Excuses for Nonperformance

Question 1

Conditions - Overview

Answer 1

Conditions are agreed-upon limitations on performance in a K

• Performance is contingent on the occurrence of some event
• e.g. A agrees to buy B’s car is B gets new tires; B getting new times is a condition of A’s performance (buying the car)

Question 2

Conditions - Indicated by

Answer 2

Words such as “if: “provided that,” “subject to,” etc.

Question 3

Conditions - Condition vs. Promise

Answer 3

Failure of a promise leads to a breach; failure of a condition relieves a party’s performance obligation

Question 4

Conditions - Condition Precedent

Answer 4

Condition must occur before performance due; non-occurrence excuses performance

Question 5

Conditions - Condition Subsequent

Answer 5

Condition that occurs after performance has begun and excuses duty to perform

Question 6

Conditions - Purpose Controls Interpretation

Answer 6

Substantial performance of a condition may suffice if it fulfills the condition’s purpose

• Parties’ intent controls: e.g. if a condition is clearly designed to protect one party, it will be interpreted consistently with that intent
• A party protected or benefitted by a condition may waive or estop the condition from being enforced

Question 7

Conditions - Excuse

Answer 7

Conditions may be legally excused by breach repudiation, etc.

• A party whose performance is subject to a condition cannot prevent or hinder the condition’s occurrence; will result in excuse of condition

Question 8

Insecurity & Adequate Assurances - Overview

Answer 8

Insecurity arises when a party to a K has reasonable grounds to believe the other party will be unwilling or unable to perform under the K

• Insecure party may demand adequate assurances the other party will perform and suspend performance in the meantime
• Arises out of UCC, but many states apply to non-UCC Ks

Question 9

Insecurity & Adequate Assurances - Demand for Adequate Assurances

Answer 9

Must be made in writing based on reasonable and justified grounds for insecurity

• No response required if demand is unjustified or unreasonable (i.e. if party seeking adequate assurances is unreasonably secure)
• Suspension of Performance: A justifiably insecure party may suspend performance until adequate assurances are provided

Question 10

Insecurity & Adequate Assurances - Adequate Assurances

Answer 10

Commercially reasonable commitment from a party that it will perform under the K

• If not provided, insecure party may treat K as repudiated
  - Failure to respond to unreasonable demand is not a repudiation
• If adequate assurances are provided, the formerly insecure party must perform; failure to do so will constitute a breach

Question 11

Insecurity & Adequate Assurances - Insecurity vs. Anticipatory Repudiation

Answer 11

Insecurity involves uncertainty regarding the other party’s performance, whereas anticipatory repudiation involves a clear indication the other party will not perform

Question 12

Anticipatory Repudiation - Overview

Answer 12

Anticipatory repudiation arises when one party to a K makes it clear that he will not perform under the K

• Effect: excuses performance by the other party

Question 13

Anticipatory Repudiation - Requirements (3)

Answer 13

1) Unambiguous Act: Makes an unambiguous statement of conduct

2) Prior to Full Performance: Prior in time performance is due

3) Indicating Non-Performance: Which indicates he will not perform
- E.g. A hires B to remodel A’s kitchen, B is almost finished when A tells B she does not want the remodel and will not pay; B can treat K as breached, which excuses B’s obligation to continue working

Note: Distinguish from insecurity which involves mere uncertainty regarding other party’s performance

Question 14

Anticipatory Repudiation - Withdrawal

Answer 14

Repudiation can be withdrawn unless other party has either:

a) materially changed position in reliance on the repudiation,

b) cancelled the K in response to the repudiation, or

c) indicated they consider the repudiation to be final

Question 15

Anticipatory Repudiation - Non-repudiating Party’s Options

Answer 15

She may either:

a) Treat the anticipatory repudiation as a total repudiation and sue,

b) Suspend performance until performance date is due and wait to sue

c) Treat repudiation as an offer to rescind and treat K as discharged

d) Ignore repudiation and urge promisor to perform

Question 16

Impossibility and Impracticability - Overview

Answer 16

If an unforeseen event occurs after K formation but before performance is complete, performance may be excused as impossible or impracticable

Question 17

Impossibility and Impracticability - Requirements

Answer 17

An unforeseen event, which neither party assumed would occur, must make completing performance either:

a) Impossible: Performance is objectively impossible, or

b) Impracticable: Performance is only possible with extreme and unreasonable difficulty or expense

Question 18

Impossibility and Impracticability - Common Unforeseen Events

Answer 18

Substantial damage or destruction of K’s subject matter
- Damage or destruction must not have been either party’s fault

Death: K obligations generally survive the death of a party, unless deceased party’s K obligations are non-delegable
- Usually only unique personal services are non-delegable

Subsequent law or regulation (e.g. supervening illegality)
- If performance becomes illegal, excuse by impossibility

Question 19

Frustration of Purpose - Overview

Answer 19

A party’s duty to perform under a K may be discharged if an unforeseen event occurs that undermines (i.e. frustrates) one or both party’s principal purpose for entering into the K

Question 20

Frustration of Purpose - Requirements (3)

Answer 20

A K may be discharged if:

1) AN UNEXPECTED EVENT DESTROYS ONE OR BOTH PARTY’S PURPOSE FOR ENTERING INTO THE K;
- Whether performance is possible after the event is irrelevant
- Issue is whether performance after the unforeseen event nullifies one or both party’s original purpose for the K

2) The unforeseen event is not the fault of the frustrated party; and

3) The non-occurrence of the event was a basic assumption of the K
- Does not have to be a stated assumption in the K