Contracts: Breach, Discharge, and Excuses

Contracts Overview

  • Breach, Discharge, Excuses: Understanding contractual obligations and the conditions leading to breach or discharge.

Assignment and Delegation

  • Intended Beneficiaries: Individuals for whom a contract is performed and who have rights to enforce the contract.
  • Incidental Beneficiaries: Individuals who may benefit from a contract but do not have the legal right to enforce the contract.

Discharging Contract Obligations

  • Ways obligations are discharged:
    • Completion of Promises: When parties fulfill their contractual duties, the contract is executed.
    • By Agreement: Parties may mutually agree to discharge the contract.
    • Excused Performance: Certain circumstances can excuse a party from performance.

Excuses from Performance

  • Impossibility:
    • Meaning: Performance is impossible under the terms of the contract.
    • Example: A painter contracted to paint a building that is later destroyed (by a tornado) cannot perform.

Commercial Frustration

  • Definition: The doctrine that allows for contract termination when an unforeseen event frustrates the essential purpose of the contract.
  • Example Case: Krell v. Henry (1903):
    • Lessee rented a room for Edward VII's coronation.
    • Coronation postponed due to illness.
    • Court ruled that the essential purpose was frustrated, thus no obligation for further payment.

Force Majeure

  • Concept: A clause in contracts that frees parties from liability when an extraordinary event prevents performance.
    • Implications: Parties can list specific events (like natural disasters or pandemics) that exempt them from performance.
    • Case Inquiry: Did COVID-19 excuse a manufacturer from performing under a Force Majeure clause? Impossibility vs. Frustration.

Statute of Limitations

  • Definition: The time limits within which a party may bring a lawsuit for breach of contract.
    • Massachusetts: 6 years for written/verbal contracts.
    • Rhode Island/Wyoming: 10 years (longest).
    • Louisiana: 1 year (shortest).

Conditions of Performance

  • Understanding Conditions:
    • Condition Precedent: An event that must occur before a party has the duty to perform.
    • Example: A buyer's obligation to purchase is contingent upon obtaining financing.

Material Breach of Contract

  • Definition: When a party refuses to perform as promised, allowing the non-breaching party to sue.
  • Considerations: Evaluate potential damages versus the breaching party’s gains.

Minor Breach

  • Concept: Occurs when the breach does not result in damages to the non-breaching party.
  • Implications: Generally, not actionable as the non-breaching party sees no damages. The party still must perform.
  • Policy Goal: Facilitate economic interactions, particularly under UCC rules.

Duty of Good Faith

  • Obligation: Once a contract is formed, parties must act in good faith during performance/enforcement.
  • Criteria: Adherence to reasonable commercial standards, diligence, and cooperation among parties.