Chapter 18

Question 1

Conditions

Answer 1

The most common way to discharge, terminate, contractual duties is by the performance of those duties

Question 2

Three Types of Conditions

Answer 2

1. Conditions Precedent
2. Conditions Subsequent
3. Concurrent Conditions

Question 3

Conditions Precedent

Answer 3

• A condition that must be fulfilled before a party’s performance can be required. The condition precedes the absolute duty to perform.
• A contract to lease university housing may be conditioned on the person’s being a student at the university.

Question 4

Conditions Subsequent

Answer 4

• When a condition operates to terminate a party’s absolute promise to perform.
• The condition follows, or is subsequent to, the time at which the absolute duty to perform arose. If the condition occurs, the party’s duty to perform is discharged.
  o Law firm hires an employee but will fire her after failing bar exam twice.

Question 5

Concurrent Conditions

Answer 5

When each party’s performance is conditioned on the other party’s performance or offer to perform (tender, defined shortly)

These conditions exist only when the contract expressly or impliedly calls for the parties to perform their respective duties simultaneously

Question 6

Expressed Conditions

Answer 6

are provided for by the parties’ agreement. normally prefaced by the words if, provided, after, or when.

Auto insurance policies include what is known as a cooperation clause. This clause states that if the insured person is involved in an accident, he or she must cooperate with the insurance company in the defense of any claim or lawsuit.

Question 7

Implied Conditions

Answer 7

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

Courts may imply conditions from the purpose of the contract or from the intent of the parties.

Question 8

Discharge By Performance

Answer 8

1. Complete Performance
2. Substantial Performance
3. Performance to Satisfaction of Other
4. Material Breach of Contract
5. Anticipatory Repudiation
6. Time for Performance

Question 9

Tender

Answer 9

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

Question 10

Material vs. Minor

Answer 10

• If the breach is minor (not material), the nonbreaching party’s duty to perform is not entirely excused, but it can sometimes be suspended until the breach has been remedied.
• Once the minor breach has been cured, the nonbreaching party must resume performance of the contractual obligations.

Question 11

Anticipatory Repudiation

Answer 11

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.

Repudiation is a material breach

Question 12

Anticipatory Repudiation and Market Prices

Answer 12

Occurs when performance of the contract would be extremely unfavorable to one of the parties because of a sharp fluctuation in market prices.

Question 13

Discharge by Agreement

Answer 13

1. Discharge by Mutual Rescission
2. Discharge by Novation
3. Discharge by Settlement Agreement
4. Discharge by Accord and Satisfaction

Question 14

Discharge by Novation

Answer 14

Occurs when both of the parties to a contract agree to substitute a third party for one of the original parties.

Question 15

Requirements for Discharge by Novation

Answer 15

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

Question 16

Discharge by Operation of Law

Answer 16

1. Material Alteration of the Contract
2. Statutes of Limitations
3. Bankruptcy
4. Impossibility of Performance
5. Commercial Impracticability
6. Frustration of Purpose

Question 17

When Performance is Impossible

Answer 17

When one of the parties to a personal contract dies or becomes incapacitated prior to performance.

When the specific subject matter of the contract is destroyed.

When a change in law renders performance illegal.

Question 18

Commercial Impracticability

Answer 18

 anticipated performance must become significantly more difficult or costly.
 the added burden of performing must not have been foreseeable by the parties when the contract was made.

Question 19

Frustration of Purpose

Answer 19

a contract will be discharged if unforeseen supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract

Question 20

Difference in Frustration of Purpose and Commercial Impracticability

Answer 20

• Commercial impracticability involves an event that increases the cost or difficulty of performance.
• Frustration of purpose typically involves an event that decreases the value of what a party receives under the contract.