1. Chapter 17 Contracts: Performance and Discharge Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Jentz Miller Cross BUSINESS LAW Alternate Edition 11 th Ed.

2. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2Introduction  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.

3. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage 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.

4. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4Conditions  Types of Conditions: –Conditions Precedent. –Conditions Subsequent. –Conditions Concurrent. Express.Express. Implied in Fact.Implied in Fact. Implied in Law.Implied in Law.

5. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage 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). CASE 17.1 Jacobs & Young v. Kent (1921).CASE 17.1 Jacobs & Young v. Kent (1921). –Performance to the Satisfaction of one of the parties or a third party.

6. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage 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.

7. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage 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 Shah v. Cover-It, Inc. (2004). Material Breach of Contract

8. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Anticipatory Repudiation  If before performance is due, one party refuses to perform his or her contractual obligation.  Results in material breach.  The nonbreaching party should not be required to remain ready and willing to perform when the other party has repudiated the contract.

9. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Anticipatory Repudiation  The nonbreaching party should have the opportunity to seek a similar contract elsewhere.  Time For Performance.

10. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage 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.

11. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 §4: Discharge by Operation of Law  Alteration of The Contract.  Statutes of Limitations.  Bankruptcy.  Impossibility or Impracticability. 

12. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage 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 17.3 Facto v. Pantagis (2007).  Frustration of Purpose.  Temporary Impossibility.