© 2004 West Legal Studies in Business A Division of Thomson Learning 1 Chapter 16 Contracts: Performance and Discharge Chapter 16 Contracts: Performance and Discharge

© 2004 West Legal Studies in Business A Division of Thomson Learning 2 Introduction How does a party know when his or her obligations under the contract are at an end? A party may be discharged from a valid contract by:  A condition occurring or not occurring.  Full performance or material breach by the other party.  Agreement of the parties.  Operation of law. How does a party know when his or her obligations under the contract are at an end? A party may be discharged from a valid contract by:  A condition occurring or not occurring.  Full performance or material breach by the other party.  Agreement of the parties.  Operation of law.

© 2004 West Legal Studies in Business A Division of Thomson Learning 3 §1: Conditions 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 4 Conditions Types of Conditions:  Conditions Precedent.  Conditions Subsequent.  Conditions Concurrent. Express. Implied in Fact. Implied in Law. Types of Conditions:  Conditions Precedent.  Conditions Subsequent.  Conditions Concurrent. Express. Implied in Fact. Implied in Law.

© 2004 West Legal Studies in Business A Division of Thomson Learning 5 §2: Discharge by Performance The contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised. Types of Performance:  Complete Performance.  Substantial Performance (minor breach).  Performance to the Satisfaction of One of the Parties or a Third Party. Case 16.1: Jacobs & Young v. Kent (1921). The contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised. Types of Performance:  Complete Performance.  Substantial Performance (minor breach).  Performance to the Satisfaction of One of the Parties or a Third Party. Case 16.1: Jacobs & Young v. Kent (1921).

© 2004 West Legal Studies in Business A Division of Thomson Learning 6 Material Breach of Contract Breach of Contract - the nonperformance of a contractual duty. Material breach occurs when there has been a failure of consideration. Discharges the nonbreaching party from the contract. Breach of Contract - the nonperformance of a contractual duty. Material breach occurs when there has been a failure of consideration. Discharges the nonbreaching party from the contract.

© 2004 West Legal Studies in Business A Division of Thomson Learning 7 In a non-material breach, the duty to perform is not excused and the non- breaching party must resume performance of the contractual obligations undertaken. Case 17.2: Van Steenhouse v. Jacor Broadcasting of Colorado, Inc. (1998). In a non-material breach, the duty to perform is not excused and the non- breaching party must resume performance of the contractual obligations undertaken. Case 17.2: Van Steenhouse v. Jacor Broadcasting of Colorado, Inc. (1998). Material Breach of Contract

© 2004 West Legal Studies in Business A Division of Thomson Learning 8 Anticipatory Repudiation If before performance is due, one party refuses to perform his or her contractual obligation. Results in material breach. If before performance is due, one party refuses to perform his or her contractual obligation. Results in material breach.

© 2004 West Legal Studies in Business A Division of Thomson Learning 9 Anticipatory Repudiation The nonbreaching party should not be required to remain ready and willing to perform when the other party has repudiated the contract. The nonbreaching party should have the opportunity to seek a similar contract elsewhere. Time For Performance.  Case 16.3: Manganaro Corp v. Hitt Contracting Inc. (2002). The nonbreaching party should not be required to remain ready and willing to perform when the other party has repudiated the contract. The nonbreaching party should have the opportunity to seek a similar contract elsewhere. Time For Performance.  Case 16.3: Manganaro Corp v. Hitt Contracting Inc. (2002).

© 2004 West Legal Studies in Business A Division of Thomson Learning 10 §3: Discharge by Agreement Discharge by Rescission. Discharge by Novation.  Previous Obligation.  All parties agree to new contract.  Extinguishment of old obligations.  New Contract Formed. Discharge by Substituted Agreement. Accord and Satisfaction. Discharge by Rescission. Discharge by Novation.  Previous Obligation.  All parties agree to new contract.  Extinguishment of old obligations.  New Contract Formed. Discharge by Substituted Agreement. Accord and Satisfaction.

© 2004 West Legal Studies in Business A Division of Thomson Learning 11 §4: Discharge by Operation of Law Alteration of The Contract. Statutes of Limitations. Bankruptcy. Impossibility or Impracticability.  Alteration of The Contract. Statutes of Limitations. Bankruptcy. Impossibility or Impracticability. 

© 2004 West Legal Studies in Business A Division of Thomson Learning 12 Impossibility or Impracticability of Performance Objective Impossibility of Performance.  Death or incapacitation prior to performance;  Destruction of the Subject Matter; or  Illegality in performance. Commercial Impracticability.  Key: Circumstances not foreseeable.  Case 16.4: Cape-France v. Estate of Peed (2001). Frustration of Purpose. Temporary Impossibility. Objective Impossibility of Performance.  Death or incapacitation prior to performance;  Destruction of the Subject Matter; or  Illegality in performance. Commercial Impracticability.  Key: Circumstances not foreseeable.  Case 16.4: Cape-France v. Estate of Peed (2001). Frustration of Purpose. Temporary Impossibility.

© 2004 West Legal Studies in Business A Division of Thomson Learning 13 Law on the Web Summary of how contracts may be discharged. Findlaw.com’s contract site. Findlaw.com’s contract site Legal Research Exercises on the Web. Summary of how contracts may be discharged. Findlaw.com’s contract site. Findlaw.com’s contract site Legal Research Exercises on the Web.