• What is a condition precedent, and What is a condition precedent, and how does it affect a party’s duty to how does it affect a party’s duty to perform a contract?perform a contract?• How are most contracts discharged?How are most contracts discharged?• What is substantial performance? What is substantial performance?

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• When is a breach considered material, When is a breach considered material, and what effect does that have on the and what effect does that have on the other party’s obligation to perform?other party’s obligation to perform?• Will the courts allow parties to avoid Will the courts allow parties to avoid

performing their contractual duties performing their contractual duties when performance becomes extremely when performance becomes extremely difficult or expensive?difficult or expensive?

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• A party may be discharged from a A party may be discharged from a valid contract by: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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• A possible future event, the A possible future event, the occurrence or nonoccurrence of occurrence or nonoccurrence of which will trigger the performance of which will trigger the performance of a legal obligation or terminate an a legal obligation or terminate an existing obligation under a contract.existing obligation under a contract.• Three Types: precedent, subsequent, Three Types: precedent, subsequent,

or concurrent. or concurrent.

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• Conditions Precedent.Conditions Precedent.–Condition that must be fulfilled before

a party’s performance can be required.–Requires absolute duty to perform.

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• Conditions Subsequent.Conditions Subsequent.–When a condition operates to

terminate a party’s absolute promise to perform, after the time of absolute performance was due.–The Restatement refers to both

precedent and subsequent as ‘conditions.’

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• Concurrent Conditions.Concurrent Conditions.–When each party’s performance is

conditioned on the other party’s performance or tender.–Both parties required to perform their

duties simultaneously.

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• Complete Performance.Complete Performance.–When a party performs exactly as

agreed.–Tender: unconditional offer to perform.

• Substantial Performance: party in Substantial Performance: party in good faithgood faith performs substantially all of performs substantially all of the terms, can enforce the contract. the terms, can enforce the contract.

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• Substantial Performance (cont’d). Substantial Performance (cont’d). –Confers Most of the Benefits Promised:

performance must not vary greatly from what was promised. –Omission or defect is unimportant,

damages can be awarded.

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• Substantial Performance (cont’d). Substantial Performance (cont’d). –Entitles the Other Party to Damages.–Measure of damages is cost to bring

object of contract into compliance. There is no exact formula.–CASE 15.1 Wisconsin Electric Power Wisconsin Electric Power

Co. v. Union Pacific Railroad Co. Co. v. Union Pacific Railroad Co. (2009). Why did the court find that 84% was substantial performance?

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• Performance to the Satisfaction of Performance to the Satisfaction of Another.Another.–Issue: Is the satisfaction a condition

precedent requiring actual approval for discharge, or merely a reasonable person standard?–When the Contract is Personal: subject

matter is personal, and actual personal satisfaction is required.

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• Performance to the Satisfaction of Performance to the Satisfaction of Another (cont’d).Another (cont’d).–Reasonable Person Standard: for most

contracts, unless contract explicitly states third party approval.

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• Material Breach of Contract.Material Breach of Contract.–A material breach occurs when

performance is not substantial, and nonbreaching party is excused from performance and entitled to damages.– In a minor (non-material) breach, the duty

to perform is not excused and the non-breaching party must resume performance of the contractual obligations undertaken.

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• Anticipatory Repudiation of a Contract.Anticipatory Repudiation of a Contract.–Before performance is due, one party

refuses to perform their contractual obligation.–Treated as a material breach, and the

nonbreaching party may sue for damages immediately, even though performance is not due.

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• Anticipatory Repudiation of a Contract Anticipatory Repudiation of a Contract (cont’d).(cont’d).–Notice by repudiating party may restore

parties to original obligations. –Time for Performance.• If no time is stated in contract, reasonable

time is implied. • If time is “of the essence” it becomes a

condition precedent to performance.

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• Discharge by Mutual Rescission.Discharge by Mutual Rescission.–For an executory contract, parties must

make a new contract, oral or written. Under UCC, however, contracts must be in writing.–If one party has performed, agreement

to rescind must have additional consideration.

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• Discharge by Novation: both parties Discharge by Novation: both parties agree to substitute a new third party agree to substitute a new third party for one of the original parties. for one of the original parties. –Requirements: previous valid obligation,

agreement by all parties, extinguishment of all old obligations, and new valid contract.

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• Discharge by Accord and Satisfaction.Discharge by Accord and Satisfaction.–Accord: contract to perform existing

contractual duty not yet discharged.–Satisfaction: performance of the accord.

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• Material Alteration: innocent party is Material Alteration: innocent party is discharged after material alteration. discharged after material alteration. • Statutes of Limitations.Statutes of Limitations.• Bankruptcy: generally bars Bankruptcy: generally bars

enforcement of non-exempt enforcement of non-exempt transactions.transactions.• When Performance is Impossible.When Performance is Impossible.

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• When Performance is Impossible. When Performance is Impossible. –Objective Impossibility: supervening

event was not foreseeable.• Death or Incapacitation in personal

contract prior to performance, • Destruction of the Subject Matter; or• Change in Law makes Contract Illegal.

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• Temporary Impossibility. Temporary Impossibility. • Commercial Impracticability.Commercial Impracticability.–Performance becomes extremely difficult

or costly, and not have been known by parties when contract made.–CASE 15.2 Merry Homes, Inc. v. Chi Merry Homes, Inc. v. Chi

Hung LuuHung Luu (2010). Why was the lease void and unenforceable?

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• Frustration of Purpose.Frustration of Purpose.–Supervening event make it impossible

to attain purpose both parties had in mind.–Event must not have been reasonably

foreseeable, and decreases value of what a party receives under contract.

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