business law
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Quote of the Day
“If you can’t give me your word
of honor, will you give me
your promise?”
Samuel Goldwyn,
Hollywood producer
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Discharge
- A party is discharged when she has no more duties under a contract.
- Most contracts are discharged by full performance.
- Sometimes the parties discharge a contract by agreement.
- Rescind means that they terminate it by mutual agreement.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Conditions
- A condition is an event that must occur before a party becomes obligated under a contract.
- How Conditions are Created
Express Conditions -- No special language is necessary to create the condition, but it must be stated clearly somehow.
Implied Conditions – The condition is not stated, but is clear from the agreement.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Types of Conditions
- Condition Precedent
Must occur before a duty arises.
- Condition Subsequent
Must occur after the particular duty arises.
- Concurrent Conditions
Certain things must occur simultaneously.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Performance
- Strict Performance
Performance that is exactly what promised; is usually not expected and failure to do so does not cause for discharge.
- Substantial Performance
A party that substantially performs its obligations will receive the full contract price, minus the value of any defects.
A party that fails to perform substantially receives nothing on the contract and will only recover the value of the work, if any.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Personal Satisfaction Contracts
- A personal satisfaction contract is one which the promisee makes a personal, subjective evaluation of the promisor’s performance.
A court uses a subjective standard only if assessing the work involves feelings, taste, or judgment and the contract explicitly demands personal satisfaction.
In all other cases, a court applies an objective standard to the decision.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Good Faith
- The Restatement (Second) of Contracts §205 states: “Every contract imposes upon each party a duty of good faith and fair dealings in its performance and its enforcement.”
- The difficulty, of course, is applying this general rule to the wide variety of problems that may arise.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Time of the Essence Clauses
- A time of the essence clause will generally make contract dates strictly enforceable.
- Merely including a date for performance does not make time of the essence.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Breach
- Material Breach
Generally courts will discharge only if a party committed a material breach.
- Anticipatory Breach
Anticipatory breach is committed by one party making it unmistakably clear that he will not honor the contract.
- Statute of Limitations
Will limit the time within which the injured party may file suit.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Impossibility
- True Impossibility
Something has happened making it utterly impossible to fulfill the promise.
Generally limited to destruction of the subject matter, death of the promisor in a personal service contract and subsequent illegality of the contract.
- Commercial Impracticability
Some event has occurred that neither party anticipated, making the contract extra-ordinarily difficult and unfair to one party.
- Frustration of Purpose
Some event has occurred that neither party anticipated and the contract now has no value for one party.
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
“Good faith and reasonable conduct will prevent many contract disputes.”