Performance, Breach, and Discharge

Question 1

What is a “contractual condition”?

Answer 1

An occurrence or circumstance that triggers or relives duties

*conditions may be express or implied

Question 2

What is the difference between a “condition” and “promise”?

Answer 2

Promise: an undertaking to perform or refrain from performing some designated act

Condition: a contractual provision that creates or extinguishes a duty to perform under a K

*look to the intent of the parties to determine whether a contractual provision is a promise or a condition

Question 3

What is a “condition precedent”?

Answer 3

requires something to occur before a party will have a duty to perform under a contract

Question 4

What is the effect of concurrent conditions under a K?

Answer 4

-if the condition concurrent is fulfilled, the other party’s duty to perform arises

-if the condition concurrent is NOT fulfilled (ie, if tender is not made), the other party’s duty does NOT arise

Question 5

What is a condition subsequent?

Answer 5

a condition under which occurrence or nonoccurence extinguishes or terminates a party’s already existing duty to perform

Question 6

What is an express condition?

Answer 6

an explicit contractual provision requiring a described event or state of the world to occur or not occur before a party’s performance is due

Question 7

What is an implied condition?

Answer 7

An inferred contractual condition that a duty to perform is conditional upon the occurrence of a specific event or state of the world, even though the contract does not explicitly state it

Question 8

What is a “constructive condition”?

Answer 8

is an inferred contractual condition that a duty to perform is conditional upon the occurrence of a specific event or state of the world, even thought the contract does not explicitly state it

*constructive condition is another term for an implied condition

Question 9

What are the 8 types of excuse from performance under a K?

Answer 9

A contract may be excused by:

1. failure to cooperate
2. actual breach
3. anticipatory repudiation
4. prospective inability to perform
5. substantial performance
6. divisibility of contract
7. waiver or estoppel
8. impossibility, impracticability, or frustration of purpose

Question 10

What is a “divisible contract”?

Answer 10

A contract drafted in a way that it is possible to apportion each party’s performances into matching pairs of duties

*this is done so that a failure for the performance of one aspect of the contract will not necessarily result in a breach of the entire contract

Question 11

What are the 3 ways a buyer may claim a breach of an installment contract under the UCC?

Answer 11

A buyer may claim a breach of an installment contract based on:

1. nonconformity of the installment, substantially impairing the value of the whole contract
2. nonconformity that cannot be cured
3. seller fails to give adequate assurance of their intent to cure

Question 12

May a π discharge a contract when here are no defenses to formation?

Answer 12

Yes

π may sue for breach of a contractual duty to perform

Question 13

What is the effect of “impossibility” in the execution of a contract?

Answer 13

An impossibility defense excuses performance of a contractual duty that cannot be done because of an event whose nonoccurence was a basic assumption on which the contract was made (eg, one of the parties to the K dies, destruction of the contract’s subject matter)

**Impossibility and Impracticability are similar and often no distinction is made between the two defenses

Question 14

What is the effect of “impracticability” in the execution of a contract?

Answer 14

An implacability defense excuses performance of a contractual duty that has become extremely and unreasonably difficult to perform because of an occurrence or event whose nonoccurrence was a basic assumption upon which the contract was made (eg, war unexpectedly begins and cuts off supply of product)

*almost no distinction between impossibility and impracticability

Question 15

When will “frustration of purpose” discharge a contractual duty to perform?

Answer 15

Frustration of purpose excuses performance of a duty IF:

-the purpose or value of the contract

-which the parties KNEW when they entered into the contract,

-has been completely or almost completely destroyed

-by a supervening act or event NOT FORESEEN or caused by the parties

Question 16

What is mutual rescission?

Answer 16

occurs when parties discharge a contract that is still executory on both sides by an express agreement between the parties to rescind (cancel) the K

Question 17

May a contract be discharged by unilateral rescission?

Answer 17

NO

Unless there are legal grounds for rescission (eg, mistake or misrepresentation) unilateral rescission constitutes a BREACH

Question 18

May a contract be discharged by a release?

Answer 18

YES

A contract may be discharged by the execution and delivery of a release supported by adequate consideration

Question 19

What is a “contractual discharge by substitute contract”?

