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Chapter 11

CHAPTER 11 DISCHARGES AND BREACH.doc

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Department
Law and Business
Course Code
LAW 122
Professor
Theresa Miedema

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CHAPTER 11 DISCHARGES AND BREACH A contract is Discharged: when the parties are relieved of the need to do anything more under the contract, they are relieved of their obligations • Can be granted discharge if the other side did a major breach • Does not mean the contract is dead, some clauses can survive, exclusion, liquidated discharge, jurisdiction (survive discharge) DISCHARGE BY PERFORMANCE Performance: when the parties fulfill all of the obligations contained in the contract  General rule, that parties must perform exactly as the contract requires. Any deviation from the terms of the contract, however small, is considered a breach, rather than performance and will entitle the innocent party to a remedy TIME AND PERFORMANCE  Although the parties generally have to perform exactly as the contract requires courts usually hold that Time is not of the essence  If a contract states that performance must occur by a particular date, a party may be entitled to perform late  it can be held liable if the other party suffers results of the delay  Some situations time is of the essence, and late performance can be refused, and if that happens the contract will not be discharged by performance.  A contract with perishable goods or a volatile market may require the parties to act promptly  Method of discharge pg 252 figure 11.1 TENDER OF PAYMENT  Debtor has the primary obligation of locating the creditor and tendering ( offering) payment even if the creditor has not asked for it  If the case eventually goes to trial a judge can punish a creditor who improperly rejected a reasonable tender by holding the party liable for the debtors cost of litigation  Second the creditor can insist on receiving legal tender: is a payment of notes and coins to a certain amount.  Third, debtor does not have to actually tender payment if it would obviously be refused TENDER AND PERFORMANCE  Damages: is the amount of money that the court may order the defendant to pay the plaintiff Substantial Performance  Party may be discharged form further obligations if it provides:  substantial performance: generally satisfied the contract but is defective or incomplete in some minor way  court will determine number of factors o nature of the defect o difference between the contract price and the cost of curing the defect  Parties may create a ENTIRE CONTRACT says that no part of the price is payable unless all the work is done DISCHARGE BY AGREEMENT OPTION TO TERMINATE  Option to terminate: is a contractual provision that allows one or both parties to discharge a contract without agreement of the other  Usually found in employment contracts  Usually requires a written notice and time limit (triggered by a party) CONDITION SUBSEQUENT AND CONDITION PRECEDENT  Condition subsequent: is a contractual term that states that the agreement will be terminated if a certain event occurs  Does not have to exercised by either party to be effective  discharged if a relevant situation occurs (triggers with an external event)(ex if there is bad weather) • True condition precedent: is a contractual term that states that an agreement will come into existence only if and when a certain event occurs (Ex weapon will be able to be bought once accepted by the government) • Condition Precedent : is a contractual term that state while a contract is formed immediately, it does not have to be performed unless and until a certain event occurs (ex case pg 259) and (concept summary 11.1) RESCISSION  Executory: a contract is executory if a party has not fully performed its obligation under the contract  If a contract is Fully Executory- both parties still owe obligation under the contract (still have rights), use the contract of rescission to bring the fully executory contract to an end  Executed: if a contract has fully performed its obligations under the contract  Rescission: occurs when the parties agree to bring a contract to an end. ACCORD AND SATISFACTION  Accord and Satisfaction: Occurs when a party gives up its right to demand contractual performance in return for some new benefit  Accord= parties new agreement  Satisifaction= new consideration provided by the party that is relieved of the need to perform the original contract  Requires fresh consideration  Hard to recognize if parties has given nothing new  General rule a promise to pay a smaller sum cannot discharge an obligation to pay a larger amount RELEASE  Release: is an agreement under seal to discharge a contract  The parties can agree to discharge a contract without fresh consideration if they enter into a release VARIATION  Variation: involves an agreement to vary the terms of an existing contract  Requi
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