Excusing Performance Flashcards
What is required for a contract to be excused based on mistake?
The mistake must significantly impact the value of the transaction for one or both parties
What is a unilateral mistake?
One party’s mistake about material facts as they exist at the time of contracting
When is unilateral mistake excused?
A unilateral mistake will only be excused if:
1. the other party knew or had reason to know of the party’s mistake
2. there was a serious clerical error and reliance, unless the error was caused by extreme negligence or the other party relied on the clerical error
What is mutual mistake
Where both parties labor under a common faulty assumption concerning the present facts
When is a contract voidable based on a mutual mistake?
A contract is voidable by the disadvantaged party when all of the following requirements are met:
1. mistake relates to material facts
2. mistake was made by both parties
3. the disadvantaged party did not bear the risk of mistake
When will a contract be excused for impossibility?
Both parties will be excused from performance if performance has been rendered impossible by events occurring after contract was formed.
What are requirements for excuse by impossibility?
- Impossibility is objective and performance is literally impossible for anyone due to circumstances outside the parties’ control
- the contingency that creates the impossibility arose after making the contract and was unknown and unanticipated by the parties
Is impossibility recognized under the UCC?
Yes, impossibility is recognized by both common law and under the UCC
When may a contract be excused based on impracticability?
A promisor may be excused from performance where unforeseen difficulties have made performance prohibitively expensive or otherwise extremely burdensome
What are requirements for impracticability excuse under common law?
- impracticability was unforeseen
- The risk was neither assumed nor allocated by the parties
- increased cost or burden of performance would now be far beyond what either party anticipated
What are requirements for impracticability excuse under UCC?
A shortage of goods must be caused by something like, war, embargo, local crop failure, or unforeseen shutdown of supply
When is a contract excused due to frustration of purporse?
When the value of the benefit of the contract to the receiving party is dramatically reduced
When will frustration of purpose excuse performance?
A receiving party’s obligation will be discharged due to frustration of purpose when:
1. principal purpose of entering contract is substantially frustrated
2. frustration was substantial in nature
3. non-occurrence of the event that cause the frustration was a basic assumption of the contract
When may performance be excused by Rescission?
Rescission may excuse performance when both parties agree mid-performance and consideration is given by each party to discharge the other party’s duties
What is an accord?
An accord is when an obligee promises to accept substituted performance in satisfaction of the obligor’s existing duty
