1. Section 11.2

2. What You’ll Learn
How to explain situations in which the law will permit a discharge by impossibility (p. 231)
How to identify discharges that occur by operation of law (p. 233)

3. What You’ll Learn
How to define the statute of limitations (p. 233)
How to identify debts that cannot be discharged in bankruptcy (p. 235)

4. Why It’s Important
Understanding when contracts are discharged by impossibility and by operation of law will help you know your legal rights and obligations in such situations.

5. Legal Terms
impossibility of performance (p. 231)
operation of law (p. 233)
statute of limitations (p. 233)
bankruptcy laws (p. 235)

6. Section Outline Involuntary Discharge
Discharge by Impossibility of Performance
Death or Illness in a Personal Service Contract
Destruction of the Exact Subject Matter
Illegality

7. Section Outline Discharge by Operation of Law Wrongful Alteration
Statute of Limitations
Bankruptcy

8. Pre-Learning Question
How can a contract be involuntarily discharged?

9. Involuntary Discharge
Some contracts come to an end despite what the parties intend or what they actually do. In these situations, the obligations that exist under the contract may also expire.

10. Involuntary Discharge
Two ways contracts are discharged:
by impossibility of performance
by operation of law

11. Pre-Learning Question
How can contracts be discharged by impossibility of performance?

12. Discharge by Impossibility
of Performance
A contract that becomes legally impossible to perform generally may be discharged and both parties released from the obligation.

13. Discharge by Impossibility
of Performance
Three situations in which the courts will allow a discharge for impossibility of performance are:
death or illness that prevents the performance of a personal service contract

14. Discharge by Impossibility
of Performance
destruction of the exact subject matter or the means for performance
illegality, or situations in which the performance of a contract becomes illegal

15. Death or Illness in a Personal
Service Contract
The death or illness of a party to a contract may be an excuse for nonperformance only if the contract requires the personal service of the person who has died or become ill.

16. Destruction of the Exact Subject Matter
If the subject matter that is essential to the performance of the contract is destroyed through no fault of either party, the contract is discharged.

17. Destruction of the Exact Subject Matter
The destruction must occur after the contract is entered into, but before it is carried out.

18. Illegality
A contract is considered void if its performance would be illegal at the time the agreement was initiated.
The same general rule applies when performance becomes illegal after the contract has been initiated.

19. Pre-Learning Question
How can contracts be discharged by operation of law?

20. Discharge by Operation of Law
At times, the best interests of society demand that a contract be terminated. Under these circumstances, the law declares contract discharged by operation of law.

21. Discharge by Operation of Law
These include
when a wrongful alteration has occurred
when the statue of limitations has run its course
in cases of bankruptcy

22. Wrongful Alteration
Sometimes wrongful acts of one of the parties, such as altering, or changing, a contract, will discharge a contract by operation of law.

23. Statute of Limitations
All states have a law that specifies in what time a legal action may be brought on a contract, which is called the statute of limitations.

24. Bankruptcy
Congress has the authority to pass bankruptcy laws, which are set procedures for discharging a debtor’s obligations.

25. Bankruptcy Certain debts cannot be discharged under bankruptcy laws.
education, during the first five years of the repayment period
taxes

26. Bankruptcy
alimony
child support
maintenance payments

27. Explain which method of involuntary discharge would be suitable in each of the following cases.

28. Kimi added a “0” after the date March 3 to attempt to extend the date a contract was to be completed.

29. ANSWER
Wrongful alteration

30. Kharim was hired to paint a mural for the middle school gym one week before a tornado ripped through the school.

31. ANSWER
Destruction of exact subject matter

32. Between amassed credit card debt, car payments, and school loans, Bob, who could not find a well-paying job when he graduated from college, was totally unable to pay his bills.

33. ANSWER
Bankruptcy

34. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
When will the law permit a discharge by impossibility?

35. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Death or illness of a party in a personal service contract, destruction of the exact subject matter of the contract, and when the contract becomes illegal.

36. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
When will the law permit a discharge by operation of law?

37. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
When a wrongful alteration has occurred, when the statute of limitations has run its course, and in cases of bankruptcy

38. Reviewing What You Learned What is the statute of limitations?
Section Assessment
Reviewing What You Learned
What is the statute of limitations?

39. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Specifies the length of time within which legal actions can be brought

40. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What debts cannot be discharged in bankruptcy?

41. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Education loans, taxes, alimony, child support, and maintenance payments.

42. Critical Thinking Activity Bankruptcy
Section Assessment
Critical Thinking Activity
Bankruptcy
What is the legal philosophy behind the idea that certain contracts cannot be discharged in bankruptcy?

43. Critical Thinking Activity Answer Bankruptcy
Section Assessment
Critical Thinking Activity Answer Bankruptcy
Answers will vary but should recognize that certain debts are too important to society be discharged.

44. Legal Skills in Action Debts after Bankruptcy
Section Assessment
Legal Skills in Action
Debts after Bankruptcy
Your friend Charlotte says her parents are about to go to bankruptcy court. She believes that all of the family’s debts will vanish as a result of the bankruptcy proceedings.

45. Legal Skills in Action Debts after Bankruptcy
Section Assessment
Legal Skills in Action
Debts after Bankruptcy
Write a letter to your friend explaining that some of her family’s debts will remain even after declaring bankruptcy.

46. Legal Skills in Action Answer
Section Assessment
Legal Skills in Action Answer
Debts after Bankruptcy
Letters will vary but may include that educational loans, taxes, alimony, child support, and maintenance payments are not affected by a general discharge of debts in bankruptcy.

47. End of Section 11.2