ACCT 202 Lecture Notes - Lecture 1: Force Majeure, The Employer, Condition Subsequent

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29 May 2018

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Chapter 13: Performance of Contractual Obligations (Pages 227-240; PDF 260-273)

Chapter Objectives

• Eplai the sigifiae ad effet of tede.

• Reogize ho a otat a e dishaged othe tha  pefoae.

• Eplai the sigifiae ad effect of a condition precedent.

• Reogize ad eplai the effet of a fustated otat

THE NATURE AND EXTENT OF PERFORMANCE

A contract that contains all of the essential requirements for a binding agreement, and that does not

contain an element enabling a party to avoid the agreement, must be performed by the parties in

accordance with its terms. Anything less than complete compliance with the promise would render the

party in default liable for breach of the contract and the agreement remains in effect until the promise is

fulfilled or the agreement is discharged in some other way

• Whether the performance is complete or not must be determined by comparing the promise

made with the act performed.

• When the performance of the promises of the parties is complete it’s discharged.

Tender: The act of offering to perform the promise by act of performing the contract or the offer of

payment of money due under a contract.

Figure 13.1: Obilgation links to both forms of tender (performand and payement)

Tender of Payment

performance is made when payment is offered to the seller at the required time and place fixed for

delivery under the contract. If the form of payment is not specified, then currency, or legal tender,

must be offered to the seller.

• Legal tender may not be refused when offered in payment, providing that it is the exact amount

required

• Once a proper tender of payment is made, interest ceases to run on the debt. While the debtor is not

free of the obligation to pay, the debtor need only hold the amount of the debt until the creditor

later demands payment, then pay over the money courts will penalize the creditor with costs for

causing the unnecessary litigation or action if the creditor t’s to seize debtors asset or sues debtor.

• Sale of land: When the purchaser is willing to close the transaction and was prepared to pay the

required funds they may bring the action to court if the deed to the land is not given to them and

they met up with seller on specified date to close the trans. in payment.

Tender of Performance of an Act

The seller performance is by tender of performance of act

Sale of goods: if the seller is prepared to deliver goods at set time of agreement and specifications of the

agreement and the buyer refuses to take good they are not required to deliver the goods again and the

can institute legal proceedings against the buyer for breach of the contract.

Contract concerning land: equitable remedy of specific performance may be available to the seller by

showing that they were prepared and attempted to deliver the title documents for the property to the

unwilling purchaser on set date as required under the agreement. Unless the purchaser has

lawful/legitimate reason for unwillingness the courts will order them to pay funds or accept the land

under breach of contract

• If A covenants or engages by contract to buy an estate of B, at a given price, although that contract

may be silent as to any obligation on the part of B to sell, yet as A cannot buy without B selling, the

law will imply a corresponding obligation on the part of B to sell

Breach of contract: The failure to perform a contract in accordance with its term it has the effect of

discharging the injured party from any further performance under the agreement

DISCHARGE BY MEANS OTHER THAN PERFORMANCE

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Document Summary

Chapter 13: performance of contractual obligations (pages 227-240; pdf 260-273) Chapter objectives: e(cid:454)plai(cid:374) the sig(cid:374)ifi(cid:272)a(cid:374)(cid:272)e a(cid:374)d effe(cid:272)t of te(cid:374)de(cid:396), re(cid:272)og(cid:374)ize ho(cid:449) a (cid:272)o(cid:374)t(cid:396)a(cid:272)t (cid:373)a(cid:455) (cid:271)e dis(cid:272)ha(cid:396)ged othe(cid:396) tha(cid:374) (cid:271)(cid:455) pe(cid:396)fo(cid:396)(cid:373)a(cid:374)(cid:272)e, e(cid:454)plai(cid:374) the sig(cid:374)ifi(cid:272)a(cid:374)(cid:272)e a(cid:374)d effect of a condition precedent, re(cid:272)og(cid:374)ize a(cid:374)d e(cid:454)plai(cid:374) the effe(cid:272)t of a f(cid:396)ust(cid:396)ated (cid:272)o(cid:374)t(cid:396)a(cid:272)t. A contract that contains all of the essential requirements for a binding agreement, and that does not contain an element enabling a party to avoid the agreement, must be performed by the parties in accordance with its terms. Tender: the act of offering to perform the promise by act of performing the contract or the offer of payment of money due under a contract. Figure 13. 1: obilgation links to both forms of tender (performand and payement) Tender of payment performance is made when payment is offered to the seller at the required time and place fixed for delivery under the contract.

