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Fundamentals of Business Law and Ethics > Performance and Discharge > Flashcards

Flashcards in Performance and Discharge Deck (29)
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A party is discharged when she has no more duties under a contract.


Discharged Contracts

Most contracts are discharged by full performance. Sometimes the parties discharge a contract by agreement


Commercial Impracticability

Claim that you can't be forced to rent space that was useless or buy advertising for a business that had close. (Very difficult to win)


Condition Precedent

Some event had to occur before she was obligated to pay



An event that must occur before a party becomes obligated under a contract. No special language needed to create the condition ("provided that" is often used though). As long as parties intended to create a condition, a court will enforce it.


Common in All Conditional Clauses

If the condition does not occur, one party will probably be discharged without performing


Condition Precedent

An event must occur before a duty arises. Unless and Until. Plaintiff has burden to prove condition happened


Condition Subsequent

The condition must occur after the particular duty arises. Defendant who must prove that the condition occurred, relieving him of any obligation


Concurrent Conditions

Both parties have a duty to perform simultaneously. Both parties agree to do something and each performance is the condition for the other's performance.


Strict Performance

A party is not generally required to render strict performance unless the contract expressly demands it and such a demand is reasonable.


Substantial Performance

In a contract for services, a party that substantially performs its obligations will receive the full contract price, minus the value of any defects


Failure to give Substantial Performance

Party that fails to perform substantially receives nothing on the contract itself and will only recover the value of the work, if any


When is performance substantial?

How much benefit has the promisee received? If it is a construction contract, can the owner use the thing for its intended purpose? Can the promisee be compensated with money damages for any defects? Did the promisor act in good faith?


Personal Satisfaction Contract

The promisee makes a personal, subjective evaluation of the promisor's performance.


Subjective Standard in Personal Satisfaction Contracts

A court applies a subjective standard only if assessing the work involves personal feelings, taste, or judgment and the contract explicitly demanded personal satisfaction. Promisee's judgment does not have to be reasonable.


Objective Standard

Standard will be used if assessing the work does not involve personal judgement or if the contract failed to explicitly demand personal satisfaction. Promisee's judgment of the work must be reasonable


Good Faith

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. Remain faithful to the "agreed common purpose and justified expectations of the other party"


Time is of the Essence Clause

A time of the essence clause will generally make contract dates strictly enforceable. Merely including a date for performance does not make time of the essence



When one party breaches a contract, the other party is discharged.


Material Breach

Courts will only discharge a contract if a party committed a material breach. One that substantially harms the innocent party and for which it would be hard to compensate without discharging the contract


Anticipatory Breach

When one party makes it unmistakably clear that it will not honor the contract.


Statute of Limitations

A statute of limitations begins to run at the time of injury and will limit the time within which the injured party may file suit



One party seeks to discharge without fulfilling its contract obligations because it was "impossible"


True Impossibility

Rare. Means that something has happened making it utterly impossible to do what the promisor said he would do.


True Impossibility Limited to 3 Caauses

1. Destruction of the Subject Matter (vineyard example)
2. Death of the Promisor in a Personal Services Contract.
3. Illegality. (construction in Iran example)


Commercial Impracticability

Means some event has occurred that neither party anticipated and fulfilling the contract would now be extraordinarily difficult and unfair to one party


Frustration of Purpose

Means some event has occurred that neither party anticipated and the contract now has no value for one party.


Financial Difficulties

Mere financial difficulties will never suffice to discharge a contract. If the promisor must use a different means to accomplish her task, at a greatly increased cost, she probably does have a valid claim of impracticability


Force Majeure Clause

is significant, but not necessarily dispositive. Companies sometimes include a force majeure clause, allowing cancellation of the agreement in case of extraordinary and unexpected events.