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Chapter 16

Performance and

A party is discharged when she has no
more duties under the contract.

There are a number of ways discharge

can happen.

Discharge by Full Performance

Most contracts are discharged by full

Discharge by Agreement
Parties can agree upon a discharge.

Discharge by other party breaching

If one party breaches a contract, the
other party will be discharged.

Discharge by raising a defense

Sometimes a party can be discharged
from contractual duties by raising a

Defenses That Discharge

Failure of a condition in the
Frustration of Purpose

A condition is an event that must occur
if a party is to become obligated
under a contract.
If the condition does not occur,
one party will probably be discharged
without performing.
No special language is necessary to
create a condition.

How Conditions are Created

Express Conditions
No special language is necessary
Example: provided that
Parties intent to create
condition is necessary

Implied Conditions
When its clear from the
agreement that there is one

Types of Conditions
1. Condition precedent: A type of condition
which must occur before a duty arises.
2. Condition subsequent: A type of condition
which must occur after a duty arises. If
the condition does not occur, the duty is
3. Concurrent conditions: Each partys
performance is conditioned on the other
partys performance.

So whats the difference, really?

If the parties agreed to a condition
precedent, the plaintiff has the burden to
prove that the condition
If the parties agreed to a condition
subsequent, the defendant has the
burden to prove that the condition did
not occur.


Arkansas Farm Bureau Ins. Fed. V.

Summary of Facts
Whats the issue?
How did the court
rule and why?

Anderson v. Country Life Ins

Summary of facts
How did the trial court
Whats the issue?
Courts decision

Strict Performance
A party is generally not required to
render strict (perfect) performance
The contract expressly
demands it, and
Such a demand is reasonable.


Substantial Performance
Will receive the full contract price, minus
the value of any defects.

A party that fails to perform

substantially will receive nothing on the
contract and will recover only the value
of the work, if any.

Substantial Performance Guidelines

There is no perfect test, but here are some
Can the thing constructed be used
for its intended purpose?
Can the promisee be compensated with
money damages for any defects?

Did the promisor act in good faith?


Strategic Resources Group v. KnightRidder Inc.

Summary of facts

What is the issue?

How did the appellate court
rule and why?

Personal Satisfaction Contracts

Contracts in which the promisees duty is
conditional upon a personal, subjective
evaluation of the promisors
performance, to be made by the
Courts will enforce such contracts if:
Explicitly demanded in the contract, and
Reasonable given the nature
of the work.

Duty of Good Faith

Every contract imposes upon each
party a duty of good faith and fair
dealing in its performance and its

Applies in common law and UCC.

Time is of the Essence

Merely including a date for performance does
not permit strict enforcement.
Courts require each party to accommodate
reasonable delays.
A time of the essence clause, however, will
generally make contract dates strictly


The Effect of Breach

When one party breaches a contract, the
other party:
Is discharged of their obligation to
perform, and
May sue for damages
However, breach must be material


Material Breach
Courts will only discharge a contract if a party
committed a material breach.
Your text says a material breach is one that:
Substantially harms the innocent party,
For which it would be hard
to compensate without
discharging the contract.
(huh, what?)

Material Breach
a breach that substantially harms
the other party.
and destroys the value of the
contract (e.g., defeats the purpose of
the contract)

Anticipatory Breach
When one party makes it unmistakably clear
that it will not honor the contract
Can be by promisor informing it wont
perform or
Can be by promisee finding out the other
party cant perform (reading promisor went
out of business).


Statute of Limitations
the time within which an injured party must
file suit
each type of action (tort, oral contract, written
contract) has different statute of limitations
it is extremely technical statute
differs from issue to issue
differs from state to state

Something happens that makes performing
the contract utterly impossible
-Destruction of the subject matter
-Death of a promisor in a
personal services contract
-Subsequent illegality


Commercial Impracticability
When something happens that:
Neither party anticipated, and
Creates a situation wherein fulfilling the
contract would now be
Extraordinarily difficult, and
Unfair to one party,
courts sometimes will discharge the contract.


Frustration of Purpose
When something happens that:
1. Neither party anticipated, and

2. The contract now has no value for one

courts sometimes will discharge
the contract.


Force Majeure Clauses

Buyer agrees that seller shall not be liable
for delays caused by acts of God, fire,
labor disputes, accidents, or
transportation difficulties.
The presence of a force majeure clause in
a contract may strengthen the
defendants case of commercial
impracticability, but only a little.