C: Performance, Breach, and Discharge

CONDITION

an event that must occur before a party’s contractual obligations are created, destroyed, or changed

CONDITION PRECEDENT

a condition that must occur before a party has the duty to perform

CONDITION SUBSEQUENT

a condition that excuses a party’s duty to perform

How can a condition be excused?

• waiver

• wrongful interference

• estoppel

STANDARD OF PERFORMANCE (CL)

1. The Standard

2. Breach

3. Exception

1. substantial performance

2. IF material breach, THEN the non-breaching party…
   (a) can withhold performance
   (b) can pursue remedies
   IF partial breach, THEN the non-breaching party…
   (a) must fully perform as promised
   (b) can pursue remedies

3. express condition (must be complied with exactly)

STANDARD OF PERFORMANCE (UCC)

1. The Standard

2. Breach

3. Exception 1

4. Exception 2

1. perfect tender

2. IF the seller fails to deliver perfect tender, THEN the buyer can…
   (i) accept the goods, OR
   (ii) reject the goods, OR
   (iii) accept some and reject the rest.
   Any rejection of goods must be made within a reasonable time.

3. The seller has a right to cure only if…
   (i) reasonable time for performance has not passed
   (ii) gives the buyer notice of intent to cure

4. In an installment contract, IF an installment contains a nonconformity, THEN the buyer can reject only if…
   (i) nonconformity substantially impairs the value of the goods
   (ii) nonconformity cannot be cured

When does the RISK OF LOSS shift to the buyer?

1. Carrier Cases

2. Non-carrier cases

1. IF a shipment contract, THEN the risk of loss shifts to the buyer when the goods are in the buyer’s possession.
   IF a delivery contract, THEN the risk of loss shifts to the buyer upon delivery.

2. IF the seller is a merchant, THEN the risk of loss shifts to the buyer when the goods are in the buyer’s possession.
   IF seller is not a merchant, THEN the risk of loss shifts to the buyer upon delivery.

ANTICIPATORY REPUDIATION

1. Requirements

2. Effect of Repudiation

3. Retraction of Repudiation

1. (i) unequivocal communication
   (ii) of inability or unwillingness to perform

2. The non-breaching party can…
   (i) treat the contract as repudiated AND sue (for damages OR specific performance), OR
   (ii) wait until performance is due AND then sue (for damages OR specific performance), OR
   (iii) urge the other party to perform, OR
   (iv) treat the entire contract as discharged

3. IF a party repudiates, THEN that party can generally retract the repudiation and restore the contract, UNLESS the non-breaching party…
   (i) relied on the contract, OR
   (ii) cancelled the contract, OR
   (iii) sued for repudiation

ADEQUATE ASSURANCE OF PERFORMANCE

• A party can demand adequate assurances of performance if…
  (i) cannot establish anticipatory repudiation
  (ii) has reasonable grounds to be insecure

• After demand, can suspend one’s own performance if commercially reasonable.

• Failure to respond (UCC: reasonable time OR 30 days) = repudiation

OBLIGATION OF GOOD FAITH AND FAIR DEALING

1. CL Approach

2. UCC Approach

1. “good faith” = honesty in fact

2. “good faith” (for merchants) = honesty in fact + observing reasonable commercial standards of fair dealing

EXPRESS WARRANTY

1. Requirements

2. Can it be disclaimed?

1. (i) seller makes affirmation of fact, promise, description OR provides a sample
   (ii) that becomes part of the basis of the bargain

2. cannot be disclaimed

IMPLIED WARRANTY OF MERCHANTABILITY

1. Requirements

2. Can it be disclaimed?

1. IF a good is sold by a merchant who deals in goods of that kind, THEN the good must be fit for its ordinary purpose.

2. can be disclaimed by…
   (i) “as is” statement that is
   a) clear
   b) in writing

   OR
   (ii) oral statement that uses the term “merchantability”

IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE

1. Requirements

2. Can it be disclaimed?

1. (i) seller KSK the buyer’s particular purpose of the goods
   (ii) buyer relies on seller’s skill or judgment to select suitable goods

2. can be disclaimed by “as is” statement that is (a) clear, (b) in writing

IMPLIED WARRANTY OF TITLE

1. Requirements

2. Can it be disclaimed?

1. (i) good title to the goods
   (ii) rightful transfer
   (iii) no liens attached

2. can be disclaimed by…
   (i) express statement, OR
   (ii) circumstances

ACCORD & SATISFACTION

1. “Accord”

2. “Satisfaction”

1. a new agreement where a party agrees to accept a different performance than what was originally agreed upon; requires new consideration

2. what occurs when the other party completes the different performance, which discharges the original contract duties and the accord agreement duties

NOVATION

a new contract that is created when a party to the original contract (i.e obligor) agrees to release the other party (i.e. delegator) and substitute a new party (i.e. delegatee)

IMPOSSIBILITY

A contractual duty is discharged if…
(i) unforeseeable event
(ii) that makes performance objectively impossible

IMPRACTICABILITY

A contractual duty is discharged if…
(i) unforeseeable event
(ii) that makes performance extremely and unreasonably difficult/expensive

FRUSTRATION OF PURPOSE

A contractual duty is discharged if…
(i) primary purpose of the contract
(ii) known by both parties at the time of contracting
(iii) that was substantially frustrated by an unforeseeable event
(iv) that occurred after the contract was entered into