Related Questions

B offered to sell a boat to C for $35,000. Câs response statedâI accept your offer but I will also need the boat moved to my boatslip at the same marina.â Is there a contract? If so what are theterms? Explain.

4. Perfect Poultry Company offers to sell a specified number ofchickens and turkeys to Quick Markets. Without including anyadditional terms in the proposal it is a valid offer to form acontract? Explain.

5. Daveâs uncle tells Dave that if âhe feels thatDave deserves it,â he will give Dave $10,000 when Dave graduatesfrom college. Dave agrees to the deal. Is the uncleâs promiseenforceable if Dave graduates? Explain.

6. Jennifer was about to be struck by a speeding car. Eva pushedher out of the carâs path, just in time to save her from beingstruck. However, Eva was herself struck by the car and wasseriously injured. Several weeks later, Jennifer promised Eva thatshe would pay her $1,000 per month for life. Is Jenniferâs promiseenforceable? Explain.

7. Vincent entered into a contract to sell his laptop to Millie,age 17. Millie took possession of the computer and continued to useit for five months after reaching her 18^th birthday. Howsignificant is her continued use of the computer?

8. Baker, a real estate broker, only licensed in Oregon,concluded a land sale in California. If the California clientrefuses to pay Baker the commission on the sale may he successfullysue the client for breach of contract? Explain.

9. DG Corp. has recently created a genetically modified cow,which they named Elsie. The MJ Dairy Co. contacts DG about buyingElsie. On November 1st, DG and MJ sign a contract stating that DGwill sell Elsie to MJ for $50,000. What neither party knows is thatElsie died during the preceding night. Explain the significance ofthat event.

10. Gene sells a trail bike to Hollis without disclosing thatthe odomeÂter, which reads 10,000 miles, was disconnected 90,000miles ago. Does Hollis have to pay the contract price? Discuss.

11. Mona is induced by her guardian Newt to sign acontract to invest her student loan funds in Overseas Bank throughNewtâs investment firm. Unknown to Mona, Newt realizes ongoingcommissions from the investment. On what basis could Mona rescindthe contract? Discuss.

12. Carl leases 2 acres of land to his friend, Larry. Larryintends to build a house on the property which will significantlyincrease its value. Larry applies for a $1 million loan from FleetBank to build the house. Carl orally promises the bank that he willbe responsible for paying back the loan if Larry does not. On thatbasis the loan is approved.

Is Carlâs promise enforceable if Larry fails to pay back theloan? Explain.

13. Guardian Security, Inc., and Hedge Fund Corporation enterinto an oral contract under which Guardian Security agrees toprovide security services for Hedge Fund offices for as long asHedge Fund needs them. This contract is/is not enforceÂ¬able?

14. The Caplans contract with Fain Construction tobuild a house on their lot for $300.000. The written contractspecifies that Fain is to satisfactorily install Crane brandbathroom fixtures. Fain completes construction but the Caplansrefuse to pay the full contract price because they are notsatisfied with the bathroom fixtures installations. Discuss whetherFain is or is not entitled to the full contract price.

15. Polly agrees to buy Quinnâs Cycle World but only ifRidgeline Credit Union approves the financing. This approval isa:

a. Condition precedent.

b. Condition subsequent.

c. An illusory promise.

16. Edâs Electric substantially performs its contract withForest Hills Apartments, Inc., to deliver and install an alarmsystem and parking lot lighting. Edâs is entitled to

a. Nothing due to the breach of contract.

b. Payment to the extent that it performed the contract.

c. Full payment of the contract price since it did substantiallyperform.

17. Gliding Light, LLC, and Hang Gliders, Inc., are parties to acontract. They subseÂquently agree that High Riders Inc. shouldtake Gliding Lightâs place and assume all of its rights and dutiesunder the contract. This is:

a. A mutual agreement to rescind.

b. An accord and satisfaction.

c. A novation.

d. A settlement agreement.

18. Omar and Penn want to discharge their contract by executinga new agreement with performance by Penn to be different from whatwas originally promised. This can best be accomplished by:

a. A mutual agreement to rescind.

b. An accord and satisfaction.

c. A novation.

