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Flashcards in Chapter 18 Deck (58)
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1
Q

Discharge

A

To terminate contractual duties OR to be finished with duties OR to no longer be required to perform

2
Q

Performance

A

The fulfillment of one’s duties arising under a contract; the normal way of discharging one’s contractual obligations

3
Q

Conditions

A

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).

4
Q

Absolute Promises v. Conditions

A

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

5
Q

Conditions Precedent

A

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.

6
Q

If the condition precedent does not occur…

A

the parties are discharged from their contractual obligations

7
Q

Conditions Precedent - Real Estate Contract Example

A

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).

8
Q

Conditions Precedent - Italian Sports Car

A

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.

9
Q

Conditions Subsequent

A

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.

10
Q

The occurrence of the conditioning event…

A

extinguishes an existing contractual duty, so that the parties are discharged

11
Q

Concurrent Conditions

A

the performance of each party is conditioned or dependent upon the simultaneous performance of the other party.

12
Q

Express condition

A

A condition that is clearly stated and provided for in the contract by the parties

13
Q

Implied-in-fact condition

A

One that is not expresed by the parties but is understood or inferred from the contract

14
Q

Discharge by Performance

A

Full, complete performance in the manner prescribed by the contract discharges the performing party.

15
Q

Tender of complete performance:

A
  1. An unconditional offer to perform by a party who is ready, willing, and able to do so.
  2. The tendering party is discharged if his tender is not accepted.
16
Q

Substantial Performance

A
  1. 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.
  2. If performance is substantial, the other party’s duty to perform remains absolute, less damages for the deviation.
17
Q

Jacobs & Young, Inc. v. Kent.

A

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.

18
Q

Change orders

A

common in today’s construction contracts. The builder is entitled to changes, after there is a conversation with the homeowner.

19
Q

What is the measure of damages? - Substantial Performance

A

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.

20
Q

“personal” contract

A

If personal taste, preferences, aesthetics, fancy, or comfort is involved (construction contracts will never fit this)

21
Q

Reasonable person standard

A

If satisfaction relates to operative fitness, marketability, merchantability, or mechanical utility

22
Q

A breach of contract

A

any non-performance of anything in the contract

23
Q

A “material” breach

A

performance is not at least substantial

24
Q

A party who totally fails to perform is not discharged and is liable for damages for breach of contract. What about the other party?

A

The other party, however, is discharged and need not hold himself ready to perform.

25
Q

If there is a minor, nonmaterial breach of contract, the breaching party is liable for damages if the breach is not cured. What about the nonbreaching party?

A

The nonbreaching party is not discharged and is required to perform

26
Q

Anticipatory Repudiation of Contract

A

When one party to a contract refuses to perform the contract in advance of the performance date
(shipment of goods, ongoing contract)

27
Q

Repudiation

A

Refusal to perform

28
Q

Anticipatory

A

Before performance is due

29
Q

If a party repudiates a contract, it is treated as…

A

a present material breach of contract

30
Q

Nonbreaching party has several choices under anticipatory repudiation:

A

Permitted to bring an action for damages immediately
File a suit even if the scheduled time for performance under the contract is still in the future

31
Q

If time for performance is not stated…

A

performance is to be rendered within a reasonable period of time.

32
Q

The time requirement must be…

A

complied with if parties stipulate that time is of the essence (vital).

33
Q

If time for performance is specified, but not vital, performance prior to or within a few days of the stated time…

A

satisfies the contract.

34
Q

Discharge:

A

To terminate contractual duties OR
To be finished with duties OR
To no longer be required to perform

35
Q

Discharge by Agreement

A
  1. Discharge by Mutual Rescission
  2. Discharge by Novation
  3. Discharge by Settlement Agreement
  4. Discharge by Accord and Satisfaction
36
Q

Discharge by Mutual Rescission

A

Undoing of the parties of the contract. Agreement of Recission has to have consideration. If one of the parties has already performed we have to give them something new or give them something back. q

37
Q

Discharged by Novation

A

The third person is substituted for one of the original parties with the consent of the party entitled to receive the performance. Everyone involved in the contract is in the know.

38
Q

The original obligation of the prior party is extinguished, and the prior party is…

A

discharged. (original party is released)

39
Q

Discharge by Agreement

A

The agreement can be contained in the original contract, or the parties can form a new contract for the express purpose of discharging the original contract.

