due to be performed in the future

Accord and Satisfaction:

An agreement between the parties to a different performance than originally agreed. Until both parties perform the terms of the accord, their rights and duties under the original agreement are merely suspended

Tender:

An unconditional offer to perform and obligation by a person who is ready, willing, and able to do so

Time for performance:

If not time is stated in the contract, performance is due within a reasonable time

Material Alteration:

If one or more material terms of a contract are altered, an innocent party (i.e., one who neither altered nor consented to an alteration of the contract) may be discharges from its contractual obligations

Concurrent Conditions:

Mutually dependent conditions that must occur or be performed at the same time in order to give rise to any absolute obligations to perform (e.g., Nikki offers to pay Tina $100 in exchange for Tina's class ring)

However, until the non-repudiating party treats the repudiation as a material breach, the repudiating party can _________ her repudiation and restore the parties' contractual rights and obligations

Retract

Satisfy a third party:

Some contracts require that the performance satisfy some one-party (e.g., an art critic, an architect, an independent lab). Courts tend towards the objective satisfaction standard in these cases, but some have applied the subject satisfaction test when the third party's expertise goes to the same factors that would lead a court to apply the subjective test if a party's satisfaction was at stake

Some contracts require ne party to perform to the satisfaction of the other. When a contract so provides, courts will apply one of two tests depending on the circumstances:

Subjective Satisfaction, Objective Satisfaction

Novation:

Substituting a new contract for the old one, replacing one or more of the original parties, thereby terminating the original parties' rights and duties under the old contract

Frustration of Purpose:

Supervening circumstances make it impossible for both parties to achieve their purpose for entering into a contract

Rescission:

The process by which the parties cancel a contract and return one another to their pre-contract status

Substituted Agreement:

The same parties that contracted with one another substitute a new contract for their old one, thereby terminating their rights and duties under the old contract (e.g., a settlement agreement) in favor of those in the new agreement

Complete vs. Substantial Performance:

When a party fails to completely preform her contractual duties, the question arises whether the performance affords the other party substantially the same benefits as those promised. If so, then the first party is said to have substantially performed

Subjective Satisfaction:

When the purpose of the performance is to satisfy personal taste, aesthetics, and the like (e.g., painting a portrait of a customer's beloved), the court will ask whether the party to be satisfied was, in good faith, satisfied or dissatisfied with the performance

Objective Satisfaction

When the purpose of the performance is to serve some function (e.g., roofing a warehouse to keep out the elements), the court will ask whether a reasonable person would be satisfied or dissatisfied with the performance

A party's obligations to perform under a contract may be either ____ or _____ on the occurrence or nonoccurrence of some event

absolute; conditioned

If a party fails to substantially perform, the other party's remaining contractual obligations, if any, are ____________

discharged

a repudiation _______ the non-repudiating party from performing under the contract

excuses

Courts recognize and enforce both ____ and ______ implies conditions

express; implied

If a party's breach is non-material, the non-breaching party's duty to perform may be ________ until the breach is remedied or "cured." However, a non-material breach will not _____ excuse performance by the non-breaching party. Only a _____ breach will excuse the non-breaching party from its contractual obligations

suspended, excuse, material

If a party substantially performs, _____ _____ _____ ___ ______ and the other party must still perform its duties- although it may be entitled to recover damages for the substantially performing party's failure to perform fully

the contract remains in force