Something that must take place before a party has a duty to perform is called a condition subsequent

ELEMENTS OF CONSIDERATION [4316]

•    Consideration, which must be given in order to make a contract legally binding, is legally sufficient and bargained-for value, given by the promisor in return for the promisee performing or refraining from performing some act which results in a detriment to the promisee and/or a benefit to the promisor. “ A bargained for exchange in which there is a legal determinant to the promisor or legal benefit to the promise.”

•     Legally Sufficient Value may be established by: [4316.08]

(1)   promising to do something that the promisor has no prior legal duty to do (e.g., promising to pay money for the promisor’s goods);

(2)   performing an action that the promisor is not otherwise obligated to undertake; or

(3)   refraining from exercising a legal right which the promisor is otherwise entitled to exercise.

•     In a bargained-for exchange, the consideration given by the promisor must induce the promisee to incur a legal detriment and/or provide a legal benefit to the promisor, either or both of which are sufficient to induce the promisor to make the promise.

INSUFFICIENT CONSIDERATION [4316.07]

•    Pre-Existing Legal Duty: Under most circumstances, a promise to do (or refrain from doing) what one already has a legal duty to do (or refrain from doing) does not constitute legally sufficient consideration.

•     A commonly-recognized exception to the foregoing rule is the so-called “unforeseen difficulties” doctrine, which permits an existing contract to be modified to account for unforeseen difficulties that arise during the course of performance.

•     Past Consideration: Promises made in return for acts or events that have already taken place are unenforceable for lack of sufficient consideration.

•     Illusory Promises: If the terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to dQ (or refrain from doing) anything, the promise is unenforceable for lack of sufficient consideration.

·        Moral obligation: while you may feel morally obligated, it doesn’t mean there is a legal obligation….

RESCISSION AND NOVATION

•      The unmaking of an existing contract and making of a new contract between the same parties (e.g., to account for unforeseen difficulties) are known, respectively, as rescission and novation.

•     Rescission: Canceling an existing contract, and returning the parties to their pre-contract states (i.e., stopping it before it goes further and going back to where you were before the contract.)

•     Novation: Replacing an existing contract with a new, superseding contract between the same partie (continuing)

ACCORD AND SATISFACTION 4326.06

•      Accord and Satisfaction: An agreement between an obligor (debtor) and obligee (creditor), by which the obligor agrees to pay the obligee some amount owed under the contract (generally less than the amount in dispute) in exchange for a discharge of all obligations owed by the obligor to the obligee.

•     For accord and satisfaction to occur, the amount of the obligor’s debt to the obligee must be in dispute, or unliquidated.

•      Liquidated Debt: A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.

•      Unliquidated Debt: A debt whose amount may be disagreed on by reasonable persons.

RELEASES AND COVENANTS NOT TO SUE 4326.08/.09

•     Release: An agreement whereby one party forfeits its rights to pursue a legal claim against another party.

•     Releases are generally binding if they are:

(1)   given in good faith,

(2)   stated in writing, and

(3)   accompanied by consideration.

•     Covenant Not to Sue: An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.

PROMISSORY ESTOPPEL

•       Promissory Estoppel: When a promisor makes a clear and definite promise on which the promisee justifiably relies, the promisor is bound by the promise, even if it was insufficient to form the basis of a valid, legally binding contract.  This is equitable relief.

•     For the doctrine of promissory estoppel to be applied, the following elements must be established:

(1)   the promise was clear and definite;

(2)   the promisee justifiably relied on the promise;

(3)   the promisee’s reliance was substantial and of a definite character; and

(4)   enforcing the promise will serve the best interests of justice.

•     Other Promises Enforceable Without Consideration:

Courts may also enforce, despite the lack of consideration,

(1)   promises to pay a debt, otherwise barred by limitations, made after limitations have run, and, in rare cases,

(2)   promises to charitable institutions.

TERMINATION, DISCHARGE,

PERFORMANCE, AND TENDER

•     Discharge [4326]: The termination of a party’s obligations arising under a contract.

