Contracts: Performance and Discharge

Introduction

How does a party know when his or her obligations under the contract are at an end?

A party may be discharged from a valid contract by:

§ A condition occurring or not occurring.

§ Full performance or material breach by the other party.

§ Agreement of the parties.

§ Operation of law.

Conditions

Possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

Types of Conditions:

§ Conditions Precedent.

§ Conditions Subsequent.

§ Conditions Concurrent.

•    Express.

•    Implied in Fact.

•    Implied in Law.

Discharge by Performance

The contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised.

Types of Performance:

§ Complete Performance.

§ Substantial Performance (minor breach).

§ Performance to the Satisfaction of One of the Parties or a Third Party.

Case 16.1: Jacobs & Young v. Kent (1921).

Material Breach of Contract

Breach of Contract - the nonperformance of a contractual duty.

Material breach occurs when there has been a failure of consideration.  Discharges the non breaching party from the contract.

In a non-material breach, the duty to perform is not excused and the non-breaching party must resume performance of the contractual obligations undertaken.

Case 17.2: Van Steenhouse v. Jacor   Broadcasting of Colorado, Inc.  (1998).

Anticipatory Repudiation

If before performance is due, one party refuses to perform his or her contractual obligation.

Results in material breach.

The nonbreaching party should not be required to remain ready and willing to perform when the other party has repudiated the contract.

The nonbreaching party should have the opportunity to seek a similar contract elsewhere.

Time for Performance.

Case 16.3:  Manganaro Corp v. Hitt Contracting Inc.(2002).

Discharge by Agreement

Discharge by Rescission.

Discharge by Novation.

§ Previous Obligation.

§ All parties agree to new contract.

§ Extinguishment of old obligations.

§ New Contract Formed.

Discharge by Substituted Agreement.

Accord and Satisfaction.

Discharge by Operation of Law

ü Alteration of The Contract.

ü Statutes of Limitations.

ü Bankruptcy.

ü  Impossibility or Impracticability. à

Impossibility or Impracticability of Performance

Objective Impossibility of Performance.

§ Death or incapacitation prior to performance;

§ Destruction of the Subject Matter; or

§ Illegality in performance.

Commercial Impracticability.

§  Key: Circumstances not foreseeable.

Case 16.4: Cape-France v. Estate of Peed (2001).

ü Frustration of Purpose.

ü Temporary Impossibility.