CHAPTER 17: PERFORMANCE,
BREACH, AND DISCHARGE
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TOPICS COVERED IN CHAPTER 17:
PERFORMANCE, BREACH &
DISCHARGE
A. Conditions.
B. Discharge by Performance.
C. Discharge by Breach.
D. Discharge by Agreement of the
Parties.
E. Discharge by Operation of Law.
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CONDITIONS
 Definition of a Condition – an event
whose happening or nonhappening
affects a duty of performance.
 Express Condition – contingency
explicitly set forth in language. 
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CONDITIONS
 Satisfaction of a Contracting Party –
express condition making
performance contingent upon one
party's approval of the other's
performance.
• Subjective Satisfaction – approval based
upon a party's honestly held opinion. 
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CONDITIONS
 Satisfaction of a Contracting Party.
• Objective Satisfaction – approval based
upon whether a reasonable person
would be satisfied.
• MICHAEL SILVESTRI V. OPTUS SOFTWARE,
INC. (2003).
• Satisfaction of a Third Party.
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CONDITIONS
 Implied-in-Fact Conditions –
understood by the parties to be part of
the agreement, though not expressed.
 Implied-in-Law Conditions –
contingency not contained in the
contract but imposed by law
(constructive condition). 
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CONDITIONS
 Concurrent Conditions – conditions
that are to take place at the same time.
 Conditions Precedent – an event that
must or must not occur before
performance is due.
 Conditions Subsequent – an event that
terminates a duty of performance.
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DISCHARGE BY PERFORMANCE
 Discharge – termination of a
contractual duty.
 Performance – fulfillment of a
contractual obligation resulting in a
discharge.
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DISCHARGE BY BREACH
 Breach.
• Wrongful failure to perform the terms
of a contract that gives rise to a right to
damages by the injured party. 
 Material Breach.
• Nonperformance that significantly
impairs the injured party's rights under
the contract. 
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DISCHARGE BY BREACH
 Material Breach.
• Discharges the injured party from any
further duty under the contract.
• Prevention of Performance – one
party's substantial interference with or
prevention of performance by another;
is a material breach and discharges the
other party. 
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DISCHARGE BY BREACH
 Material Breach.
• Perfect Tender Rule – standard under
the UCC that a seller's performance
under a sales contract must strictly
comply with contractual duties and that
any deviation discharges the injured
party. 
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DISCHARGE BY BREACH
 Substantial Performance –
incomplete performance that does
not defeat purpose of the contract;
does not discharge injured party but
entitles him to damages. 
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DISCHARGE BY BREACH
 Anticipatory Repudiation – an
inability or refusal to perform, before
due; treated as a breach, allowing the
nonrepudiating party to bring suit
immediately.
• HOCHSTER V. DE LA TOUR (1853). 
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DISCHARGE BY BREACH
 Material Alteration of Written
Contract – a material and fraudulent
alteration of a written contract by a
party to the contract; discharges the
entire contract.
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DISCHARGE BY AGREEMENT
OF THE PARTIES
 Mutual Rescission – an agreement
between the parties to terminate their
respective duties under the contract.
 Substituted Contracts – a new
contract accepted by both parties in
satisfaction of the parties' duties
under the original contract. 
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DISCHARGE BY AGREEMENT
OF THE PARTIES
 Accord and Satisfaction – substituted
duty under a contract (accord) and the
discharge of the prior contractual
obligation by performance of the new
duty (satisfaction).
• MCDOWELL WELDING & PIPEFITTING, INC. V.
UNITED STATES GYPSUM CO. (2008). 
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DISCHARGE BY AGREEMENT
OF THE PARTIES
 Novation – a substituted contract
involving a new third-party promisor
or promisee.
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DISCHARGE BY
OPERATION OF LAW
 Impossibility – performance cannot
be done.
• Subjective Impossibility – the
promisor—but not all promisors—
cannot perform; does not discharge the
promisor. 
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DISCHARGE BY
OPERATION OF LAW
 Impossibility.
• Objective Impossibility – no promisor is
able to perform; generally discharges
the promisor.
• CHRISTY V. PILKINTON (1954). 
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DISCHARGE BY
OPERATION OF LAW
 Impossibility.
• Subsequent Illegality – if performance
becomes illegal or impractical as a
result of a legal change, the duty is
discharged.
• Frustration of Purpose – principal
purpose of a contract cannot be
fulfilled because of a subsequent event.
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DISCHARGE BY
OPERATION OF LAW
 Impossibility.
• Commercial Impracticability –
performance can be accomplished only
under unforeseen and unjust hardship;
the contract is discharged under the
Code and the Restatement.
• NORTHERN CORPORATION V. CHUGACH
ELECTRICAL ASS’N (1974).
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DISCHARGE BY
OPERATION OF LAW
 Bankruptcy – discharged if debtor
obtains an order of discharge by the
bankruptcy court.
 Statute of Limitations – after the
statute of limitations has run, debt is
not discharged, but a creditor cannot
bring an action against debtor.
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DISCHARGE OF CONTRACTS
A
Enters
into
Contract
with
B
A fully performs
B materially breaches
A and B agree to substitute C for A
A discharge in bankruptcy
A
Discharged
Failure of a condition
Mutual recission of the contract
Substituted contract
Accord and satisfaction
Subsequent illegality of the contract
Impossibility of performance
A and B
Discharged
B fully performs
A materially breaches
A and B agree to substitute C for B
B discharged in bankruptcy
B
Discharged
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