40
Q

Discharge by Settlement Agreement

A

arises out of a genuine dispute over the obligations under an existing contract will be recognized at law.

41
Q

Discharge by Accord and Satisfaction

A
  1. An accord is an executory contract to perform some act in order to satisfy an existing contractual obligation. Unliquidated debt
  2. Satisfaction is the performance or execution of the accord agreement.
42
Q

Discharge by Operation of Law

A
  1. Material Alteration of the Contract
  2. Statutes of Limitations
  3. Bankruptcy
  4. Discharge by Impossibility/Impractability of Performance
43
Q

Material Alteration of the Contract

A

If there is a material alteration of a written contract without consent, the contract is voidable by the party who was unaware of the change.

44
Q

What are the options of the party who is unaware of the change under material alteratin of the contract?

A

The contract is either discharged or as enforceable in accordance with the original terms or with the terms as altered

45
Q

Statutes of limitations

A

Statutes provide that a person who has a cause of action must bring his action or lawsuit within a specified period of time.

46
Q

Failure to commence an action/suit within the period of limitation…

A

bars access to judicial remedies but does not extinguish a debt or underlying obligation

47
Q

Bankruptcy

A

A discharge in bankruptcy operates as a release of a debtor from most debts and contractual obligations.

48
Q

After a decree of discharge in bankruptcy is issued by a Bankruptcy Court…

A

A partial payment by a debtor will not revive the obligation.

49
Q

Discharge by Impossibility of Performance

A

ONLY THREE SITUATIONS!!
a) Death, serious illness, or incapacitation of a party who was to render personal services.
b) Destruction of specific subject matter of contract. Dog dies, crops completely burned in a fire, car completely totalled.
c) Change in law making performance illegal.

50
Q

Discharge by Temporary Impossibility

A

An occurrence or event that makes it temporarily impossible to perform the act in the contract will suspend performance until the impossibility ceases.

51
Q

When the impossibility ceases…

A

the parties must ordinarily perform the contract

52
Q

If the laps of time and change in circumstances make the contract substantially more burdensome to perform…

A

the parties will be discharged

53
Q

Keefe Hurwitz contracted to sell his home in Louisiana to Wesley and Gwendolyn Payne for $241,500. Four days later, Hurricane Katrina made landfall and caused extensive damage to the house. The cost of repairs was estimated at $60,000. Hurwitz refused to spend $60,000 for the repairs and still sell the property to the Paynes for the previously agreed-on price of $241,500. The Paynes filed a lawsuit to enforce the contract.

A

Hurwitz argued that Hurricane Katrina had made it impossible for him to perform and had discharged his duties under the contract. The court, however, ruled that Hurricane Katrina had caused only a temporary impossibility. Hurwitz was required to pay for the necessary repairs and to perform the contract as written. He could not obtain a higher purchase price to offset the cost of the repairs.

54
Q

In 1942, actor Gene Autry was drafted into the U.S. Army. Being drafted rendered his contract with a Hollywood movie company temporarily impossible to perform, and it was suspended until the end of World War II in 1945. When Autry got out of the army, the purchasing power of the dollar had declined so much that performance of the contract would have been substantially burdensome to him.

A

The contract was discharged. There was a change in circumstances because of the wartime. A new contract was formed. Temporary Impossibility.

55
Q

Commercial Impracticability

A

Subjective… harder to perform.
An unforeseen event that has occurred that makes performance SUBSTANTIALLY more burdensome/costly/difficult to perform.

56
Q

A couple has gotten married. Reception at a wedding venue. Pay separately for all the vendors. An hour into the reception and the electricity just randomly goes out. It’s August… so it is super hot. Vendor contracts that cannot be fully performed.

A

Court said the electricity was an unforeseen event. Discharged. The bride and groom don’t have to pay full price. Pro-rated every contract… not just the venue itself. Commercial Impracticability.

57
Q

Frustration of Purpose

A

Makes the contract’s PURPOSE unattainable. Both parties have a purpose that cannot be accomplished.

58
Q

Cotton farmer. I do not own the machine that strips the cotton in the field. Rented from John Deer. Entered into the lease agreement. The night before I strip the cotton, the field of cotton is destroyed by a fire.

A

There is now no need for the cotton stripper. The contract is over the machine… I now have no need for a machine to strip cotton… I have no cotton. Frustration of Purpose