BLW 302 Ch.18

Condition

Condition

A qualification in a contract based on a possible future event

Conditions Precedent

• Condition that must be fulfilled before a party’s performance can be required.

• Requires absolute duty to perform

Conditions Subsequent

• When a condition operates to terminate a party’s absolute promise to perform, after the time of absolute performance was due.

  • Example Continued employment conditioned on passing Bar Exam

Restatement

refers to both precedent and subsequent as “conditions”

Conditions Concurrent

• When each party’s performance is conditioned on the other party’s performance or tender.

• Both parties required to perform their duties
  simultaneously

Express

Provided in the parties’ agreement, usually
preceded by words such as “If” or “Provided.”

Implied

Understood to be a part of the contract, depending on the purpose

Discharge by Performance

Both parties fulfill their respective duties by performing the acts they have promised

Tender of performance

An unconditional offer to perform

Complete Performance

• Parties perform exactly as agreed, or “perfect.”

• All conditions are satisfied.

• Normally, conditions expressly stated in a contract must fully occur in all respects for complete performance of the contract to take place

Substantial Performance

• A party in good faith that performs substantially all of the terms can enforce the contract.

• Confers most of the benefits promised:
  performance must not vary greatly from what was promised

Measure of Damages

The cost to bring the object of the contract into compliance with its terms—if that cost is reasonable under the circumstances

When the Contract Is Personal

The performance must actually satisfy the party specified in the contract, and only the personal
satisfaction of the party fulfills the condition.

• Still must act in good faith

• Example painting a portrait – cannot unreasonable reject the completed art work

Reasonable Person Standard

Most other contracts need to be performed only to the satisfaction of a reasonable person unless they expressly state otherwise

Material Breach of Contract

Occurs when performance is not substantial.

• Material versus Minor Breach

• Underlying Policy

Material versus Minor Breach

If the breach is minor (not material), the nonbreaching party’s duty to perform may be suspended until the breach has been remedied.

Underlying Policy

Any breach entitles the nonbreaching party to sue for damages. Only a material breach discharges the nonbreaching party from the contract.

Anticipatory Repudiation

Refusal of one party to carry out his or her contractual obligations before either party has a duty to perform

Time for Performance

If no time is stated in contract, reasonable time is implied

• If time is “of the essence,” it becomes a
  condition precedent to performance

Discharge by Mutual Rescission

Parties must make another agreement that also satisfies the legal requirements for a contract

• There must be an offer, an acceptance, and consideration.

• Rescission of most executory contracts is enforceable even if agreement is made orally

Discharge by Novation

Substitution of a new third party for one of the original parties

Requirements:

• Previous valid obligation.
  • Agreement by all parties.
  • Extinguishment of all old obligations.
  • New valid contract

Discharge by Settlement Agreement

A compromise that arises out of a genuine dispute over the obligations under an existing contract will be recognized at law

Discharge by Accord and Satisfaction

• Accord: Contract to perform existing contractual duty not yet discharged.

• Satisfaction: Performance of accord.

• Once the accord has been made, the original obligation is only suspended until the accord agreement is fully performed

Statutes of Limitations

A suit for breach of contract must be filed within the time permitted by applicable law

Bankruptcy

A discharge in bankruptcy usually prevents creditors from enforcing most of the debtor’s contracts

Impossibility of Performance

Supervening events may make performance objectively impossible

When Performance Is Impossible

Types of situations that may allow for discharge of contractual obligations:

• One party to a personal contract dies or becomes incapacitated prior to performance.

• The specific subject matter of the contract is destroyed.

• When a change in law renders performance illegal

Temporary Impossibility

• Performance Normally Is Only Delayed

• Performance Can Be Discharged

Performance Normally Is Only Delayed

Once the temporary event ends, parties ordinarily must perform the contract as originally planned.

Performance Can Be Discharged

If the lapse of time/the change in circumstances surrounding the contract makes it substantially more burdensome for the parties to perform the promised acts, the contract will be discharged in that situation

Commercial Impracticability

Parties may be excused from performance if it becomes more difficult or expensive than the parties originally expected at contract formation

Frustration of Purpose

A contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract