Chapter 18 Flashcards
Discharge
To terminate contractual duties OR to be finished with duties OR to no longer be required to perform
Performance
The fulfillment of one’s duties arising under a contract; the normal way of discharging one’s contractual obligations
Conditions
a qualification in a contract based on a possible future event and…. It can trigger performance or it can cause performance to end (two most common conditions).
Absolute Promises v. Conditions
Absolute promises: must be performed, the parties promising the acts will be in breach of contract
Condition: a possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract
Conditions Precedent
A condition precedent is one that must be fulfilled before a party’s performance can be required. The conditioning event occurs, then performance is required.
If the condition precedent does not occur…
the parties are discharged from their contractual obligations
Conditions Precedent - Real Estate Contract Example
Contract Financing section of the real estate contract. Third party financing is the most common type of financing. Condition precedent for the buyer actually building the house. We are in the deal to buy the house… but the buyer still has to secure the financing. If the buyer can’t secure the means to buy the house, the buyer should be relieved from the obligation to buy the house (discharged – performance is not required).
Conditions Precedent - Italian Sports Car
Individual who owns a Lambo. He had it insured with Farmers. It is stolen. He reports it to Farmers as being stolen. A month later the cops find the car but it is completely totaled. He sells it for scrap metal. And then he turns around to Farmers and wants the liability to claim to be paid. He did not give the insurance company the right to inspect before paying. Condition Precedent. The Individual gets nothing after a lengthy lawsuit.
Conditions Subsequent
A condition subsequent is one that operates to terminate a party’s absolute promise to perform. Occurs after performance is happening and it ends the contract.
The occurrence of the conditioning event…
extinguishes an existing contractual duty, so that the parties are discharged
Concurrent Conditions
the performance of each party is conditioned or dependent upon the simultaneous performance of the other party.
Express condition
A condition that is clearly stated and provided for in the contract by the parties
Implied-in-fact condition
One that is not expresed by the parties but is understood or inferred from the contract
Discharge by Performance
Full, complete performance in the manner prescribed by the contract discharges the performing party.
Tender of complete performance:
- An unconditional offer to perform by a party who is ready, willing, and able to do so.
- The tendering party is discharged if his tender is not accepted.
Substantial Performance
- Performance which does not greatly vary from the performance that is promised in the contract but is slightly less than that which reasonably could be expected.
- If performance is substantial, the other party’s duty to perform remains absolute, less damages for the deviation.
Jacobs & Young, Inc. v. Kent.
1920s. Construction contract. Mr. Kent hired Jacobs & Young to build him a country home. Contract has a very specific criteria in it about the pipes. “Well galvanized…” 4 descriptions of a specific pipe and manufacturer. Construction is done in phases. Today the bank releases money to the builder each time a phases is completed. Mr. Kent had been unavailable for the period of time when the pipe needed to be put in. The builder cannot get the Reading Manufacture pipe. Mr. Kent finds that there was a substitution done and is pissed. It would have required the builder to rip out completed walls. The homeowner will not release the last phase of the money. The builder sued the homeowner. Not complete performance, but according to the court it is substantially completed. The pipes were a “substantial equivalent”. The value was given without the specific Manufacturer pipe. If the value of what was contracted for and what was received was different, the homeowner wouldn’t have to pay as much. That’s not what happened. Kent is required to pay the full amount.
Change orders
common in today’s construction contracts. The builder is entitled to changes, after there is a conversation with the homeowner.
What is the measure of damages? - Substantial Performance
It’s the cost to bring the object of the contract into compliance, if the cost is reasonable under the circumstances. If that cost is unreasonable, then it’s the difference between the value of performance rendered and the performance that should have been rendered.
“personal” contract
If personal taste, preferences, aesthetics, fancy, or comfort is involved (construction contracts will never fit this)
Reasonable person standard
If satisfaction relates to operative fitness, marketability, merchantability, or mechanical utility
A breach of contract
any non-performance of anything in the contract
A “material” breach
performance is not at least substantial