Answer 19

occurs when the parties enter into a 2nd contract that immediately revokes and replaces the OG K

Question 20

What is an “accord”?1.

Answer 20

An agreement where one party promises to render substitute performance and the other party promises to accept the substitute in discharge of the existing agreement

*an accord suspends the original agreement until satisfaction occurs

Question 21

What are the 4 types of relief for a breach of contract?

Answer 21

1. damages
2. specific performance
3. rescission and restitution
4. reformation

Question 22

What factors do courts consider when evaluating whether a breach was material or minor?

Answer 22

In evaluating whether a breach was material or minor, courts generally consider 6 factors:

1. the amount of benefit received
2. adequacy of damages
3. the amount of the k performed
4. hardship to breaching party
5. whether the breach was willful or negligent
6. likelihood of full performance

*the factors for determining the materiality of a breach are also used to determine substantial performance

Question 23

What is a “minor breach” under common law?

Answer 23

occurs when the non-beaching party still receives the substantial benefit of their bargain despite the breaching party’s defective performance

*a minor breach will NOT excuse the other party’s duty of performance AND the non-breaching party may sue for damages

Question 24

When does a seller have the “risk of loss”?

Answer 24

Seller has the risk of loss from when they first acquire the goods until either the goods are shipped or delivered, depending on the nature of the contract (ie, “shipment” or “destination” k)

*if the goods are destroyed when the seller has the goods and neither party is at fault, the seller is responsible for replacing the goods

Question 25

What is the effect of a failure of the required method of transportation under UCC?

Answer 25

If a K for the sale of goods specifies a method of transportation that later becomes impractical or unavailable, any commercially reasonable means must be accepted as an alternative

Question 26

When does a seller's obligation to hold goods end under a non-carrier contract?

Answer 26

If there is no carrier, then the seller holds the goods until the buyer picks them up, a which time the seller's obligation is complete

Question 27

When is a buyer required to pay for the sale of goods under a carrier contract?

Answer 27

Under a carrier K, the buyer must pay when they receive the goods *a buyer has the right to inspect the goods B4 making a payment

Question 28

When does a seller's obligation to hold goods end under carrier (ie, shipment and destination) contracts?

Answer 28

SHIPMENT CONTRACT: the Seller's obligation ends when they deliver the goods to the carrier, at which point the risk of loss passes to the buyer DESTINATION CONTRACT: the seller's obligation ends when they deliver the goods to the buyer and the risk of loss passes to the buyer

Question 29

When does the risk of loss for defective goods pass to the buyer?

Answer 29

the risk of loss will not pass until the defective goods are cured by the seller

Question 30

What constitutes a buyer's acceptance of goods from a seller?

Answer 30

1. after a reasonable opportunity to inspect the goods, the buyer accepts by indicating to the seller that the goods are conforming or that they will take them inspire of any non-conformity OR 2. the buyer fails to reject w/in a reasonable time after receiving the goods or fails to seasonably notify the seller of their intent to reject

Question 31

When may a buyer reject goods under the UCC?

Answer 31

if the goods tendered fail to conform to the K, the buyer may validly reject the goods BEFORE accepting them (ie, the buyer must inspect the goods before inspecting)

Question 32

When may a seller cure imperfect tender?

Answer 32

Before the time for performance has expired, the seller has the right to notify the buyer of their intention to cure and make a conforming delivery w/in the contract time

Question 33

What are the 2 requirements for a buyer to revoke their acceptance of non-conforming goods under UCC?

Answer 33

A buyer may revoke their acceptance of non-conforming goods if they were accepted: 1. with a reasonable belief that the defect would be cured and it has not been cured; AND 2. because of the difficulty of discovering defects or the seller's assurance that the goods conformed to the contract

Question 34

When does a party to the contract have the right to demand assurances under the UCC?

Answer 34

a party to the K may demand adequate assurance if they have reasonable grounds for believing that the other party will not be able to perform their obligations under the K

Question 35

What is "anticipatory repudiation"?

Answer 35

occurs when either party to a K, in advance of the time set for performance, unequivocally communicates that they will not perform This anticipatory cancellation (repudiation) excuses the other party from holding themself ready to perform and rendering or tendering performance *vague doubts and grudgingly willingness to perform do NOT constitute anticipatory repudiation

Question 36

May a party retract their anticipatory repudiation?

