CHAPTER 10 CONTRACT PERFORMANCE BREACH AND REMEDIES I DISCHARGE BY PERFORMANCE Performance can also be accomplished by tender unconditional offer to perform by a person who is ready willing and able to do so A buyer who offers to pay for goods has tendered payment and can demand delivery of goods Once performance has been tendered the party making the tender has done everything possible to fulfill their end of the contract and has standing to sue A Conditions In most contracts promises of performance are absolute they must be fully performed or parties promising the acts will be in breach of contract Condition possible future event that will trigger the performance of a legal obligation or terminate an existing obligation under a contract Parties obligations are discharged if conditions is not fulfilled Type of performance required must be considered in determining whether the performance satisfied the contract B Types of Performance 1 Complete Performance 2 Substantial Performance A party performs exactly as agreed and fulfills every condition in the contract A party who in good faith performs substantially all of the terms of a contract can enforce the contract against the other party under the doctrine of substantial performance Confers most of the benefits promised if the omission variance or defect in performance is unimportant and can easily be compensated by awarding damages a court is likely to hold that the contract has been substantially performed case by case basis Entitles the other party to damages if cost is reasonable measure of damages is cost to bring objects to contract into compliance with terms if cost is unreasonable then damages value of performance under contract actual performance 3 Performance to the Satisfaction of Another Contracts often state that completed work must personally satisfy one of the parties or a third When the contract is personal only personal satisfaction of a party fulfills the contract i e tailoring works of art portraits unless person is showing dissatisfaction only to avoid payment Reasonable person standard contract performed only to the satisfaction of a reasonable person some contracts require satisfaction of a third party II A DISCHARGE BY BREACH Material Breach of Contract Breach nonperformance of a contractual duty material when performance is not at least substantial If breach is material the non breaching party is discharged fully of its duties and has right to sue for damages If breach is minor non material other party is temporarily suspended from its duties but not fully discharged can also sue B Anticipatory Repudiation One of the parties refuses to carry out contractual obligations before either party has a duty to perform treated as a material breach because 1 non breaching party should not be required to remain ready and willing to perform 2 non breaching party should be allowed to seek a similar contract elsewhere Repudiation can be retracted as long as other party has not yet considered it a breach C Time for Performance If time is vital under contract then it becomes a condition DISCHARGE BY AGREEMENT III A Discharge by Rescission Mutual rescission parties must make another agreement that satisfies legal requirements of a contract offer acceptance and consideration Executory contracts agreements to rescind even those made orally are enforceable Agreements to rescind contracts for sale of goods or transfer of realty must be in writing B Discharge by Novation Novation both of the parties to a contract agree to substitute a third party for one of the original parties Requirements Previous valid obligation Agreement by all parties to new contract Extinguishing of old obligation immediate discharge of prior contract New contract that is valid Discharge of prior contract is explicit and if not it is implied C Discharge by Settlement Agreement Two original parties to the contract form a different agreement to substitute for the original one arises out a genuine dispute D Discharge by Accord and Satisfaction Accord contract to perform some act to satisfy an existing contractual duty that is not yet discharged satisfaction performance of accord agreement An accord and its satisfaction discharge the original contractual obligation Example Linn owes Holly 8 000 that must be paid in full Holly agrees with Linn that the debt can be paid if Linn transfers her car to Holly accord Linn has the option to pay the 8 000 original obligation or transfer her car satisfaction DISCHARGE BY OPERATION OF LAW IV A Alteration of the Contract Law operates to allow innocent party to be discharged when the other party has materially altered a written contract without consent By agreement parties can reduce the period but they cannot extend it B Statute of Limitations C Bankruptcy A proceeding in bankruptcy attempts to allocate debtor s assets to creditors in a fair and equitable fashion once assets have been allocated debtor receives a discharge in bankruptcy D Impossibility or Impracticability of Performance 1 Objective Impossibility of Performance Objective impossibility it is impossible for anyone to perform Subjective impossibility it is impossible for me to perform does not discharge party Situations that qualify as grounds for discharge When one of the parties dies or becomes incapacitated prior to performance When the specific subject matter of the contract is destroyed When a change in law renders performance illegal 2 Temporary Impossibility Suspend performance until impossibility ceases If circumstances surrounding the contract make it substantially more burdensome for the parties to perform as promised contract may be discharged 3 Commercial Impracticability For someone to invoke this doctrine successfully the anticipated performance must become extremely difficult or costly and must have been unforeseeable i e discharging a contract for the purchase of land because of contaminated groundwater Involves an increase in cost and difficulty of performance 4 Frustration of Purpose Contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract Typically involves an event that decreases the value of what a party receives under contract A Damages V REMEDIES FOR BREACH OF CONTRACT Remedy at law monetary damages remedies in equity rescission and restitution specific performance and reformation Usually court will no allow equitable remedy unless remedy at
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