Performance and Excuse of Nonperformance

Question 1

Performance at common law

Answer 1

A party’s basic duty at common law is to substantially perform all that is called for in the contract
-Essential purpose of contract
-Material breach not ok

Question 2

Performance under Article 2

Answer 2

Requires a perfect tender
-The delivery and condition of the goods must be exactly as promised in the contract
-All parties must fact in good faith

Question 3

Seller’s Obligation of Tender and Delivery

Answer 3

Non carrier cases (no intent for third party shipper)
-Tender is when the seller puts conforming goods on hold for a time sufficient for the buyer to take possession
-Seller must give buyer reasonable notice
-Tender must be at a reasonable hour
-Place of deliver is generally the seller’s place of business

Carrier cases (intent for third party shipper)
1. Shipment contract (seller has not agreed to tender at specific destination)
-Contract with carrier and give it the goods
-Obtain and promptly tender documents necessary for buyer to take possession
-Promptly notify the buyer of shipment
2. Destination contract (seller has agreed to tender at specific destination)
-Seller must, at the destination, put and hold conforming goods at the buyer’s disposition

Question 4

Buyer’s Obligation to Pay

Answer 4

Shipment contract: price is due when the goods are put in the hands of the carrier

Destination contract: price is due when the goods reach the named destination

Non carrier case: price is due concurrently with tender of delivery

Installment contract: payment for each installment if the price can be apportioned

Question 5

Payment by check

Answer 5

Tender of payment by check is sufficient unless the seller demands cash and gives the buyer time to get it

Question 6

Buyer’s Right of Inspection

Answer 6

The buyer has a right to inspect the goods before they pay unless the contract provides for payment C.O.D. or provides otherwise

Question 7

Promise vs. Condition

Answer 7

Conditions limit the obligation created by the contract
-Failure to comply with condition is not a breach of contract, but it discharges liability of the promisor
-Language: “if,” “as long as,” “until,” “when,” “provided that,” “on condition that”

Promises are commitment to do or refrain from doing something
-The failure to perform a promise is a breach of contract
-Language: “promise” or “agree”

Question 8

Express condition

Answer 8

Express conditions must be perfectly satisfied
-i.e., a party will only pay if “satisfied” with the other’s performance (reasonable person), unless of personal judgement or taste (subjective)
-i.e., mechanical fitness, utility, or marketability in construction or manufacturing contract (reasonable person)

Question 9

Condition precedent

Answer 9

Condition must occur before performance is due
-Creates duty
-Agreement to pay if X happens

Question 10

Condition subsequent

Answer 10

Condition cuts off already existing duty
-Excuses performance
-Agree to pay unless X happens

Question 11

Excuse of Conditions

Answer 11

1. Other party fails to cooperate
2. By waiver or estoppel
3. Material breach by other party
4. Anticipatory repudiation (other party indicates they won’t perform)
   -Party can retract its repudiation any time before performance is due unless the other party changed their position in reliance on the repudiation
5. Effect of prospective failure
   -Innocent party can suspend further performance until given adequate assurance
   -If other party fails to provide adequate assurances, it is treated as anticipatory repudiation and the party is excused

Question 12

Discharge by recession

Answer 12

Valid rescission of a contract will excuse both parties
-Both parties must have some performance remaining in mutual rescission
-A party can unilaterally rescind if nonperforming party offers new consideration, there is detrimental reliance, or the original offeree intends to make a gift

Question 13

Partial discharge by modification of contract

Answer 13

If a contract is subsequently modified by the parties, it will discharge only those terms of the original contract subject to the modification
-Immediately excused

Question 14

Discharge by accord and satisfaction

Answer 14

Agreement to do something different in lieu of the old obligation
-“If . . . then” language
- i.e., discharge a debt if the other party promises to do her yard work
-Only excused after new performance
-Must be supported by consideration even if lesser value than originally bargained-for consideration

Question 15

Discharge by novation

Answer 15

Agreement to substitute a new party for the existing party and discharges the old contract
-Mere delegation is not sufficient

Elements
-Previous valid contract
-Agreement among all parties, including the new one
-Immediate extinguishment of original contractual duties
-Valid and enforceable new contract

Question 16

Discharge by impossibility

Answer 16

Contractual duties will be discharged if it has become impossible to perform them
-Impossibility must be objective
-Must arise after contract has been entered
-Excuses both parties to duties that are not yet fulfilled, but part performance prior to impossibility is subject to quasi-contractual recovery
-Partial impossibility only discharges duty to that extent
-Temporary impossibility suspends the duties, but does not discharge them

Death or physical incapacity of a person necessary to effectuate the contract discharges the contract
-Services must be unique (cannot be delegated)

Supervening illegality (government regulation)

Subsequent destruction of contract’s subject matter or means of performance
-BUT a contractor’s duty to construct a building is not discharged by the destruction of the work in progress (entitled only to contract price)
-Repair or remodeling contract that is destroyed is excused + entitled to restitution
-Does not apply if the risk of loss has already passed to the buyer

Question 17

Discharge by impracticability

Answer 17

The party to perform has encountered: (1) extreme and unreasonable difficulty and/or expense; and (2) its nonoccurence was a basic assumption of the party
-Increase in cost is not an excuse
-Shortage of raw materials due to war, strike, embargo etc. are sufficient
-Seller must deliver if only partial inability to perform

Question 18

Discharge by frustration

Answer 18

Purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking to discharge

Elements:
-Supervening act leading to the frustration
-Not foreseeable at time of contract formation
-Purpose of the contract has been completely destroyed by the act
-Purpose of the contract was realized by both parties

Common fact pattern:
-Person rents venue for a specific purpose known to the owner and a storm or death that was not reasonably foresee renders the purpose for renting the place moot