Answer 36

YES. A repudiating party may retract its repudiate before performance is due UNLESS: 1. the non-repudiating party cancelled the K 2. materially changed position in reliance on repudiation OR 3. otherwise indicated that the repudiation was final *the retraction may be made in any manner, oral or written, but it must provide adequate assurances of the intent to perform under the K -such retraction reinstates the contract

Question 37

How long is the statute of limitation to bring an action for a breach of K under UCC?

Answer 37

4 years

Question 38

What does the "warranty of tile" guarantee under UCC?

Answer 38

Is the seller's assurance that the title conveyed is good, its transfer is rightful, and the goods shall be free from a security interest or encumbrance, unless the buyer has knowledge of such interest *warranty of title is implied in ALL sales of goods contracts

Question 39

What does the "implied warranty of merchantability" guarantee under UCC?

Answer 39

guarantees basic conditions about the goods, including that they "are fit for the ordinary purposes for which such goods are used" and they meet certain basic standards (eg, adequately packaged, meet the contract description, conform to any label promises)

Question 40

When does the "implied warranty of fitness for a particular purpose" apply and what does it guarantee under the UCC?

Answer 40

The "implied warranty of fitness for a particular purpose": -APPLIES: when a seller has a reason to know a buyer intends to use the goods for a particular purpose and is relying on the seller's skill or judgment in the selection of suitable goods; AND -GUARANTEES: that the goods are fit for the particular purpose

Question 41

What are "express warranties" under the UCC?

Answer 41

are warranties explicitly stated in a contract

Question 42

May an implied warranty be excluded from a UCC contract?

Answer 42

YES All implied warranties may be excluded by expressions calling the buyer's attention to the exclusion of warranties and making it clear that implied warranties are excluded (eg, "as is" or "with all faults")

Question 43

Does a seller's warranties protect 3rd parties under the UCC?

Answer 43

YES. A seller's express and/or implied warranties extend to the buyer's family/household, assuming it is "reasonable to expect that such person may use, consume or be affected by the goods"

Question 44

Which party carries the burden to prove the existence of a condition precedent?

Answer 44

the PLAINTIFF has the burden to plead and prove the condition precedent because they are claiming that the defendant had a duty to perform it

Question 45

What are the "implied conditions of performance"?

Answer 45

the duty of each party to a contract to render performance so that the other party may render its performance *this is an implied condition establishing that one party's performance hinges on the other party's performance

Question 46

What is the effect of "partial impossibility"?

Answer 46

Partial impossibility occurs when impossibility exists as to the part, but not all of the contract and may excuse performance to the extent of the impossibility *performance on the remainder of the contract may still be required even if it will involve added difficulty or expense

Question 47

What is temporary impossibility?

Answer 47

-occurs when part of the K is impossible for a limited period of time and merely suspends the contractual duty -the contractual duty resumes when performance comes possible again unless either party to the K would be substantially more burdened

Question 48

When will death or incapacity amount to impossibility?

Answer 48

impossibility will discharge contractual duties if the deceased or incapacitated party was necessary to perform the K *most common scenario is a personal service contract for unique service (eg, commissioned painting)

Question 49

When does destruction of the subject matter of the K amount to impossibility?

Answer 49

destruction of the subject matter will discharge contractual duties if the item destroyed was necessary for performance and the destruction was not caused by either party

Question 50

Which 2 parties must consent to a novation for it to be effective?

Answer 50

1. obligee 2. obligor who is being discharged

Question 51

When does cancellation discharge a contractual obligation?

Answer 51

Destruction or surrender of a written contract by itself will generally NOT discharge a contractual obligation To discharge a contractual obligation by cancellation the parties must: 1. surrender or destroy K AND 2. manifest the intent to have the act serve as a discharge of duties *intent to have the act serve as a discharge of duties can be implied by the presence of consideration

Question 52

Is consideration necessary to discharge a contract by accord and satisfaction?

Answer 52

YES An accord and satisfaction must be supported by consideration *if the consideration is lesser in value than the OG consideration, it is still sufficient if it is a different type of consideration or to be paid by a 3rd party

Question 53

When on party fails to perform an accord, which two remedies are available to the aggrieved party?

