Chapter 13
Discharge Of Contracts
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin

A contract may provide for its termination either:
 After a certain period of time
 Upon the occurrence of a certain event
Contracts may also be terminated by mutual agreement of both parties
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Complete and satisfactory performance
Substantial performance
 All terms and conditions are executed with the exception of minor details
 No materially affect on the intent of the agreement
Performance by payment of money
 Not complete until the amount agreed upon has been paid
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An offer to perform
Evidence of a party’s willingness to fulfill the terms of a contract
Refusal of a tender of performance
 Relieves party making the offer of obligation to perform
 May sue the other party for breach of contract
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An offer to provide goods agreed upon
Evidence of a party’s willingness to fulfill the terms of a contract
Refusal of a tender of goods
 Relieves party making the offer of obligation to provide goods
 May sue the other party for breach of contract
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An offer of money in payment of an obligation
Evidence of a party’s willingness to fulfill the terms of a contract
Refusal of a tender of payment does not cancel the debt
 Penalties and interest cannot be charged beyond the date of the offer of payment
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Must be made as specified in the contract
Tender of payment must be for the exact amount
Tender of goods must be for the specific goods specified in contract
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Unforeseen circumstances may make a contract impossible to fulfill
 Voids contract
 Parties are discharged from obligations
Death of disabling illness
 Voids personal service contracts requiring special skill or talent
Frustration of purpose
 When reason for contract no longer exists, through no fault of either party
 Terminates contract
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Material alteration
 A deliberate change of an important element in a written contract
 Affects the rights or obligations of the parties
Operation of law
 When a law is passed after the parties enter into a contract that makes performance illegal
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When a party to a contract refuses to perform as required by the contract
When a party performs in an unsatisfactory manner
Three common ways contracts are breached:
 Anticipatory breach
 Breach resulting from a deliberate or negligent act
 Failure to perform an obligation
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Various laws and regulations allow consumers to terminate a contract under certain conditions
Federal Consumer Credit Protection Act
 Applies to contracts that require consumers to pledge their home as a security deposit
 Gives consumers the right to cancel a credit transaction within three days
Federal Trade Commission
 Gives the consumer a “cooling-off” period of three days
 Consumer has the right to cancel contracts for either goods or services made in the consumer’s home
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Injured party may sue for an amount of money that will compensate for the loss
 Injured party must determine the damage in terms of money
 The court will determine if the claim is fair and adequate
Injured party may sue for specific performance
 A court order directing a person to perform as he or she agreed to do
Restraining order or injunction
 A court order prohibiting the performance of a certain act
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