1. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 1 Performance of Duties Describe how contracts are usually satisfied Explain the ways contracts can be discharged other than by performance of their terms LESSON 13-2 GOALS

2. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 2 HOW ARE CONTRACTS USUALLY DISCHARGED? When a contract is made, the parties take on certain duties. Discharge of a contract is a termination of duties that ordinarily occurs when the parties perform as promised. (#17) Most contracts are discharged by complete performance of the terms of the contract.

3. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 3 HOW ARE CONTRACTS USUALLY DISCHARGED? Failure to provide complete performance is a breach of contract. Ending a contract for sale of goods because of breach is called cancellation. Performance of all but a minor contractual duty is call substantial performance.

4. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 4 HOW ARE CONTRACTS USUALLY DISCHARGED? A failure to perform is called default. Notification, before the scheduled time of performance, of refusal to perform contractual terms as agreed is called anticipatory breach.

5. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 5 Question #14 1. When there is a Major Breach by one party, the other party may regard her/his obligation as discharged. 2. When there is a Minor Breach, but substantial performance, the non-breaching party may have to pay what is due less the cost of completing the work. If deliberate may be a major breach.

6. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 6 Question #14 continued 3. When there is an Anticipatory Breach, the victim may wait until the new, later time of performance or treat the notice as evidence of breach and immediately sue for damages.

7. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 7 WHAT’S YOUR VERDICT? Must Wesley accept the ring instead of the painting of his home?

8. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 8 HOW ELSE CAN CONTRACTS BE DISCHARGED? In addition to discharge by complete performance, a contract may be discharged by: By Agreement (#18) On a specified date or upon the expiration of a specified period of time Upon the happening of a specified event Upon the failure of a certain event to happen At the free will of either party upon giving notice

9. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 9 HOW ELSE CAN CONTRACTS BE DISCHARGED? (#18) Rescission (#18) Accord and satisfaction Discharging a contract by replacing it with a new one is called substitution. An agreement to change the obligation required by a contract is called accord. Performance of a new obligation in an accord is called satisfaction.

10. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 10 HOW ELSE CAN CONTRACTS BE DISCHARGED? (#18) Novation Releasing the other party from the duty of performance and accepting a substitute party is called novation.

11. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 11 HOW ELSE CAN CONTRACTS BE DISCHARGED? (#18) By impossibility of performance Destruction of the subject matter Performance declared illegal Death or disability

12. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 12 HOW ELSE CAN CONTRACTS BE DISCHARGED? (#18) By operation of law Alteration is a material change in the terms of a written contract without consent of the other party. Bankruptcy Statute of limitations expiration for the performance

13. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 13 HOW ELSE CAN CONTRACTS BE DISCHARGED? (#15) Not having the money to repay a debt might not be foreseeable, but does not make the contract impossible to perform. (#15)Likewise, a manufacturer’s increased costs should have been foreseen when the contract was made, but the increases do not make the contract impossible to perform.

14. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 14 To discharge the contract, the alteration must be: Material, thus changing the obligation in an important way. Made intentionally, and not by accident or mistake. Made by a party to the agreement, or by an authorized agent. Made without consent of the other party.

15. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 15 WHAT’S YOUR VERDICT? When would the contract with Diaz terminate?

16. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 16 WHAT IS THE EFFECT OF TENDER OF PERFORMANCE? An offer to perform an obligation is a tender. If the obligation requires the payment of money, rejection of an offer to pay the money does not discharge the debt nor does it prevent the creditor from collecting later. A tender of only part of the debt is not a valid tender. Legal tender is currency or coins.

17. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 17 WHAT IS THE EFFECT OF TENDER OF PERFORMANCE? (#16) If a duty requires the doing of an act, a tender that is made in good faith but is rejected will discharge the obligation. (#16) If an obligation requires the payment of money, only the exact amount in legal tender will discharge the obligation.

18. LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 13Slide 18 WHAT’S YOUR VERDICT? Is Quincy liable for damages?