Excuse of nonperformance Flashcards
Excuse of nonperformance
Most obvious– 2. Excuse of performance because of the other guy’s nonperformance
Excuse because of anticipatory repudiation
To excuse other party’s duty to perform, must be
1) Unambigious 2)made prior to the time that performance was due
c. Time of recovery
i. A/R generally gives rise to an IMMEDIATE claim for damages for breach unless the claimant has already finished her performance.
ii. Exception:if the nonbreaching party has finished performance before breaching party repudiates. CANNOT recover for breach of k on the day of repudiation, must wait until due date of payment.
d. A repudiation may be retracted so long as 1) there has not been a material change in position by the other party and is 2) TIMELY
1. for ex other party hasn’t found another job or moved all equipment
1. if done without material change by non-repudiating party and in timely manner, the duty to perform is reimposed on the non-repudiating party. Performance can be delayed until adequate assurance is provided (like putting money in escrow).
iii. If so, the other party MUST PERFORM!
Excuse bc of insecurity about whether other side will perform
a. A/R requires unambiguous statement.
b. IF words or conduct of other party merely makes performance uncertain, then the other party can, in writing, demand adequate assurance and if it is “commercially reasonable” can suspend performance until it gets adequate assurance.
1. for ex. learning that other party was late on all goods were late on deliveries to other customers = reasonable grounds for uncertainty
ii. written demand for adequate assurance
iii. commercially reasonable to stop performance.
Excuse because of improper performance– non–UCC
Remember, perfect tender only applies to UCC sale of goods
Common law– material breach rule
1) damages can be recovered for any breach
2) only MATERIAL breach excuses non-breaching party from performance.
3) Defining material breach: substantial performance is not material.
- there are other ways to have material breach– this is a question of fact.
Other ways to have material breach:
i. Material breach because of the quality of performance
1. for ex. painting house purple instead of white.
ii. Material breach because of the quantity of performance.
1. if less than half of what was supposed to be done was done, we have a material breach.
Dont have to pay for material breaches under contract law, even if you are unjustly enriched
May still have to pay under quasi-k law–> look to equity
Do have to pay for nonmaterial breaches, but can still recover damages.
iii. Divisible contract corollary: in a divisible k, there can be k law recovery for substantial performance of a divisible part even though there has been a material breach of the entire k. Look at whether price is stated on per performance or lump sum.
1. For ex. if one piece of paper for painting of 10 apartments, but it’s worded as you’ll be paid 1k / apt NOT as 10k for the job→ construed as 10 separate agreements
2. so no excuse, even if the guy only paints 2 apartments, you must pay him for those 2. look to material breach on a per-apartment basis
Excuse because of nonoccurence of an express condition
To understand conditions think of the home sale k. For ex. you can only afford house if you can get a 5% mortgage. Buyer’s obligation is conditioned on her getting that mortgage. But let’s say she gets a 5.2% mortgage, she can still buy the house
Look for express conditions in the language of the k, words like “if, only if, provided that, so long as, subject to , in the event that, unless, when, until, and on condition that”
Even if the condition doesn’t happen–> parties can still go through with the k. Up to the person who is protected by the condition. But that person must try to make condition happen in good faith (try hard to get a 5% mortgage, e.g)
Unlike conditional acceptance– where no k is created.
Nonoccurence of a condition results in excuse, not breach
Standard for determining whether a condition occurred.
Strict compliance. Condition must be met exactly. (e.g. exactly under 5% mortgage)
ii. Exception: Forfeiture. some courts are bothered that for slight deviations, one party won’t be paid. Some courts→ refuse to requires strict compliance bc of excessive harm
iii. Exception: Condition of personal satisfaction of one of the parties— must be honest and in good faith
3. This provision doesn’t have to be strictly complied with—courts instead look to whether RP would be satisfied
What is the difference between conditions precedent and conditions subsequent.
- Almost all k conditions are conditions precedent—conditions that excuse performance until and unless the condition first occurs.