Answer 53

the other party may sue for: 1. breach of OG agreement OR 2. breach of the accord

Question 54

What is a "discharge of contractual obligation by an account stated"?

Answer 54

is an agreement between parties where they "settle" for an amount that constitutes the final balance due from all prior transactions, merging all transactions, and discharging all claims owed *the account stated does not need to be in writing UNLESS one or more of the oG transactions between parties was subject to stat of frauds

Question 55

Where the duty of each party is a condition concurrent, when does lapse of time discharge a party's contractual obligation?

Answer 55

A reasonable amount of time will amount to a lapse and discharge a party's contractual obligation *if the contract contains a "time is of the essence" provision, a lapse will occur immediately

Question 56

When is a contractual obligation discharged by operation of law?

Answer 56

When a party obtains a judgment against the other for breach of contractual duties, that duty of performance merges w/ the judgment and is discharged *HOWEVER, the judgment debtor still has the duty to comply w/ the terms of judgment, such as paying damages

Question 57

When is a condition of satisfaction involving personal taste or judgment satisfied?

Answer 57

When the subject matter of a contract involves personal taste or judgment, the condition of satisfaction is satisfied only if the promisor is personally satisfied *dissatisfaction must be honest and in good faith

Question 58

When is a condition of satisfaction involving mechanical fitness, utility, or marketability satisfied?

Answer 58

When subject matter involves these, the condition of satisfaction is satisfied by a performance that would satisfy a reasonable person *it is immaterial if the promisor is not personally satisfied as long as a reasonable person in same circumstances would be satisfied by the promisee's performance

Question 59

What is an "implied condition concurrent"?

Answer 59

Occurs when the K fixes the performance of both promises at the same time *for example, an implied condition concurrent exists when payment is due upon purchasing an item at the store

Question 60

When does a buyer have the risk of loss in carrier contracts?

Answer 60

The point when the risk of loss passes to the buyer depends on the type of carrier K: -SHIPMENT contract: seller must ship the goods by carrier, and risk of loss transfers to the buyer when the goods are delivered to the carrier DESTINATION contract: the seller must deliver conforming goods to a particular location, and risk of loss transfers to buyer once goods are delivered at the specified destination

Question 61

What is the difference between "FOB origin" and "FOB Destination"?

Answer 61

FOB ORIGIN: means the purchaser pays the shipping cost from the factory or warehouse and gains ownership of the goods as soon as it leaves its point of origin FOB Destination: means seller retains the risk of loss until the goods reach the buyer

Question 62

What does "perfect tender" mean?

Answer 62

means that the seller's performance must be perfect w/ respect to the goods delivered and the manner of delivery

Question 63

Does the perfect tender rule apply to installment contracts?

Answer 63

NO. Under installment contracts, the buyer's ability to reject goods due to improper tender is limited

Question 64

Where goods fail to conform to a single delivery contract, what are the buyer's three options?

Answer 64

the buyer may: 1. reject the whole in a reasonable time 2. accept the whole 3. accept part and reject the rest *the buyer must pay for the goods they accept and may seek damages for the seller's imperfect tender

Question 65

What is the appropriate manner to raise a demand for assurances?

Answer 65

must be made in writing

Question 66

What are the non-repudiating party's potential remedies after an anticipatory repudiation occurs?

Answer 66

The non-repudiating party has several remedies including: 1. treating the repudiation as a breach and suing immediately 2. suspending performance and waiting to sue until the performance date 3. treating the repudiation as an offer to rescind the K 4. ignore repudiation and urge performance

Question 67

May a party demanding assurances suspend performance?

Answer 67

YES. the party demanding assurance may suspend performance under K until assurances are received

Question 68

What is the appropriate length of time for a party to provide assurance after a valid demand was made?

Answer 68

the party who received a valid written demand for assurances must provide the requesting party adequate assurances of performance w/in a reasonable time, not to exceed 30 days

Question 69

What happens if there is a failure to provide assurances?

Answer 69

may be treated as repudiation of the contract

Question 70

How does substantial performance correlate tot he materiality of a breach?

