Chapter 17: Performance and Discharge
Vocabulary:
Anticipatory Repudiation – before either party to a contract has a duty to perform, one of the
parties may refuse to carry out his or her contractual obligations.
Breach of Contract – the nonperformance of a contractual duty.
Commercial Impracticability – the anticipated performance must become significantly more
difficult or costly than originally contemplated at the time the contract was formed.
Concurrent Conditions – when each party’s performance is conditioned on the other party’s
performance or tender of performance (offer to perform)
Condition – a 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.
Condition Precedent – a condition that must be fulfilled before a party’s performance can be
required.
Condition Subsequent – when a condition operates to terminate a party’s absolute promise to
perform.
Discharge – terminate one’s contractual duties.
Discharge in Bankruptcy – partial payment of a debt after assets have been allocated to
creditors in a fair and equitable fashion.
Frustration of Purpose – after a contract has been made, supervening circumstances make it
impossible to attain the purpose both parties had in mind when making the contract.
Impossibility of Performance – after a contract has been made, supervening events (such as
fire) may make performance impossible in an objective sense.
Mutual Rescission – the process by which a contract is canceled or terminated and the parties
are returned to the positions they occupied prior to forming it.
Novation – when both parties to a contract agree to substitute a third party for one of the
original parties. This requires:
1.
2.
3.
4.
A previous valid obligation.
An agreement by all the parties to a new contract.
The extinguishing of the old obligation (discharge of the prior party).
A new contract that is valid.
Performance – one’s contractual duties.
Tender – an unconditional offer to perform by a person who is ready, willing, and able to do so.
By Performance
By Agreement
By Breach
Contract
Discharge
By Failure of a
Condtion
By Performance:
 Complete
 Substantial
By Agreement:
 Mutual rescission
 Novation
 Accord and satisfaction
By Breach
 Material breach
 Anticipatory breach
I.
By Operation of Law
 Material alteration
 Statutes of limitations
 Bankruptcy
 Impossibility or impracticability of performance
By Failure of a Condition: If performance is conditional,
duty to perform does not become absolute until that
condition occurs.
Contractual Liability ends upon…
A.
B.
C.
D.
E.
II.
By Operation of Law
Occurrence or failure of a condition
Performance or breach
Agreement of the parties
Operation of the law
Excuse
Conditions – it is a possible future event that impacts the duty to perform
under the contract or terminates the contract.
*Signs of Optional: “If…then…” or “As long as I find…”
A. When they occur in relation to the duty
1.
2.
3.
Precedent – triggers the duty (before hand); ex. if I find the financing then I will buy the
house
Concurrent – arises at the same time the duty is triggered; ex. if you give me the money
then I’ll give you the bike
Subsequent – follows the trigger of the duty and terminates it, for example if one is
already performing the duty; ex. if President Hass is president at GVSU I’ll work there.
B. How they are created
1.
2.
3.
Express – specifically stated in the contract; ex. “As long as…” or “If…then…”
(concurrent)
Implied-in-Fact – arise out of facts in the contract; ex. unload the ship at 5am, implied
that the ship will be there at 5am (concurrent)(subsequent)
Implied-in-Law – imposed by legal standards, aka, the law enforces the duties in the
contract; ex. licensing, buying of alcohol at 21
*Clean my house every Wednesday at 10am. Terminates when you well the house.
III.
Performance – you are called upon to perform at the level which is
received. One must specify everything (such as the type of granite for
counters) in the contract
A.
B.
C.
D.
IV.
Complete/Strict - perfection
Substantial – diminished value rate applies
Inferior/Material Breach – so horrible you may get damages
Anticipatory Breach – on party tells the other that they are going to breach
Discharge by Action / Agreement of the Parties
A. Mutual Agreement – after contract is formed
B. Accord and Satisfaction – exchange of equal value; ex. “I’ll sell you this car for
$5000.” -> “I have a boat worth $5000. I’ll give you that for the car.”
C. Waiver – when party establishes a pattern of failure to enforce contract rules
D. Alteration – a party makes material alterations to the contract
V.
Discharge by Law
A. Bankruptcy – you only get a portion (court assigned) and then the contract ends.
B. Expiration of the Statue of Limitations – there is a certain amount of time to
enforce an obligation after that you can no longer enforce it.
VI.
Discharge by Excuse
A. Impossibility – (objective) impossible for anybody to complete the contract; ex.
freak weather kills all the violets so no one can get violets in for your wedding
order.
B. Frustration of Purpose – the benefit can no longer be achieved; ex. you sign up
for a dance class then have a car accident and can no longer dance.