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Chapter 9

BUS 393 Chapter Notes - Chapter 9: Fundamental Breach, Force Majeure, Condition Subsequent

Business Administration
Course Code
BUS 393
Richard Yates

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Chapter 9 – The End of the Contractual Relationship
Contracts may be discharged through performance, breach, agreement, or
Contracts usually have major terms (conditions) and minor terms
When warranty breached, contract still considered performed and other party
is obligated to perform, subject to claim for compensation for breach of
If condition breached, contract normally considered discharged and other
party is relieved of obligations
However, if condition is breached in minor way (substantial performance),
court usually treats as breach of warranty
Tendered performance – if person is ready/willing/able to perform
obligation and attempts to do so, but other party refuses to accept or
prevents it, first party is taken to have completed obligation and other party
required to perform
Exception: where debt owed and money refused – money still owed, but
creditor bears expense and responsibility of collecting the debt
Payment must be in legal tender, and payment method(s) specified in
Delivery/tender of performance must be as specified, or at reasonable time
and place
Some obligations can continue after contract has been properly performed
(eg. quality of goods)
Breach – failure to properly perform contractual obligations by 1)
improper/incomplete performance and 2) refusal to perform
Conditions and Warranties
Breach of warranty does not relieve party of obligation to perform, but has
right to sue other party for cost to overcome deficiency
After breach of condition, victim may still choose to treat contract as binding
If non-breaching party has received significant benefit, loses right to
discharge contract and must perform her obligations
Exemption Clauses
Exemption clause – attempt by party to significantly limit/eliminate its liability
If there is ambiguity, narrow/restrictive meaning used
Terms cannot be unilaterally imposed, must be brought to attention at time
contract is made
Fundamental Breach
Fundamental breach may be permitted by exemption clause, but only if
absolutely clear both parties understood its coverage => not likely
(construction approach)
Repudiation – refusal to perform, after performance is due
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