Contracts 6: Excuse Based on Later Events
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What are SEVEN excuses for non-performance?
- Other party's breach
- Anticipatory repudiation
- Failure to give adequate assurance
- Later agreement
- Frustration of purpose
- Failure of condition
Can the OTHER party's breach provide an EXCUSE for non-performance?
- Article 2 SOG: If seller's perforamnce is not perfect in every respect, buyer has free reign (can reject or accept all or part of the order).
- Common law: Only a MATERIAL breach provides an excuse. However, the injured party can recover DAMAGES for ANY breach, material or not.
What happens under COMMON LAW when there is a DIVISIBLE contract which one party has partially performed? (Is the breaching party entitled to anything?)
If payment is to be made on a PER UNIT basis, the BREACHING party can recover the contract price for ANY UNIT on which he has substantially performed.
What is ANTICIPATORY REPUDIATION?
It is a repudiation of the contarct before the time performance is due. It is considered a MATERIAL BREACH.
What is the innocent party's remedies under ANTICIPATORY REPUDIATION?
The party may stop performance and sue the (will be) breaching party for damages.
However, the breaching party can RETRACT its anticipatory repudiation as long as the other party has NOT RELIED on it.
When can a party request an ADEQUATE ASSURANCE that the other party will perform in accordance with the contract?
It may make such a request in writing when it has REASONABLE grounds for being insecure about the other party's performance of an ARTICLE 2 SOG contract.
What is the consequences of REFUSING to give adequate assurance when the requesting party has reasonable grounds for making the request?
The requesting party can treat it as ANTICIPATORY REPUDIATION.
Can a party use a request for adequate assurance to change some terms of the contract?
What is a RESCISSION? What is its effect on a contract?
It is an agreement to cancel the contract. It excuses the parties from performance SO LONG AS each party has SOME performance remaining (so that there is CONSIDERATION ffor the rescission agreement).
What is a MODIFICATION? What is its effect on a contract?
It is an agreement to replace an existing contract with a NEW one. It takes effect IMMEDIATELY.
What is an ACCORD? SATISFACTION?
An ACCORD is an agreement to accept performance in FUTURE satisfaction of an existing duty.
SATISFACTION is a performance of the ACCORD.
The existing duty is extinguished ONLY when the accord is satisfied.
How can one determine whether an agreement is a MODIFICATION or an ACCORD?
See whether the agreement takes effect "NOW" or "THEN."
What is a NOVATION? What is its effect on a contract?
An agreement to SUBSTITUTE a new PARTY for an existing one.
It excuses the substituted party from performance.
What is the difference between NOVATION and DELEGATION OF DUTIES?
In a delegation, one of the original parties to the contract delegates performance to a third party WITHOUT the other original party's consent.
In a delegation of duties, the delegating party remains LIABLE.
What is an IMPOSSIBILITY?
(called "IMPRACTICABILITY" under Article 2 SOG)
A later unforeseen event that makes performance impossible.
What are FOUR examples of IMPOSSIBILITY as an excuse from performance?
- Destruction of somethign necessary for perforamnce
- Death or incapacity of an essential person
- Supervening governmental regulation
- Increase in the cost of seller's performance
When does DESTRUCTION provide seller with an IMPOSSIBILITY EXCUSE?
- Common Law: When there is DESTRUCTION of something NECESSARY for performance.
- Article 2 SOG: Same as above PLUS: (1) a seller who bears risk of loss when goods are damaged/destroyed is excused by impracticability; and (2) seller is excused ONLY IF the goods that were damaged/destroyed had been "IDENTIFIED TO THE CONTRACT."
When does the death or incapacity of a person excuse performance?
When the dead or incapable person is an ESSENTIAL person (has unique skills and cannot be replaced)
When does the INCREASE in the cost of seller's performance constitute an IMPOSSIBILITY EXCUSE?
- MBE--Almost never.
- NY--Depending on the ABSOLUTE and RELATIVE amounts of the increase.
When can the FRUSTRATION of buyer's PRIMARY purpose constitute EXCUSE?
When the seller knew what the buyer's purpose was when they entered the contract.
What does the failure of an express condition do? How is it treated?
It limits obligations created by other contract language. (look for words such as "if," "as long as," "when," "provided that," "on condtion that" and "unless")
Courts require STRICT COMPLIANCE of express conditions.
Can a party sue for the other party's failure to meet an EXPRESS CONDITION?
No; it does NOT create an independent obligation.
How are SATISFACTION CLAUSES measured?
By a REASONABLE person standard UNLESS the contract deals with ART or matters of PERSONAL TASTE.
What are THREE types of EXPRESS conditions and what language does each employ?
- Condition precedent: "if" (condition has to occur first before party is obligated to perform)
- Condition concurrent: "as long as" (condition runs alongside the obligation)
- Condition subsequent: "until" (occurence of the event cuts off the obligation)
How may the occurrence of a condition be excused?
It may be excused by the later action or inaction or the person who is protected by the condition:
- Failure to cooperate
- Waiver (however, the person may retract the waiver for future performances if the other party has not relied on the waiver)
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