Performance, Breach, & Discharge

Question 1

Define: condition

Answer 1

Action or event that is required to take place before performance is triggered/due

Question 2

What is the difference between a condition vs. a promise?

Answer 2

Condition: dependent on other events to trigger act/performance (ex. “if you clean your room, I will take you out for pizza”)
Promise: does not depend on other events/actions to trigger duties (ex. “I promise to take you out for pizza next Thursday”)

Question 3

Define: condition precedent

Answer 3

Condition must take place before performance/another event is triggered

(e.g. Max will take Kathy on a trip to Europe if he passes the bar exam)

Question 4

Define: condition subsequent

Answer 4

Performance is not excused until after event occur

(e.g. Max will continue taking the bar exam until he passes it)

Question 5

Define: concurrent condition

Answer 5

Each party is required to perform at the same time

Question 6

Define: express condition

Answer 6

Expressly included in K as a condition

(e.g. “on the condition that”)

Question 7

If the satisfaction of one party is listed as an express condition, what standard is used?

Answer 7

Objective, reasonable person standard.

Question 8

If an express condition is the aesthetic taste of one party, what standard is used?

Answer 8

Subjective, good faith standard

Question 9

At common law, if one party’s performance is subject to an express condition, what is the result if that condition does not occur?

Answer 9

The party who would have benefited from the condition is discharged from their performance obligations, unless there was waiver, bad faith conduct, or one of the parties may suffer forfeiture or great loss.

Question 10

At common law, under what 3 circumstances can a failed express condition be excused?

Answer 10

1. Waiver: The party who would have been discharged by the condition’s failure may waive that right and perform anyway, making their obligations absolute.
2. Bad Faith Conduct: bad faith conduct will excuse a condition if the benefitting party fails to take steps necessary for the condition to be met, or interferes with the fulfillment of the contract.
3. To Avoid Forfeiture: a court may excuse a condition if fulfillment of that condition would cause one of the parties great loss or forfeiture.

Question 11

Define: implied conditions

Answer 11

Conditions deemed to be part of contract because the agreement suggests it was the parties’ intent to include them. These are construed by the court when interpreting the contract.

Question 12

At common law, what type of compliance with contractual duties is required for discharging duties flowing from an implied condition?

Answer 12

Substantial performance will satisfy the party’s obligations, and the aggrieved party will not be discharged from their performance obligations.The doctrine of substantial performance applies to contracts for services, often construction contracts.

Question 13

What performance obligations remain when there is a failed condition in a divisible contract?

Answer 13

If the contract is easily apportioned into agreed equivalents, then the failure excuses the performance of the divisible portion, but not the performance of the other portions.

Question 14

What is the duty of good faith and fair dealing?

Answer 14

Implied in all K’s:1. Duty to not wrongfully interfere with performance; and 2. Duty to cooperate

Question 15

Define: common law doctrine of substantial performance

Answer 15

As long as a party substantially performs (even if they did not meet every requirement), the other party is still obligated to perform their obligations

⚠️ Note: unless it is an express condition precedent, in which full performance is required, substantial performance will suffice

Question 16

Does the doctrine of substantial performance apply to sale of goods?

Answer 16

No.The sale of goods is governed by UCC rules, and the doctrine of substantial performance is strictly common law.

Question 17

A party who fails to substantially perform has made a ________ breach

Answer 17

Material

Question 18

What are five factors to determine whether there was a material breach?

Answer 18

1. Extent to which the aggrieved party will be deprived of the expected benefit ;
2. Likelihood that the breaching party will cure;
3. Extent to which the aggrieved party can be compensated by damages;
4. Extent to which the breach was willful or in bad faith; and
5. Extent to which the breaching party will suffer great loss or forfeiture if a material breach is found

Question 19

Define: anticipatory repudiation

Answer 19

1. Party’s definitive statement indicating it will breach; or 2. Party’s voluntary act that renders the party unable to perform its contractual obligations

Question 20

What 3 options does the aggrieved party have when faced with repudiation?

Answer 20

1. Treat repudiation as breach & bring action for damages or specific performace;
2. Ignore the repudiation and continue; or
3. Cancel contract and discharge all obligations and rights from it

Question 21

When can a repudiation not be retracted?

Answer 21

When the other party has;
1. Acted in reliance upon the repudiation;
2. Accepted the repudiation by signaling their acceptance to the breaching party; or
3. Commenced a suit for damages or specific performance

Question 22

Define: impracticability

Answer 22

Impracticability occurs when unforeseen circumstances render one party’s performance under the contract prohibitively expensive or otherwise unduly burdensome. If performance of a contract becomes impracticable, the duty to perform is discharged

Question 23

What are the 3 elements of the impracticability defense?

Answer 23

These three elements are required to show performance under the contract is impracticable:
1. The impracticability arose out of an unforeseen contingency;
2. The risk was not assumed nor allocated by the parties;
3. The increased cost of performance is now far greater than either party had reasonably anticipated

Question 24

What are examples of impracticability?

Answer 24

• Purpose of contract is now illegal;
• Shortages caused by war or embargo;
• Crop failure;
• Death or disability of party necessary for performance

Question 25

For a sale of goods between merchants, is the impracticability defense available in a situation where the cost of performance substantially increases, causing the seller to lose money?

Answer 25

No, not generally when the UCC applies, because these are considered assumed business risks. Under the UCC the line is drawn for impracticability where there is a completely unforeseen event that causes a severe price increase, like war or embargo.

Question 26

Define: impossibility defense

Answer 26

A defense available (under both common law and UCC) when performance has been rendered impossible by unexpected events that took place after the contract was formed. If the defense is successful, both parties are excused from performance.

⚠️ Only objective impossibility will discharge the duty. Subjective impossibility does not suffice.

Question 27

What’s the doctrine of frustration of purpose?

Answer 27

If unforeseen circumstances make the purpose of the contract essentially impossible, the parties may be discharged from their contractual duties.

Ex. If Joe contracts with Liza to build a house solely out marble, but marble suddenly becomes unavailable, the purpose of the contract has been frustrated, and Joe might be relieved from his duties.

Question 28

What are the two elements of the doctrine of frustration of purpose?

Answer 28

1. The party’s principal purpose of entering into the contract is substantially frustrated; and 2. Non-occurrence of the event that caused the frustration of purpose was an implicit assumption of the contract

Question 29

Define: accord and satisfaction

Answer 29

When parties agree to accept substituted performance to satisfy original duties
Accord: agreement to accept different performance obligations. Consideration required.
Satisfaction: completion of accord agreement

Question 30

When is satisfaction of an accord complete, and what is the effect of completion?

Answer 30

Satisfaction of an accord is complete when the obligated party has fully performed their duties under the accord, and the effect is that the duties under the original contract are discharged.

Question 31

What happens if an accord is not satisfied?

Answer 31

Parties can be liable for both the original K and the accord (b/c there has been no discharge of either)