Exam 2: Conditions and Performance

Discharge

Termination of contractual duties.

Absolute duty

A duty to perform that is not dependent on an unmet contractual condition.

Conditional duty

A duty whose existence or continuation depends on a specified event.

Condition precedent

An event that must occur before a duty to perform becomes absolute.

Failure of a condition precedent

The conditional duty generally does not become absolute if the required event does not occur.

Condition subsequent

An event that terminates a duty that already exists.

Concurrent conditions

Conditions requiring the parties’ performances to occur simultaneously.

Tender of performance

An unconditional offer to perform by a party ready, willing, and able to perform.

Tender in a concurrent exchange

Proper tender generally triggers the other party’s corresponding duty to perform.

Complete performance

Exact fulfillment of contractual obligations.

Strict performance

Another term for complete performance according to the contract’s requirements.

Substantial performance

Good-faith performance providing substantially the promised benefit despite a nonmaterial defect.

Requirements for substantial performance

Good faith, no considerable variation from the promise, and substantially the same contractual benefit.

Substantial performance and damages

The performing party may enforce the contract but remains liable for the loss caused by the defect.

Substantial performance and material breach

A material breach generally prevents reliance on substantial performance.

Substantial performance and express conditions

Substantial performance does not automatically satisfy an express condition requiring exact compliance.

Personal satisfaction clause

A clause involving personal taste or aesthetics generally evaluated using honest subjective satisfaction.

Commercial satisfaction clause

A clause involving mechanical fitness or commercial utility generally evaluated using a reasonable-person standard.

Subjective satisfaction standard

The particular person must honestly be satisfied.

Objective satisfaction standard

The performance must satisfy a reasonable person.

Named commercial satisfaction under PPT 21’s majority rule

The reasonable-person standard generally applies even if a particular person’s satisfaction is named.

Named commercial satisfaction under PPT 21’s minority rule

The named person’s subjective satisfaction controls, subject to good faith.