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Lecture Notes CH 17, 18, 19 - LECTURE NOTES CHAPTER...

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LECTURE NOTES: CHAPTER 17 "PERFORMANCE AND DISCHARGE" INTRODUCTION Chapter 17 answers these questions—when have the parties to a contract done all that is required under the contract? When is a party excused from doing what he or she promised in the contract to do? When contracting parties do what they promised to do, their duties are discharged, and their contract is terminated. Performance is the most common form of discharge, but duties can be discharged in other ways. Generally, the occurrence or failure of a condition on which a contract is based will discharge the parties' duty to perform. A breach of contract will discharge the duty of the nonbreaching party to perform. The parties may agree—through rescission, novation, or accord and satisfaction—not to perform as they contracted. Also, by operation of law the parties' duties may be discharged (through material alteration of the contract, a statute of limitations, bankruptcy, impossibility or commercial impracticability, or frustration of purpose). Conditions Sometimes performance is conditioned on a certain event. If the condition is not satisfied, the obligations of the parties are discharged. A condition that must be fulfilled before a party's performance can be required is a condition precedent. When a condition operates to terminate a party's duty to perform, it is a condition subsequent. Generally, conditions precedent are common; conditions subsequent are rare. The Restatement (Second) of Contracts does not use the terms. Concurrent conditions exist when each party's performance is conditioned on the other's simultaneous performance. Conditions can also be classified as express or implied. II. Discharge by Performance Performance (doing what was promised) is the most common way to discharge contract duties. Performance may also be accomplished by tender. A. TYPES OF PERFORMANCE 1. Complete Performance Ordinarily, express or implied-in-fact conditions must fully occur for complete performance to take place. Any deviation operates as a discharge. 2. Substantial Performance When a party fulfills his or her contract obligation in good faith with substantial performance (performance that does not vary greatly from that promised in the contract), the other party may be held to his or her obligation to perform, less damages for minor deviations. 3. Performance to the Satisfaction of One of the Parties When the subject matter of a contract is personal, its performance must actually satisfy the party to whom the performance is owed. The only requirement is that 1
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this party act honestly and in good faith. Contracts that involve mechanical fit- ness, utility, or marketability need only be performed to the satisfaction of a reasonable person. 4. Performance to the Satisfaction of a Third Party When a contract requires performance to the satisfaction of a third party, some courts require the personal satisfaction of that party. Most courts, however, require the work to satisfy a reasonable person.
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