Chapter 20: Performace

Business Law, Sixth Edition
© 2019 BVT Publishing. All rights reserved.
S-1
Chapter 20:
Performance

S-2
Learning Objectives
• Understand the intent of the parties in a
contract.
• Explain the types of conditions to a
contract.
• Discuss the performance of conditions.
• Recognize the various excuses for
nonperformance.
• Describe the methods for the discharge
of contracts.

S-3
20.0 In the News (Slide 1 of 2)
Odell Beckham Jr.’s holdout was harmless,
but he gained no leverage on the Giants
http://bvtlab.com/t7B5B
New York Giant’s rookie wide receiver has a
standard NFL contract limiting the amount of
money he (as a rookie) can make, despite his
stellar performance. Odell has stayed away from
offseason workouts, holding out for a new
contract, but it won’t make a difference.

S-4
20.0 In the News (Slide 2 of 2)
• Discuss the conditions and options
noted in the article.
• Is Beckham’s holdout considered a
breach? Explain.

S-5
20.1a Tools for Determining Intent
of the Parties
• Construction: Courts construe a
contract’s legal effect.
• Interpretation: Juries interpret the
parties’ intentions.
• The meaning the contract language
would convey to a reasonably intelligent
person who is familiar with the
circumstances

S-6
20.2a Definition of Condition
An act or event that limits or qualifies a
promise. Unless excused, must occur
before performance under a contract
becomes due.
• Must occur before the promisor has a present
duty to perform
• Party who makes an unconditional promise
has an immediate duty to perform.

S-7
20.2b Types of Conditions
Condition precedent:
An act or event that, unless excused, must
occur before a duty of performance arises
Conditioned concurrently:
Parties are to exchange performances at the
same time.
Condition subsequent:
An event that discharges a duty of
performance that has become absolute

S-8
20.2c Express Conditions Generally
Express conditions are specifically set
out in the contract
Constructive conditions: conditions
that the parties did not consider but that
the court imposes.

S-9
20.2d Express Conditions of
Personal Satisfaction
Subjective dissatisfaction: situations
involving personal taste, fancy, or judgment
• Dissatisfaction must be honest and in good
faith.
Objective dissatisfaction: situations involving
mechanical fitness, utility, or marketability
• Law requires reasonable rather than
personal satisfaction.

S-10
20.2d Critical Thinking
Case: Silvestri & Celestino
Considers whether an employer’s satisfaction with
the performance of an employee is subject to an
objective or subjective evaluation. The dismissed
employee was a high-level manager who needed to
be responsive to the needs of the owners.
• How should subjective satisfaction be judged?
Should good faith play a role? Why?
• Is the majority’s position reasonable given the
concerns raised in the dissent? Why?

S-11
20.2e Constructive Conditions
Constructive condition is one not
expressed by the parties.
• Read into the contract to serve justice—
an implied-in-law condition
• Courts make performances of bilateral
promises constructively conditional on
one another.

S-12
20.3a Tender of Performance
A tender in the law of contracts is an
offer to perform.
• In most contracts, one party or the other
is required to tender payment.
• Article 2 of the Uniform Commercial Code

S-13
20.3b Substantial Performance (Slide 1 of 2)
• Express conditions must be strictly met
or there is a material breach of contract.
• Constructive conditions need be only
significantly performed to avoid breach.
• Substantial performance is not
complete performance.
• An immaterial breach
• Dollar damages may be awarded

S-14
• Immaterial breach does not excuse
the non-breaching party of duty.
• Material breach gives the non-
breaching party an option.
• Opt to treat the contract as rescinded
• Continue under the contract by treating it
as a partial breach
20.3b Substantial Performance (Slide 2 of 2)

S-15
20.3b Critical Thinking
Case: Jacob and Youngs
Regarding non-compliance with the terms of the
contract, the difference between the type of pipe
used and the type of pipe asked for in the contract
was insignificant. The proper remedy is NOT the
cost of replacement but the difference in value.
• Does the court provide a manner for determining
when a defect is insignificant? Explain.
• The decision of the court appears to allow those
performing a contract to act in a manner different
from what they promised. Is this true? Explain.

S-16
20.3c Divisibility: Installment
Contracts
• Rights and obligations of the parties
are divided into two or more parts.
• Performance of each part by one party
is the agreed exchange for the other
party’s part.
• The second party is under a duty to
perform in part after the first party
performs an installment.

S-17
20.3d Anticipatory Repudiation
Party communicates intention to not perform.
• Remedies
– Treat as breach and seek damages immediately
– Wait until time of performance
• Does not apply to promises to pay money on
or before a specified date
• Code provision:
– Buyer may “cover” by making in good faith and
without unreasonable delay any reasonable
purchase of substitute.

S-18
20.4a Introduction Excuses for
Nonperformance
Actual failure of a condition may be legally
excused in any of the following ways:
• Hindrance
• Prevention or noncooperation
• Waiver
• Impossibility
• Frustration of purpose
• Commercial impracticability

S-19
20.4f Critical Thinking (Slide 1 of 2)
Case: Specialty Beverages
In this dispute over an exclusive distributorship
agreement in Oklahoma, Defendant canceled the
exclusive agreement in anticipation of forming a
distributorship agreement with another distributor.
Defendant claims commercial impracticality as a
defense, but that would require showing the event
on which the defense is based was
unforeseeable.

S-20
20.4f Critical Thinking (Slide 2 of 2)
• What legal test was used to determine
whether the Code was applicable?
• Why did the court find that the doctrine
of commercial impracticability did not
apply?

S-21
20.5a Methods of Discharge
• Intended method of discharge is the
complete performance by both parties.
• Rescinded contract is a discharge.
• Release is a formal written statement
by one party that the other’s duty is
discharged.
• Novation
• Accord and satisfaction

S-22
20.5b Payment
What constitutes payment?
• Transfer of money
• Conditional payments—negotiable instruments
Good evidence of payment and discharge:
• Receipt given by the creditor
• Cancelled check
How is payment applied to multiple debts?
• Debtor may direct how payment is applied.
• Courts apply the payment to the oldest
obligation.

S-23
20.5c Accord and Satisfaction
An accord may arise from a disputed
claim in either tort or contract.
• Satisfaction means that the substituted
performance is completed.
• Debtor sends a creditor a check for less than
the amount due, indicates paid in full.
• Creditor cashing the check constitutes the
satisfaction of the accord.

Chapter 20: Performace

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