Performance and Discharge

1. Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide or previous slide. CHAPTER 17 Performance and Discharge

2. Quote of the Day “If you can’t give me your word of honor, will you give me your promise?” Samuel Goldwyn, Hollywood producer

3. Discharge • A party is discharged when she has no more duties under a contract. • Most contracts are discharged by full performance. • Sometimes the parties discharge a contract by agreement. • Rescind means that they terminate it by mutual agreement.

4. Conditions • A condition is an event that must occur before a party becomes obligated under a contract. • How Conditions are Created • Express Conditions -- No special language is necessary to create the condition, but it must be stated clearly somehow. • Implied Conditions – The condition is not stated, but is clear from the agreement.

5. Types of Conditions • Condition Precedent • Must occur before a duty arises. • Condition Subsequent • Must occur after the particular duty arises. • Concurrent Conditions • Certain things must occur simultaneously.

6. Performance • Strict Performance • Performance that is exactly what promised; is usually not expected and failure to do so does not cause for discharge. • Substantial Performance • A party that substantially performs its obligations will receive the full contract price, minus the value of any defects. • A party that fails to perform substantially receives nothing on the contract and will only recover the value of the work, if any.

7. Personal Satisfaction Contracts • A personal satisfaction contract is one which the promisee makes a personal, subjective evaluation of the promisor’s performance. • A court uses a subjective standard only if assessing the work involves feelings, taste, or judgment and the contract explicitly demands personal satisfaction. • In all other cases, a court applies an objective standard to the decision.

8. Good Faith • The Restatement (Second) of Contracts §205 states: “Every contract imposes upon each party a duty of good faith and fair dealings in its performance and its enforcement.”

9. Time of the Essence Clauses • A time of the essence clause will generally make contract dates strictly enforceable. • Merely including a date for performance does not make time of the essence.

10. Breach • Material Breach • Generally courts will discharge only if a party committed a material breach. • Anticipatory Breach • Anticipatory breach is committed by one party making it unmistakably clear that he will not honor the contract. • Statute of Limitations • Will limit the time within which the injured party may file suit.

11. Impossibility • True Impossibility • Something has happened making it utterly impossible to fulfill the promise. • Commercial Impracticability • Some event has occurred that neither party anticipated, making the contract extra-ordinarily difficult and unfair to one party. • Frustration of Purpose • Some event has occurred that neither party anticipated and the contract now has no value for one party.

12. “Good faith and reasonable conduct will prevent many contract disputes.”