Excuses to Performance/Discharge of Performance

Question 1

What is the differnce between defenses and excuses?

Answer 1

Defenses relate to formation or enforcement. Excuses relate to performance.

Question 2

Generally, what is the rule for defenses?

Answer 2

Even if an agreement is supported by valuable consideration or a recognized substitute, contract rights may still be enforceable because:
* there is a defense to formation
* there is a defect in capacity
* a defense to certain terms
* other

Question 3

List the defenses to formation:

Answer 3

• Mistake (mutual, unilateral, by transmission)
• Misunderstanding
• Misrepresentation

Question 4

What are the defenses as to defect in capacity?

Answer 4

• Legal incapacity to contract (infants/minors, mental incapacity, intoxication)
• Duress
• Undue influence

Question 5

What are the defenses to enforcement?

Answer 5

• Illegality
• Unconscionability
• Public Policy

Question 6

What are the two “other” defenses to contracts?

Answer 6

• Absence of consideration (defect in formation)
• Statute of frauds (defense to enforcement)

Question 7

What is discharge of performance?

Answer 7

When the duty to perform is removed

Question 8

Discharge by performance

Answer 8

Full and complete performance of the contractual duty

Question 9

Discharge by tender of performance

Answer 9

Good faith tender of performance made in accordance with contractual terms

Question 10

Discharge by rescission

Answer 10

An express agreement between both parties to rescind contractual duties (it’s a new contract)

Question 11

Discharge by illegality

Answer 11

The subject matter of the contract has become illegal due to a subsequently enacted law or other governmental act

Question 12

Discharge by occurrence of a condition subsequent

Answer 12

This will serve to discharge contractual duties

Question 13

Discharge by lapse

Answer 13

Where duty is a condition concurrent to the other party’s duty, the obligation may lapse without breach

Question 14

Partial discharge by modification

Answer 14

If both parties modify a term/portion of the contract, that will serve to discharge the original terms that were the subject of the modification

Question 15

Discharge by cancellation

Answer 15

The physical destruction or surrender, if the parties manifest their intent to have these acts serve as a discharge, if consideration or one alternative is present

Question 16

Discharge by release

Answer 16

A release or contract not to sue, if in writing and supported by new consideration or promissory estoppel

Question 17

Discharge by accord and satisfaction

Answer 17

Accord: Agreement in which one party to an existing contract agrees to accept in lieu of the performance (must be supported by consideration)
Satisfaction: Performance of the accord agreement. Its effect is to discharge the original contract and the accord contract.

Question 18

Discharge by novation

Answer 18

A novation occurs when a new contract substitutes a new party to receive benefits and to assume duties that had originally belonged to one of the original parties under the terms of the old contract

Question 19

Elements for valid novation

Answer 19

1. Previous valid contract
2. Agreement among all parties (including new party) to the new contract
3. Immediate extinguishment of contractual duties between the original parties
4. A valid and enforceable new contract

Question 20

Discharge by substituted contract

Answer 20

When the parties to a contract enter into a second contract that immediately revokes the first contract

Question 21

Discharge by excuse

Answer 21

The occurrence of an unanticipated or extraordinary event that makes contractual duties (a) impossible or (b) impractiable to perform or (c) may frustrate the purpose of the contract.

Question 22

When does excuse apply?

Answer 22

Where the non-occurrence of the event was a basic assumption of the parties in making the contract and neither party expressly or impliedly assumed the risk of the event occurring

Question 23

Impossibility, generally

Answer 23

Contractual duties will be discharged if it has become impossible to perform them.

Question 24

Impossibility must be . . .

Answer 24

objective. The duties could not be performed by anyone.

Question 25

The impossibility must arise . . .

Answer 25

after the contract has been entered.

Question 26

Who is excused from performance under impossibility?

Answer 26

All parties

Question 27

Partial impossibility

Answer 27

If performance to be rendered under the contract becomes only partially impossible, the duty may be discharged only to that extent. The remainder of the performance may be required according to the contractual terms, even if remaining performance might involve added expense or difficulty.

Question 28

Temporary impossibility

Answer 28

Temporary impossibility only suspends contractual duties. It does not discharge them. When performance becomes possible again, the duty springs back into existence if the burden on either party would not be substantially increased or different from what was originally contemplated.

Question 29

Impracticability, generally

Answer 29

Where performance might still be possible but the occurrence of an event raises the cost of performance excessively and unreasonably. Just being more expensive will not excuse performance.

Question 30

Frustration of purpose, generally

Answer 30

Frustration of purpose will exist if the purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seekign discharge.

Question 32

Elements of frustration of purpose

Answer 32

1. supervening act or event 2. parties did not reasonably foresee the act or event occurring at the time of contract 3. Purpose of the contract has been completely or almost completely destroyed by this act or event 4. Purpose of the contract was known and understood by both parties at the time of contract

Question 33

Excuse: Forfeiture

Answer 33

If the nonfulfillment of a condition would cause a disproporionate forfeiture, fulfillment of the condition may be excused unless the fulfillment of the condition was a material part of the agreeed exchange

Question 34

In determining whether forfeiture is disproportionate . . .

Answer 34

a court must weigh the extent of the forfeiture by the obligee against the importance to the obligor of the risk from which he sought to be protected and the degree to which that protection will be lost if the non-occurrence of the condition is excused to the extent required to prevent forfeiture. The character of the agreement may affect the rigor with which the requirement is applied.

Question 35

Excuse: Prevention

Answer 35

When a promisor prevents, hinders, or renders impossible the occurrence of a condition precedent to its promise to perform, or to the performance of a return promise, the promisor is not relieved of the obligation to perform and may not legally terminate the contract for nonperformance.

Question 36

Minor vs material breach

Answer 36

Minor breach gives rise to cause of action for damages. Material breach also excuses performance of non-breaching party.

Question 37

What are the factors for determining whether a breach is material?

Answer 37

* Extent to which breaching party has already performed * Whether breach was willful, negligent, or the result of purely innocent behavior * Extent of uncertainty that breaching party will perform the remainder of the contract * Extent to which, despite the brief, the nonbreaching party will obtain the substantial benefit they bargained for * Extent to which nonbreaching party can be adequately compensated for the defective or incomplete performance by damages * Degree of hardship would be imposed on breaching party if found that breach was material

Question 38

Material breach and repudiation

Answer 38

An act that would ordinarily be considered a minor breach will be treated as a material breach if accompanied by a repudiation (i.e., words or conduct that a reasonable person would interpret as an expression of refusal to render any further performance)

Question 39

Effect of parties' agreement on material breach

Answer 39

The contract itself may make -- expressly or impliedly -- the time, manner, or other detail of performance a matter of bargained-for importance as to one party or the other. If so, deviations from the agreed performance that would have been minor would be considered material.

Question 40

What is the traditional approach to "time is of the essence"?

Answer 40

If the contract contains a time is of the essence provision, even a minor delay is a material breach.

Question 41

What is the modern approach to "time is of the essence"?

Answer 41

To avoid forfeitures, some courts hold that if the overall circumstances indicate that the date set for performance was not of great importance to the parties, a minor delay will not constitute a material breach even though the contract contains the provision, at least in the absence of more explicit language concerning the effect of a delay.