19. Nina contracts with Office Suites Corporation to buy a suitein its Prospect Point Tower at a premium because of its undisturbedview of Quay Harbor. Unforeseeably, the town of Quay Harbor changesthe zoning law, and Resort Hotels, Inc., constructs Seaview Resort,blocking what would have been Ninaâs view. Ninaâs best argument fora change in the Office Suites contract or its price is:

a. Frustration of purpose.

b. Objective impossibility of performance.

c. Anticipatory repudiation.

d. Commercial impracticability.

erinhyena731

LMC Solutions(LMC) is a publicly-traded marketing company that offers a variety of marketing offerings to its customers. Specifically:

â¢ LMC will create a TV commercial for $1M, build an app for $500K, and build a Facebook page for $250K. These amounts represent LMCâs charges for these items when LMC sells them separately to customers. The TV commercial, the app, and the Facebook page are not interrelated; that is, each functions independently of the other offerings.

â¢ If a customer purchases all aforementioned items together, the total cost is $1.5M. Payment terms are 50 percent consideration due at contract signing, with the remaining 50 percent due over the rest of the development period (25 percent at mid-point, 25 percent at completion).

â¢ If the app is downloaded 500K times or more in the first month, there is a one-time bonus of $250K payable to LMC.

Acme Equipment Co., a customer, approaches LMC with the hopes of reinventing its image to a younger customer base. Acme has a verbal agreement with LMC that is based on LMCâs unsigned quote to Acme on January 15, 2018, for one TV commercial, one app, and a Facebook page. The agreement creates enforceable rights and obligations pursuant to LMCâs customary business practices. None of these items can be redirected by LMC to another customer. LMC performed a credit check on Acme and has determined that Acme has the intention and ability to pay LMC for fulfilling its portion of the contract. Acme is required to pay LMC for performance completed to date if Acme cancels the contract with LMC for reasons other than LMCâs failure to perform under the contract as promised.

Acme makes a payment on January 15, 2018, in the amount of $750K pursuant to the agreement. From the date of the quote, it takes LMC six months to develop and produce the TV commercial, two weeks to complete the Facebook page, and three months to complete a fully functioning app. LMC believes there is 40% chance that the app will be downloaded 500K times in the first month.

Required: Explain how LMC will determine the appropriate amounts of revenue to recognize under this contract. Your explanation should include all steps LMC must complete in the revenue recognition process and should identify the amounts and timing of LMCâs recognition of revenue. Cite appropriate authoritative support for your answer.

jadesnake183

LMC Solutions(LMC) is a publicly-traded marketing company that offers a variety of marketing offerings to its customers. Specifically: â¢ LMC will create a TV commercial for $1M, build an app for $500K, and build a Facebook page for $250K. These amounts represent LMCâs charges for these items when LMC sells them separately to customers. The TV commercial, the app, and the Facebook page are not interrelated; that is, each functions independently of the other offerings. â¢ If a customer purchases all aforementioned items together, the total cost is $1.5M. Payment terms are 50 percent consideration due at contract signing, with the remaining 50 percent due over the rest of the development period (25 percent at mid-point, 25 percent at completion). â¢ If the app is downloaded 500K times or more in the first month, there is a one-time bonus of $250K payable to LMC. Acme Equipment Co., a customer, approaches LMC with the hopes of reinventing its image to a younger customer base. Acme has a verbal agreement with LMC that is based on LMCâs unsigned quote to Acme on January 15, 2018, for one TV commercial, one app, and a Facebook page. The agreement creates enforceable rights and obligations pursuant to LMCâs customary business practices. None of these items can be redirected by LMC to another customer. LMC performed a credit check on Acme and has determined that Acme has the intention and ability to pay LMC for fulfilling its portion of the contract. Acme is required to pay LMC for performance completed to date if Acme cancels the contract with LMC for reasons other than LMCâs failure to perform under the contract as promised. Acme makes a payment on January 15, 2018, in the amount of $750K pursuant to the agreement. From the date of the quote, it takes LMC six months to develop and produce the TV commercial, two weeks to complete the Facebook page, and three months to complete a fully functioning app. LMC believes there is 40% chance that the app will be downloaded 500K times in the first month. Required: Explain how LMC will determine the appropriate amounts of revenue to recognize under this contract. Your explanation should include all steps LMC must complete in the revenue recognition process and should identify the amounts and timing of LMCâs recognition of revenue. Cite appropriate authoritative support for your answer.

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ACCT 202 Lecture Notes - Lecture 1: Force Majeure, The Employer, Condition Subsequent

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