- Condition subsequent occur subsequent to the start of performance and excuse further performance when they occur
Both require strict performance. - For ex. must pay 300/hr until the temperature reaches 90 degrees. Must I contue paying when the temperature is 88 degrees and im tired—YES
Excuse by reason of a later k: recission
a. Recission (cancellation)
i. key is whether performance is still remaining from each of the k parties (executory)
ii. IF both agree to cancel→ valid
Excuse by reason of a later k: Accord and satisfaction
accord will have an agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation
1. For ex.: acceptance of a check marked “payment in full” where there is a bona fide dispute as to the amount owed.
ii. Effect of accord AND SATISFACTION
If accord is satisfied, the original obligation is excused. parties cannot recover on the original agreement
2. If the accord is not performed, then the other party can recover on either the original obligation OR the accord NOT both
Excuse by reason of a later k: Modification
i. agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.
1. agree that new agreement will replace the old agreement. SUBSTITUTING the ks.
- Unlike accord and satisfaction, for modification, you can’t recover on the original agreement, only on the substituted agreement
- accord if not performed is no excuse
- substituted agreement is an excuse on the first agreement, whether performed or not.
iii. When do you do an accord, and when do you do a substituted agreement?
1. if the agreement uses words like “if and then” → it’s an accord.
2. like “IF d delivers 20 widgets by the end of the month, THEN the debt will be excused.”
Excuse by reason of a later k: Novation
i. Defined: a novation is an agreement between BOTH parties to an existing k to the substitution of a new party, i.e. same performance, different party.
1. EVERYONE must agree.
ii. Only the new party is liable after novation. Unlike an assignemnt or delegation, which is unilateral and does not excuse the original.
Excuse by reason of a later k: discharge by account stated
parties may consolodiate everything owed between them. this merges all txs and discharges all claims owed.
Excuse of performance by reason of a later unanticipated event: Damage or destruction of subject matter of k
a. Damage or destruction of subject matter of k.
For ex: concert location burns down, singer can’t sue person who booked the concert. Existence of the concert was an IMPLIED CONDITION
i. Implied condition defined
ii. Common law:
1. house you’ve contracted to paint burns down, you’re excused from performing.
iii. Article 2:
1. If what is damaged or destroyed is a good, always do risk of loss first. (agreement, breach, common carrier, catchall (if seller is merchant–> bears risk until delivery; if seller is not merchant–> bears risk until tender)
- If risk of loss on the buyer – buyer must pay
- If risk of loss is on the seller— buyer doesn’t have to pay.
- Buyer can recover damages if the k was for fungible goods. For ex. loss profits bc buyer has to now buy more expensive grits. Seller could have gone and gotten more
- If the k was for identified goods, buyer cannot recover damages. For ex, sale of specific ‘73 cadillac that was destroyed while risk of loss on the seller. Seller is excused. Performance is impossible
Excuse of performance by reason of a later unanticipated event: Subsequent law or regulation
either excuse by impossibility or by frustration of purpose
i. Later law makes performance of k illegal—excuse by impossibility .
1. For ex. k for nude dancing, town later makes nude dancing. Strip club is excused from performing and paying its dancer.
ii. Later law makes mutually understood purpose of k illegal-excuse by frustration of purpose
1. For ex: two people enter into k for plastic surgery, and purpose of platic surgery is to make stripper better stripper. But then stripping is outlawed.
a. buyer of plastic surgery excused from getting/paying for plastic surgery
2. MUST BE MUTUALLY UNDERSTOOD PURPOSE OF K
Excuse of performance by reason of a later unanticipated event: death after k
i. Generally: Death DOES NOT make a person’s contract obligations disappear
1. for ex you take on debt , and then you die. creditor can sue estate for recovery.
2. for ex: you k to paint house. after k but before the owner of house pays OR the painter paints, painter dies. Owner hires another painter who charges $5k more, can sue for $5k expectation damages from old painter’s estate.
ii. Exception: death of party to k who is “special” person excuses performance
1. for ex. tom brady and patriots. if he dies you can’t sue his estate
iii. Compare: death during offer period kills the offer. but after k is made death does not provide for excuse.
Implied condition
Court will imply a condition if 1) nature of k suggests that parties intended to include that condition 2) fairness requires it (constructive condition
i. For ex: Constructive conditions of exchange in construction or employement ks: court will imply that builder or EE must perform at least substantially before other side’s performance (payment of $) becomes due
d. duty of good faith & fair dealing implied into ALL (both comm law and UCC) Ks; includes duty not to:
i. -hinder other party’s performance
ii. -must cooperate if necessary
e. wrongful interference with occurrence of condition will excuse the performance by non-interfering party .
