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Chapter 20: Discharge of Contracts. Conditions Relating to Performance. If the occurrence or non-occurrence of an event affects the duty of a party to perform, the event is called a condition . Condition Precedent is a condition that must occur before the party is obligated to perform.

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Chapter 20: Discharge of Contracts


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conditions relating to performance
Conditions Relating to Performance
  • If the occurrence or non-occurrence of an event affects the duty of a party to perform, the event is called a condition.
    • Condition Precedent is a condition that must occur before the party is obligated to perform.
    • Condition Subsequent is a condition that, if it occurs after an agreement is reached, may cancel the contract.
    • Concurrent Conditions are conditions that must happen simultaneously in order for the contract to be completely executed.
tender and discharge
Tender and Discharge
  • Most contracts are discharged by performance.
  • An offer to perform is called a tender of performance.
  • If a tender of performance is wrongfully refused, the duty to perform is terminated, except when the duty was the payment of money.
causes of contract discharge

Consumer Protection Rescission

Unilateral Action

Substitution

Agreement

Accord and Satisfaction

Destruction of Subject Matter

OR

Change of Law

Performance

Impossibility

Death or Disability - Personal Service

Act of Other Party

Commercial Impracticability

Economic

Disappointment

Economic Frustration

Bankruptcy

Operation of Law

Statute of Limitations

Contractual Limitations

Causes of Contract Discharge
time of performance
Time of Performance
  • Ordinarily, a contract must be performed exactly in the manner specified by the contract.
  • When a contract does not state when it is to be performed, it must be performed within a reasonable time.
  • If time for performance is stated in the contract, the contract must be performed at the time specified if such time is essential, or within a reasonable time if the specified time is not essential.
perfect performance
Perfect Performance
  • A less-than-perfect performance is allowed if it is a substantial performance and if damages are allowed the other party.
  • The other contracting party or a third person may guarantee a perfect performance. Such a guarantor is then liable if the performance is less than perfect.
discharge by agreement
Discharge by Agreement
  • A contract may be terminated by an agreement, either a provision in the original contract or a subsequent agreement.
  • A contract may also be discharged by the substitution of a new contract for the original contract; by a novation (a new contract with a new party); by accord and satisfaction; by release; or by waiver.
discharge by impossibility
Discharge by Impossibility
  • A contract is discharged when it is impossible to perform.
  • Impossibility may result from:
    • the destruction of the subject matter,
    • the adoption of a new law that prohibits performance,
    • the death or disability of a party whose personal action was required for performance of the contract, or
    • the act of the other party to the contract.
commercial impracticability
Commercial Impracticability
  • Some courts will also hold that a contract is discharged when its performance is commercially impracticable or there is economic frustration.
  • Increased cost ordinarily has no effect on a contract, but if the increase is grossly disproportionate to the original cost, some courts will classify the situation as one of commercial impracticability and discharge the contract.
frustration of purpose
Frustration of Purpose
  • In the case of frustration of purpose, the contract can be performed, but the performance has ceased to have any significant value to the party who originally contracted to obtain that performance.
    • For example, renting a stadium to hold a football game, then the team is killed in a plane crash. The contract for the stadium may be voided since neither party could foresee the cancellation of the game.
temporary impossibility
Temporary Impossibility
  • Temporary impossibility, such as a labor strike or bad weather, has no effect on a contract.
  • It is common, though, to include protective clauses that excuse delay caused by temporary impossibility.
discharge by operation of law
Discharge by Operation of Law
  • A contract may be discharged by operation of law.
  • This occurs when:
    • (1) the liability arising from the contract is discharged by bankruptcy,
    • (2) suit on the contract is barred by the applicable statute of limitations, or
    • (3) a time limitation stated in the contract is exceeded.
discharge of obligations

Tender

Payment

Timely

Adequate (substantial performance)

Consumer Rescission Rights

Agreement

Substitution of Parties

Accord & Satisfaction

Discharge of Obligations

Discharge

by

Performance

Discharge by

Action

of Parties

discharge of obligations cont

Destruction of Subject Matter

Change of Law

Impossibility

Death or Disability

Commercial Impracticability

Frustration of Purpose

Temporary Impossibility, like Weather

Bankruptcy

Statutes of Limitations

Contract Time Limitations

Discharge of Obligations (cont.)

Discharge

by

External Factors

Discharge by Operation

of Law