chapter 17 contracts: performance and discharge copyright © 2009 south-western legal studies in...

Chapter 17 Chapter 17 Contracts: Performance Contracts: Performance

and Dischargeand Discharge Copyright © 2009 South-Western Legal Studies in Business,

a part of South-Western Cengage Learning.

Jentz Miller Cross

BUSINESS LAW BUSINESS LAW Alternate Edition 11Alternate Edition 11ththEd.Ed.

Copyright © 2009 South-Western Legal Studies in Business,


2

IntroductionIntroduction How does a party know when his or her How does a party know when his or her

obligations under the contract are at an obligations under the contract are at an end?end?

A party may be discharged from a valid A party may be discharged from a valid contract by:contract by:– A condition occurring or not occurring.A condition occurring or not occurring.– Full performance or material breach by the Full performance or material breach by the

other party.other party.– Agreement of the parties.Agreement of the parties.– Operation of law.Operation of law.



3

§1: §1: ConditionsConditions

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



4

ConditionsConditions

Types of Conditions:Types of Conditions:– Conditions Precedent.Conditions Precedent.– Conditions Subsequent.Conditions Subsequent.– Conditions Concurrent.Conditions Concurrent.

• Express.Express.• Implied in Fact. Implied in Fact. • Implied in Law.Implied in Law.



5

§2: §2: Discharge by Discharge by Performance Performance

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

Types of Performance:Types of Performance:– Complete Performance.Complete Performance.– Substantial Performance (minor breach).Substantial Performance (minor breach).

• CASE 17.1CASE 17.1 Jacobs & Young v. KentJacobs & Young v. Kent (1921).(1921).

– Performance to the Satisfaction of one of the Performance to the Satisfaction of one of the parties or a third party.parties or a third party.



6

Material Breach of Material Breach of ContractContract

Breach of Contract - the Breach of Contract - the nonperformance of a contractual nonperformance of a contractual duty.duty.

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



7

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

CASE 17.2 CASE 17.2 Shah v. Cover-It, Inc.Shah v. Cover-It, Inc. (2004).(2004).

Material Breach of Material Breach of ContractContract



8

Anticipatory RepudiationAnticipatory Repudiation

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

Results in material breach.Results in material breach. The nonbreaching party should not be The nonbreaching party should not be

required to remain ready and willing to required to remain ready and willing to perform when the other party has perform when the other party has repudiated the contract.repudiated the contract.



9

Anticipatory RepudiationAnticipatory Repudiation The nonbreaching party should have the The nonbreaching party should have the

opportunity to seek a similar contract opportunity to seek a similar contract elsewhere.elsewhere.

Time For Performance.Time For Performance.



10

§3: §3: Discharge by Discharge by AgreementAgreement

Discharge by Rescission.Discharge by Rescission. Discharge by Novation.Discharge by Novation.

– Previous Obligation.Previous Obligation.– All parties agree to new contract.All parties agree to new contract.– Extinguishment of old obligations.Extinguishment of old obligations.– New Contract Formed.New Contract Formed.

Discharge by Substituted Agreement.Discharge by Substituted Agreement. Accord and Satisfaction.Accord and Satisfaction.



11

§4: §4: Discharge by Operation Discharge by Operation of Lawof Law

Alteration of The Contract. Alteration of The Contract. Statutes of Limitations.Statutes of Limitations. Bankruptcy.Bankruptcy. Impossibility or Impracticability. Impossibility or Impracticability.



12

Impossibility or Impossibility or Impracticability Impracticability of Performanceof Performance

Objective Impossibility of Performance.Objective Impossibility of Performance.– Death or incapacitation prior to performance;Death or incapacitation prior to performance;– Destruction of the Subject Matter; orDestruction of the Subject Matter; or– Illegality in performance.Illegality in performance.

Commercial Impracticability.Commercial Impracticability.– Key: Circumstances not foreseeable.Key: Circumstances not foreseeable.– CASE 17.3 CASE 17.3 Facto v. PantagisFacto v. Pantagis (2007). (2007).

Frustration of Purpose.Frustration of Purpose. Temporary Impossibility.Temporary Impossibility.

chapter 17 contracts: performance and discharge copyright © 2009 south-western legal studies in...

Documents