FIFTEENTH EDITION
The
Legal & Regulatory
Environment of Business
Chapter 9—
Contractual Issues – Form,
Interpretation, Performance,
and Discharge
REED
McGraw-Hill/Irwin
SHEDD
PAGNATTARO
MOREHEAD
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
9-1
Learning Objectives
 To appreciate that valid, enforceable contacts
can take many forms.
 To understand concepts of how contract
performance analysis occurs.
 To appreciate that contractual agreements are
discharged through performance.
 To learn that nonperformance of contracts
results in a breach unless performance is
excused.
9-2
think think think
TANK TANK TANK
All contracts, to be valid and enforceable
must be in writing and signed by the
parties to the agreement?
a. True
b. False
9-3
Form and Interpretation of Contracts
Written
v.
Oral
Contracts
Statute of
Frauds
Rules of
Interpretation
9-4
Oral Contracts
Generally
as enforceable
as written agreements
Informal
Everyday examples:
 Buying fast food
 Vending machines
9-5
Statute Of Frauds
Land
Debts of Others
Certain Contracts Must
Be In Writing
1 Year
Goods =
$500+
9-6
Exceptions to SOF
Part
Performance
Judicial admission
Rules involving
goods
• UCC
•Specifically
manufactured goods
9-7
Parol Evidence Rule
Parties to a complete
and final written contract
cannot introduce oral
evidence in court that
changes the intended
meaning of the written terms.
9-8
Contract Interpretation
Usual meaning for
common words
Interpreted against
party drafting
Rules help solve
disagreements
Specialized
meaning for
specialized trade
Handwritten against
party drafting
9-9
Duty to Perform
Offeror
Offer
Capacity
and
Legality
Offeree
Acceptance
AGREEMENT
Contract
Supported
by
Consideration
Duty To
Perform
9-10
pop pop pop
QUIZQUIZQUIZ
What is the first and most important place to
look to determine what parties to a contract
agreed to?
a. their current statements or testimony
as to what was agreed to.
b. notes from negotiation sessions.
c. the words of the contract.
d.none of the above.
9-11
Conditions of Performance
• Precedent
• Subsequent
• Concurrent
• Express
• Implied
9-12
Order of Performance
 Look to contract
 If not addressed, payment before delivery
 Delivery – UCC gap-fillers
Tender – offer to perform
9-13
Levels Of Performance
COMPLETE
SUBSTANTIAL
MATERIAL BREACH
Fulfilled
all
duties
Fallen
short
after
honest
attempt
Less
than
responsibly
acceptable
9-14
Divisibility of Performance
 Contract segments
• e.g. employment pay periods
 Construction contracts generally not
divisible
9-15
Contract Discharge
• Discharged - Party released from
obligation
• Complete performance
• Tendered performance, but
rejected
• Impossibility
• Commercial impracticability
• Waiver/release
• Substantial performance
• Performance part of divisible
contract
9-16
think think think
TANK TANK TANK
A duty of performance under a contract
is discharged because of commercial
impracticability and impossibility of
performance.
A.Yes
B. No
9-17