Performance, Breach, & Discharge

Question 1

CL

Answer 1

• material breach
• minor breach

Question 2

material breach (CL)

Answer 2

substantial performance doctrine
occurs when a party does NOT render substantial performance
- a material breach EXCUSES the non-breaching party’s performance

Question 3

minor breach (CL)

Answer 3

does NOT excuse performance
- BUT, the non-breaching party may bring a separate action for damages

Question 4

determining material breach

Answer 4

to determine if the breach is material, courts analyze:
1. extent of performance,
2. adequacy of compensation for loss to the non-breaching party,
3. hardship,
4. likelihood the breaching party will cure, and
5. whether the breach was intentional

Question 5

delayed performance

Answer 5

a party’s failure to perform by a specified time is typically NOT a material breach UNLESS
- it significantly deprives the other party of the benefit to the K, OR
- time of the essence clause: K mandates completed performance by a specific date (requiress “time of the essence” or similar language)

Question 6

UCC performance requirement

Answer 6

perfect tender rule

Question 7

perfect tender rule

Answer 7

seller MUST deliver perfectly conforming goods
- the smallest non-conformity is a breach AND buyer MAY reject all or a portion of the goods

Two exceptions:
1. right to cure
2. installment K

Question 8

right to cure

Answer 8

a seller has a right to cure when:
1. time for performance has NOT yet expired, OR
2. if the seller had reasonable grounds that substitute goods would be accepted (eg, same type of non-conforming goods had been accepted by buyer in the past)

Question 9

installment K

Answer 9

buyer can:
1. Cancel K: ONLY IF an installment is so defective that it substantially impairs the value of the ENTIRE K
2. Reject an installment: ONLY IF:
- non conformity substantially impairs the installment, AND
- time to cure has passed

Question 10

UCC Acceptance of goods

Answer 10

occurs when:
1. after reasonable opportunity to inspect, buyer signifies to seller that goods are conforming OR that it will retain them desipte a non-conformity,
2. fails to reject goods after a reasonable opportunity to inspect, OR
3. does any act inconsistent w/ seller’s ownership of the goods (eg, sells, damages, etc)

NOTE: buyer is obligated to pay for goods once accepted UNLESS revocation of acceptance is allowed

Question 11

UCC revocation of acceptance

Answer 11

a buyer may later revoke acceptance of goods ONLY IF:
1. the non-conformity substantially impairs the value of the goods, AND
2. either:
- the defect was difficult to discover (a latent defect),
- acceptance was reasonably induced by seller’s assurances, OR
- the buyer had a reasonable assumption the defect would be cured

Question 12

UCC reasonable time to revoke acceptance

Answer 12

Revocation of acceptance MUST occur w/in a reasonable time after buyer discovers or should have discovered the nonconformity
- NOT effective until buyer notifies the seller
- MUST occur BEFORE there is any substantial changes in the goods (not caused by their own defects)

Question 13

Obligations of Good faith & fair dealing

Answer 13

every K contains an implied obligation of good faith and fair dealing to act honestly and fairly

UCC: requires:
1. honesty in fact, AND
2. observance of reasonable commercial stanards of fair dealing

Question 14

conditions

Answer 14

makes performance contingent upon the occurrence or completion of the condition

Excuse of Conditions: occurs when
1. waiver: voluntarily giving up protection BUT can retract the waiver if the other party has not relied on it, OR
2. hinderance: the protected party wrongly prevents OR fails to make a good faith effort to satisfy the condition

Question 15

impossibility

Answer 15

performance is discharged when it’s objectively impossible to perform, such as:
1. death or incapacity of a person necessary to effectuate the K (otherwise on estate)
2. unanticipated destruction of the subject matter of the K, OR
3. supervening illegality: a subsequent & unanticipated law/regulation makes performance illegal

NOTE: Restatement 2nd of Ks replaced the term “impossibility” w/ “impracticability”

Question 16

impracticability

Answer 16

performance is discharged when:
1. an event occurs after contract formation,
2. that is unanticipated by BOTH parties,
3. making performance extremely and unreasonably difficult/expensive

Question 17

frustration of purpose

Answer 17

discharges performance when the purpose of the K no longer exists

Occurs when:
1. a party’s principal purpose is substantially frustrated,
2. by an unforeseeable superseding event outside of their control, AND
3. the event’s occurrence was a basic assumption of the K

NOTE: the other party needs to know about the party’s principal purpose

Question 18

anticipatory repudiation

Answer 18

occurs when a party unequivocally communicates that they are unable or unwilling to perform under the K

Question 19

anticipatory repudiation reaction options

Answer 19

if anticipatory repudiation occurs, the non-breaching party may:
1. treat the K as repudiated & sue for damages (before time of performance is due),
2. treat the K as discharged,
3. wait until performance is due then sue, OR
4. urge the other party to perform

Question 20

retracting repudiation

Answer 20

a party can retract its repudiation and restore the K UNLESS the non-breaching party has:
1. cancelled the K,
2. materially changed its position, OR
3. indicated that they consider the repudiation final

Question 21

insecurity & demand for adequate assurances

Answer 21

if there are reasonable grounds for being insecure about performance, THEN a party may make a writtne request for assurance that the other party will perform
- a party MAY suspend performance until adequate assurances are received
- if the other party does NOT give assurances after asked to do so, the requesting party may treat that as an anticipatory repudiation

NOTE: no need to respond to unreasonable demand for adequate assurances (based on UNREASONABLE grounds)

Question 22

accord & satisfaction

Answer 22

• Accord: an executory K between parties promising to relieve a party of their contractual obligations in return for a specific act
• Satisfaction: upon satisfaction of the accord (the new act), the party is excused from further performance under the OG K

If the party fails to satisfy the accord, the other party may sue under either the:
1. OG K, OR
2. accord terms

Question 23

Novation

Answer 23

occurs when:
1. all parties to a K (including the new party)
2. agree to discharge an OG party to the K, AND
3. substitute a 3P (new party) in the OG party’s place

NOTE: the new party assumes all duties required of the OG party and the OG party’s duties are discharged/excused (they cannot be sued for breach)

OG party is excused/discharged