ch 9 performance last class

Contract Performance

  • A contract binds parties when there is an offer, acceptance, and exchange of consideration.

  • Each party has a duty to perform:

    • Duty becomes absolute under certain conditions.

    • Discharged from the contract upon performing the terms.

  • Two crucial questions:

    1. When has the party's duty to perform become absolute?

    2. Has the absolute duty to perform been discharged?

  • Contracts may specify conditions under which performance is required.

Conditions on Performance

  • Types of conditions:

    • Condition Precedent: An event must occur before a duty arises.

    • Concurrent Condition: Parties must perform simultaneously.

    • Condition Subsequent: Performance is excused if a future event occurs.

  • Express Conditions: Clearly stated in the contract.

  • Implied Conditions: Inferred from the contract obligations.

Examples of Conditions on Performance

Condition Precedent

  • Example: Sal and Mary’s loan agreement, contingent on the value of Mary's home being above $100,000.

Example of Breach of Contract

  • On July 1, Mary's home appraised at $80,000, leading Sal to refuse the loan, resulting in a lawsuit for breach of contract.

Concurrent Condition

  • Smith and Jones agreement: Smith agrees to sell his vehicle for $5,000, requiring simultaneous performance; both parties must fulfill their obligations concurrently.

Further Example

  • If Jones fails to pay but Smith doesn't provide the car, neither party breaches contract as their duties arise simultaneously.

Condition Subsequent

  • Will and Grace's contract involves Will conveying a painting for $5,000 with conditions around safety approved by Captain Smith.

Example of Asserted Rights

  • Grace pays the amount, but after Captain Smith deems the exhibition's security inadequate, she claims possession of the painting.

Performance and Non-Performance

  • Three Types of Performance:

    1. Complete Performance: Fully satisfies the contract terms.

    2. Substantial Performance: Good faith effort, triggering other party's obligations despite minor deviations.

    3. Breach of Contract/Non-Performance: Failure to perform resulting in breach.

  • Non-breaching party must show willingness to perform if not for breach.

Breach of Contract

  • Minor vs. Material Breach:

    • Minor Breach: Non-breaching party receives substantial benefit; duties remain.

    • Material Breach: Non-breaching party does not receive substantial benefit; may terminate contract and sue.

Determining Materiality of Breach

  1. Amount of benefit received.

  2. Adequacy of damages.

  3. Extent of part performance.

  4. Hardship to breaching party.

  5. Negligent or willful behavior.

  6. Likelihood of full performance.

Excuses for Material Breach

  • Force Majeure: Excuses performance due to conditions beyond control.

  • Impossibility of Performance: Unforeseen events render contract duties impossible.

  • Frustration of Purpose: Unforeseen events alter the intended purpose of the contract.

  • Commercial Impracticability: Factors make performance excessively burdensome.

  • Release/Waiver: Release is a relinquishment of obligation, whereas a waiver is intentional forgone right enforcement.

Damages in Breach of Contract

  • Types of Damages:

    1. Money Damages: Compensatory, consequential, or liquidated.

    2. Non-Money Damages: Equitable relief like specific performance or rescission.

Mitigation of Damages

  • Victims must take reasonable steps to reduce damages and avoid further losses following a breach.

Third Party Rights and Beneficiaries

  • General Rule: Only signatories can sue to enforce contracts - "privity of contract".

  • Third Party Beneficiaries: May enforce rights if the contract intended to benefit them (creditor or donee beneficiaries). Incidental beneficiaries cannot sue.

Assignment and Delegation

Transfer of Rights and Duties

  • Assignment: Transfer of rights of a contract.

    • Assignee receives rights; assignor loses them; notice of assignment may not be required unless specified.

  • Delegation: Transfer of duties; delegator remains liable unless the obligee accepts performance from the delegate.

Prohibited Assignments

  • Certain assignments may be prohibited by state law or contract terms.

Novation

  • A novation allows for a substitution of a new party in a contract with the consent of all involved, releasing the original party from obligations.