Chapter17 - Performance and Discharge Performance of a...

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Performance and Discharge Performance of a contract (when the parties do what they agreed to do) discharges it. Discharging a contract terminates it. The legal environment of business requires the identification of some point at which the parties can reasonably know that their duties are at an end. The most common way to discharge , or terminate, one's contractual duties is by the performance of those duties. For example, Giles and Lopez have a contract for the sale of a 2000 Corvette for $35,000. This contract will be discharged on the performance by the parties of their obligations under the contract--Lopez’s payment of $35,000 to Giles and Giles’s transfer of possession (and title) of the Vette to Lopez. Conditions Typically, promises of performance are not expressly conditioned or qualified. Instead, they are absolute
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promises . They must be performed , or the parties promising the acts will be in breach of contract. However, performance can be contingent on the occurrence or nonoccurrence of a certain event. A condition is a possible future event--the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract. Thus, if this condition is not satisfied , the obligations of the parties are discharged . Suppose that Lopez, as above, offers to purchase Giles’s Vette only if an independent appraisal indicates that it is worth at least $30,000. Giles accepts Lopez's offer. Their obligations (promises) are conditioned on the outcome of the appraisal. Should the condition not be satisfied (if the appraiser deems the value of the Vette to be only $20,000), the parties' obligations to each other are discharged and cannot be enforced. Three types of conditions can be present in contracts: 1. conditions precedent , 2. conditions subsequent , and 3. concurrent conditions.
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Conditions are also classified as express or implied . Conditions Precedent A condition that must be fulfilled before a party's performance can be required is called a condition precedent . The condition precedes the absolute duty to perform . (just as in the Giles – Lopez Vette deal) Conditions Subsequent When a condition operates to terminate a party's absolute promise to perform , it is called a condition subsequent . If
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This note was uploaded on 03/31/2008 for the course FIN 3055 taught by Professor Cgiles during the Spring '08 term at Virginia Tech.

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Chapter17 - Performance and Discharge Performance of a...

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