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Chapter 9

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


Department
Business Administration
Course Code
BUS 393
Professor
Richard Yates
Chapter
9

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Chapter 9 – The End of the Contractual Relationship
Contracts may be discharged through performance, breach, agreement, or
frustration
Performance
Contracts usually have major terms (conditions) and minor terms
(warranties)
When warranty breached, contract still considered performed and other party
is obligated to perform, subject to claim for compensation for breach of
warranty
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
Tender
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
agreement
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
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
Repudiation – refusal to perform, after performance is due
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