Chapter 11 Presentation (Week 7)

Chapter Overview

Topic: Performance in Contracts
Chapter includes key concepts related to contract conditions, discharge of obligations, and legal doctrines affecting contracts.

LO 11–1: Identify and categorize the three types of contract conditions.
LO 11–2: Explain the doctrine of substantial performance and its effects on contracting parties.
LO 11–3: Describe four ways contracting parties can mutually discharge a contract.
LO 11–4: Describe three ways contracting parties can discharge a contract through operation of law.

Conditions: Specific circumstances under which a contract becomes enforceable.
- Condition Precedent: Condition that must occur before performance is required.
- Condition Subsequent: Condition that must occur after performance; failure to meet this condition discharges the duty to perform.
- Condition Concurrent: Each party's performance is dependent on the other’s performance.

If promises to perform in a contract are unconditional, the duty to perform is absolute.
Good faith is essential; parties must perform obligations fully to discharge one another's duties.
- Assignment: Transfer of rights to another party, but original duties remain intact.

A party's good faith effort to perform substantially can trigger the other party's obligation.
Material Deviations: Significant changes in contract performance that affect value or fundamental agreement.
Even with substantial performance, damages may be claimed for imperfect performance.

Parties may consensually terminate their contract through various methods:
- Rescission: Mutual cancellation of the contract; both parties waive rights.
- Accord and Satisfaction: Agreement for different performance; successful accord discharges obligations.
- Substitute Agreement: Replacement of the original contract with a new one.
- Novation: Replacement of one party with a third party, discharging previous obligations.

Contracts may be discharged due to unexpected events affecting performance:
- Impossibility: Objective impossibility due to events like destruction of subject matter or death of parties.
- Impracticability: Performance becomes excessively burdensome due to unforeseen circumstances.
- Frustration of Purpose: Significant change in circumstances undermines the contract's intended purpose.

Objective Impossibility: Focus on external events that prevent performance, not personal incapacity.
Four key events that may invoke impossibility:
- Destruction of the subject matter.
- Death/ incapacitation of a party.
- Impossibility of means of performance.
- Performance becoming illegal post-contract.
Temporary Impossibility: Performance is suspended, not discharged, until impossibility ceases; often governed by "force majeure" clauses.

Performance not impossible but significantly burdensome is subject to discharge if:
- Burden is unforeseeable and extreme.

When unforeseen events frustrate the main purpose without impossibility of performance:
- Must demonstrate substantial frustration was not the fault of the frustrated party.
- Key conditions: Principal purpose frustration, event occurrence central to parties' assumptions, and lack of agreement on risk-sharing.

Understanding these concepts significantly impacts the handling of contracts and obligations.
Mid Term Exam scheduled for next week (Week 8).