Transcript Chapter 16 Contracts — Performance and Discharge Introduction How does a party know when his or her obligations under the contract are at an.

Chapter 16
Contracts — Performance
and Discharge
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.
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§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.
Types of Conditions:
Conditions Precedent.
Conditions Subsequent.
Conditions Concurrent.
• Express.
• Implied in Fact.
• Implied in Law.
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§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 17.1: Jacobs & Young v. Kent (1921).
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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 non
breaching party from the contract.
In a Minor breach, the duty to performed is not
excused and the non-breaching party must
resume performance of the contractual
obligations undertaken.
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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.
The nonbreaching party should have the
opportunity to seek a similar contract
elsewhere.
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§3: Discharge by Agreement
Rescission.
Novation.
Substituted Agreement.
Accord and Satisfaction.
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§4: Discharge by
Operation of Law
Alteration of a contract.
Statutes of Limitations.
Bankruptcy.
Impossibility or Impracticability of
Performance.
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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.
Frustration of Purpose.
Temporary Impossibility.
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Case 16.1: Jacobs & Young v. Kent
(Substantial Performance)
FACTS:
Jacobs & Young built a house for Kent. A
subcontractor’s oversight led to a failure to install
pipe of “Reading manufacture,” as the contract
required.
Kent ordered Jacobs to replace it. Jacobs refused
on grounds that it would mean demolishing the
house.
Kent did not make the final payment, and Jacobs
sued. The court refused to accept evidence that
the installed pipe was of the same quality,
appearance, market value, and cost as Reading
pipe, and entered a verdict for Kent. Jacobs
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appealed.
Case 16.1: Jacobs & Young v. Kent
(Substantial Performance)
HELD: REVERSED. FOR JACOBS.
“The courts never say that one who makes
a contract fills the measure of his duty by
less than full performance.”
Court said that the amount of damages is
the difference in value between the
completed house and a house with the
correct pipe—not the cost of replacing the
pipe (demolishing the house).
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Case 16.2: Van Steenhouse v.
Jacor Broadcasting
(Material Breach of Contract)
FACTS:
In 1991, Van Steenhouse signed a three-year
agreement as a radio talk show host for Jacor,
including salary and bonuses.
Less than 3 years later, Jacor replaced her show
with Rush Limbaugh’s program.
Jacor paid Van Steenhouse her base salary, but
did not employ her as a talk show host and did not
pay a bonus.
Van Steenhouse sued Jacor for breach of
contract. The court ruled that Jacor materially
breached the contract. Jacor appealed.
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Case 16.2: Van Steenhouse v.
Jacor Broadcasting
(Material Breach of Contract)
HELD: AFFIRMED. FOR VAN
STEENHOUSE.
Jacor’s performance fell far short of substantial
performance.
“An obligation to furnish work arises if the
employee materially benefits from performing the
duties described in the agreement.”
In this case, “Van Steenhouse lost the opportunity
to build and maintain her professional
marketability. In addition, Van Steenhouse lost the
opportunity to earn a * * * performance bonus.”
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Case 16.3: Syrovy v. Alpine Resources
(Commercial Impracticability)
FACTS:
Syrovy agreed to sell Alpine Resources all of the
timber on Syrovy’s property that Alpine could
harvest over a two-year period for $140,000.
Alpine harvested some timber and paid Syrovy
$50,000.
Syrovy sued for the balance. Alpine defended on
the ground of commercial impracticability, claiming
bad weather conditions and the hunting season.
The court granted Syrovy’s motion for summary
judgment. Alpine appealed.
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Case 16.3: Syrovy v. Alpine Resources
(Commercial Impracticability)
HELD: AFFIRMED. FOR SYROVY.
Nonperformance may be excused if an
unforeseen contingency occurs, the
nonoccurrence of which was a basic
assumption made by the parties to the
contract.
Alpine’s contract negotiator was “a logger
with considerable experience in purchasing
timber” who should have foreseen that
weather conditions and hunting season
problems would have made performance
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difficult.