Ch. 17 Performance, breach, & Discharge

Conditions

An event whose happening or nonhappening affects a duty of performance

Assignor

The party who transfers their contractual rights to another

Assignee

The party to a contract who is owed a right or performance by another party (the obligor)

Obligor

The party who owes a duty to perform under a contract

Obligee

The party to a contract who is owed a right or performance by another party (the obligor)

Express Condition: set forth in language

• Satisfaction: Express condition making performance contingent on one party's approval of the other's performance

  • Subjective Satisfaction: Approval based in a party’s honestly held opinion (releases both parties)

  • Objective Satisfaction: Approval based on whether a reasonable person would be satisfied (common sense - is it reasonable overall? Measurable? release both parties)

  • Satisfaction of a third party: A contract may condition the duty of one contracting party to accept and pay for the performance of the other contracting party upon the approval of a third party to the contract (mixture of both from the above but includes a third party that if the third party is satisfied then it will occur) 

Implied-In-Fact Condition 

Contingency understood by the parties to be part of the agreement, though not expressed 

• Ex) The color of paint is already told by looking at it~ fact

Implied-In-Law Condition (Constructive Condition) 

Contingency not contained in the language of the contract but imposed by law

Concurrent Conditions

Conditions that are to take place at the same time

Condition Precendent

An event that must or must not occur before performance is due

Condition Subsequent

An even that terminates a duty of performance

Discharge By Performance: 

• Discharge: Termination of a contractual duty

• Performance: Fulfillment of a contractual obligation resulting in a discharge 

• Tender: Party’s offer to perform her obligation according to the terms of the contract  

Discharge By Breach:

• Material Breach:

  • pay and you receive some sort of material (non-material would be if the person pays late of the material thing)

• Substantial Performance

• Anticipatory Repudiation

• Unauthorized Material Alteration of Written Contract

Material Breach

Nonperformance that significantly impairs the injured party’s rights under the contract and discharges the injured party from any further duty under the contract

• Prevention of Performance~ One party’s substantial inference with or prevention of performance by the other constitutes a material breach and discharges the other party to the contract

• Perfect Tender Rule~ Standard under the Uniform Commercial code that a seller’s performance under a sales contract must strictly comply with contractual duties and that any deviation discharges the injured party

Substantial Performance 

Performance that is incomplete but that does not defeat the purpose of the contract

• Does not discharge the injured party but entitles him to damages 

Anticipatory Repudiation

An inability or refusal to perform (A PURPOSEFUL BREACH), before performance is due → that is treated as a breach, allowing the non-repudiating (the obligee) party to bring a suit immediately or is also able to wait if they wanted to

• also able to hire someone else to do the job → once obligee hires another person, the repudiated party can change their mind as long as the obligee know that the repudiated has changed their mind

  • Unless the OBLIGEE CONFIRMS A DISAFFIRMANCE OF THE CONTRACT WITH THE REPUDIATED

Unauthorized Material Alteration of Written Contract

A material and fraudulent alteration of a written contract by a party to the contract discharges the entire contract

Discharge by Agreement of the Parties:

• Mutual Rescission- An agreement between the parties to terminate their respective duties under the contract

• Substituted Contract- A new contract accepted by both parties in satisfaction of the parties' duties under the original contract

• Accord and Satisfaction- Substituted duty under a contract (accord) and the discharge of the prior contractual obligation by performance of the new duty (satisfaction)

• Novation- A substituted contract involving a new third-party promisor or promisee

Discharge by Operation of Law:

• Impossibility: Performance of contract cannot be done

• Bankruptcy: Discharge available to a debtor who obtains an order of discharge by the bankruptcy court

• Statute of Limitations: After the statute of limitations has run, the debt is not discharged, but the creditor cannot maintain an action against

  the debtor

Impossibility discharges

• Subjective Impossibility-

  • The promisor—but not all promisors—cannot perform; does not discharge the promisor

• Objective Impossibility-

  • No promisor is able to perform; generally discharges the promisor; does discharge

• Subsequent Illegality-

  • If performance becomes illegal or impractical as a result of a change in the law, the duty of performance is discharged

• Frustration of Purpose-

  • Principal purpose of a contract cannot be fulfilled because of a subsequent event

• Commercial Impracticability-

  • Where performance can be accomplished only under unforeseen and unjust hardship, the contract is discharged under the Code and the Restatement (MAKE SURE THAT ITS SOMETHING THAT it’s IMPOSSIBLE to OVERSEE BEFOREHAND)

• Availability of Restitution-

  • A person who renders more advanced performance under a contract that is discharged for impossibility, subsequent illegality, frustration, or impracticability is entitled to restitution to prevent unjust enrichment of the other party

The Perfect Tender Rule

No deviation (failure of performance) from promised performance in a sales contract = material breach and discharges the aggrieved party from the duty of performance

Novation

Making a new contract where all three parties agree to release the orginal obligor and a delegator will take its place