Contracts - Discharge/Excuses

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Contracts - Discharge/Excuses
2014-07-16 17:53:43
Contracts Discharge Excuses
Contracts - Discharge/Excuses
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  1. Excuses
    • Rule: There is a clear K but something has nevertheless happened to prevent one side from having to perform on the K.
    • **Distinguish from defenses. Defenses are things that prevent a K from being formed in the first place. Excuses are where you have a K, but something has happened that prevents you from performing the K.
  2. Excuses - Impossibility and Impracticability
    • Rule: Very similar. Impossibility is when a K can no longer be performed at all. Impracticability is a K that can only be performed w/ great difficulty.
    • Common factual scenarios:
    • 1. Performance becomes ILLEGAL after the K is formed;
    • 2. The subject matter of the K is destroyed;
    • 3. A services K w/ a “special person,” and the performing party dies or is incapacitated;
    • **BUT, something that just makes performance more expensive than expected will NOT normally excuse. Look for something that hinders the ABILITY to perform, not just the COST to perform.
    • **Look for an UNFORESEEABLE EVENT in which the non-occurrence of the event was a basic assumption of the K, and the party seeking discharge was not at fault.
  3. Excuses - Death after a K
    • Rule: Dying does not normally excuse liability on a K that has been made. The estate will normally be on the hook for any contractual obligations.
    • Exception: If there is something special about the person performing on the K, such that it makes no sense to continue if they die.
  4. Excuses - Frustration of Purpose
    Rule: Performance can still occur, but something has happened to undermine the entire reason for the creation of the K. (Note: This is very rare, and the event must be extreme and not previously allocated to one of the parties.)
  5. Excuses - Initial K Modified or Cancelled
    Rule: Performance may be excused b/c the initial K has been modified or cancelled. However, if both parties agree to just walk away from the K, AS LONG AS there is some performance remaining from each side. (if someone completes their promise, then there is a lack of consideration to rescind the deal)
  6. Excuses - Accord & Satisfaction
    • Rule: The parties to an earlier K (this is a type of modification) agree that performance will be satisfied instead by the completion of a different performance.
    • 1. Accord = The new performance
    • 2. Satisfaction = The excusing of the INITIAL performance obligation
    • Rule: If the accord is NOT performed, the other side can sue on EITHER the original obligation or the new promise.
  7. Excuses - Novation
    • Rule: Arises when BOTH parties agree that a substitute person will take over the contractual obligations.
    • 1. One side CANNOT decide to create a novation by asking someone else to do the work. This is a “delegation.”
    • 2. If there is a VALID novation, then the original promisor will be excused from performance (pinch hitter)