Answer 70

the factors for determining the materiality of a breach are also used to determine substantial performance if a breach is material, there has NOT been substantial performance If a breach is minor, there has been substantial performance

Question 71

Under what circumstances will failure of timely performance constitute a material breach?

Answer 71

Failure to provide timely performance constitutes a material breach when: 1. the nature of the contract makes performance on an exact agreed upon day of vital importance; OR 2. the contract contains a "time is of the essence" provision *merely providing an agreed upon date for performance in the contract terms does not make time of the essence

Question 72

What is a "material breach" under common law?

Answer 72

occurs when the non-breaching party does not receive the substantial benefit of their bargain due to the breaching party's failure to perform or inadequate performance

Question 73

What effect does a "novation" have on an original party's duties?

Answer 73

A "novation" occurs when through the assent of all parties, a new party is substituted for the original party to the contract The original party is excused from performance and no longer has any contractual obligations or liabilities

Question 74

What is "satisfaction" (in the context of accord and satisfaction)?

Answer 74

Satisfaction is the performance of the accord which then discharges both the original agreement and the accord

Question 75

What is a "release"?

Answer 75

Is a contractual agreement between parties which discharges their contractual duties and states they will not sue each other based on the previous contract *a release must be in writing and supported by new consideration (or promissory estoppel elements)

Question 76

Define the occurrence of accord and satisfaction

Answer 76

An accord and satisfaction occurs when both parties to an agreement agree to accept different performance in satisfaction of an existing obligation

Question 77

How material must a condition be to be waivable?

Answer 77

to be an effective waiver without additional consideration, the condition must be ancillary and collateral to the main purpose of the contract

Question 78

Can a condition to a contract be waived?

Answer 78

YES. the party the condition is intended to benefit has the power to waive the condition by words or conduct

Question 79

Does a failure to insist on compliance with a condition operate as a waiver?

Answer 79

YES. Failure to insist on compliance with a condition operates as a waiver

Question 80

What is "estoppel waiver" of a condition?

Answer 80

Occurs when a party indicates they are waiving a condition prior to its occurrence and the other party detrimentally relies on the waiver

Question 81

May a seller limit a buyer's remedies for breach of warranty?

Answer 81

Yes, as long as limitation is not unconscionable

Question 82

Can a merchant disclaim the implied warranty of merchantability?

Answer 82

YES, but it must be done EXPRESSLY (mentioning merchantability) and through a conspicuous writing

Question 83

Can the implied warranty of fitness for a particular purpose be disclaimed by the seller?

Answer 83

Yes, but it must be done through a conspicuous writing *a buyer waives this warranty to defects that can be reasonably discovered through an inspection by the buyer, IF they are missed upon inspection or the buyer refuses to inspect

Question 84

What is an "express warranty"?

Answer 84

Created when: 1. a seller makes an affirmation of fact, promise, or description or proves a sample; 2. which relates to the goods; AND 3. it becomes part of the basis of the bargain *for the seller's conduct to be a part of the basis of the bargain, the conduct needs to have occurred at a time the buyer could have relied on it prior to entering into the contract

Question 85

Can an express warranty be disclaimed by a seller?

Answer 85

NO Under UCC, the basic obligation of providing a description of the goods cannot be disclaimed by the seller

Question 86

What is the "contract to build exception" to the impossibility defense?

Answer 86

Generally, destruction of the subject matter will discharge contractual duties if the item destroyed was necessary for performance HOWEVER, under the "contract to build exception," destruction of a property build in progress will NOT discharge a contractor's duty

Question 87

In a shipment contract, when does the risk of loss transfer from the seller to the buyer?

Answer 87

In a shipment contract or a FOB as the seller's place of business, the seller bears risk of loss until the goods arrive at the carrier The buyer bears the risk of loss during shipment

Question 88

IN a destination contract, when does the risk of loss transfer from seller to buyer?

Answer 88

In a destination contract or a FOB as the buyer's address, the seller bears the risk of loss until the goods arrive at the specified destination

Question 89

How do courts evaluate whether a K is divisible?

Answer 89

To be a divisible contract: 1. the performance of each party must be divided into two or more parts under the contract; 2. the number of parts due from each party must be the same; AND 3. the performance of each part by one party must be agreed on as the equivalent of the corresponding part from the other party