•     Discharge occurs either when:

              (1)   Both parties have fully performed their contractual obligations; or

              (2)   Events, conduct of the parties, and/or operation of law release the parties from their obligations to perform.

•     Performance: Fulfilling one’s contractual duties.

•     A party’s obligations to perform under a contract may be either absolute or conditioned on the occurrence or nonoccurrence of one or more event(s).

•     Tender: An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

CONDITIONAL PERFORMANCE [4326.02]

•     Condition: A contractual qualification, provision, or clause which creates, suspends, or terminates the obligations of one or both parties to the contract, depending on the occurrence or nonoccurrence of some event(s).

•     Condition Precedent: A condition that must be satisfied before a party’s contractual obligation to perform becomes absolute (e.g., Bob promises to Hire Terry as a driver as soon as Terry gets his license).

•     Condition Subsequent: A condition the occurrence or nonoccurrence of which will terminate a party’s absolute obligation to perform (e.g., Mary agrees to let Sue stay in Mary’s spare room for as long as Sue remains unmarried).

•     Concurrent Conditions: Mutually dependent con­ditions that must occur or be performed at the same time in order to give rise to any absolute obligation to perform (e.g., Nikki offers to pay Tma $100 in exchange for Tina’s class ring).

•     Courts recognize and enforce both express and implied conditions.

CONTRACTUAL PERFORMANCE

•     Discharge by Performance: A contract terminates when both parties perform the acts they have promised.

•     Complete vs. Substantial Performance: When a party fails to completely perform his or her contractual duties, the question arises whether the performance was nonetheless sufficiently substantial to discharge the contractual obligation. If so, then the party is said to have substantially performed.

•      Substantial performance must not vary greatly from that promised in the contract, and must create substantially the same benefits as those promised.

•      If one party substantially performs, the other party’s duty to perform remains absolute --although the other party may be entitled to recover damages, if any, for the substantially performing party’s failure to fully perform.

•      If a party fails to either substantially or fully perform, the other party’s remaining obligations, if any, under the contract are discharged.

•     Time for Performance: If no time is stated in the contract, performance is due within a reasonable time.

Material Breach of Contract: A party’s failure, without legal excuse, to substantially perform the obligations he or she has promised to perform.

•     If a party’s breach is non-material, the non-breaching party’s duty to perform may be suspended until the breach is remedied, or “cured.” However, a non-material breach will not excuse performance by the non-breaching party. Only a material breach will excuse the non-breaching party from its contractual obligations.

•     If time is not “of the essence,” failure to perform by the time specified in the contract is not a material breach.

•     Anticipatory Repudiation: An action by a party to a contract that indicates that he or she will not perform a contractual obligation due to be performed in the future.

•     Such a repudiation will excuse the non-repudiating party from performing under the contract.

•     However, until the non-repudiating party treats the repudiation as a material breach, the repudiating party can retract his or her repudiation and restore the parties’ contractual rights and obligations.

·        Recission:  the process by which the parties cancel a contract and return one another to their pre-contract status.

•     Novation 4326.05: Substituting, by agreement, a new contract for an old one, and thereby terminating the parties’ rights and duties under the old contract.

>     Novation differs from assignment or delegation because novation requires a new agreement.

•     Novation requires

(1)   a valid, prior agreement, for which

(2)   all parties agree to substitute a new contract;

(3)   discharge of the prior obligation; and

(4)   a valid, new agreement.

•     Accord and Satisfaction: An agreement between the parties to accept different performance than that promised in the contract.

•     Material Alteration: If the material terms of a contract are altered, an innocent party (i.e., one who neither altered nor consented to the alteration of the contract) may be discharged from their contractual obligations.

•     Statutes Of Limitations: The running of limitations -- in the case of U.C.C. contract claims, four years from the date of the breach, regardless of the injured party’s knowledge of the breach -- does not technically discharge the parties, but it prevents the wronged party from seeking judicial remedies.

•     Bankruptcy: A discharge in bankruptcy, afforded to a debtor after its liquidation or reorganization plan is approved, bars subsequent enforcement against the debtor of any contracts that pre-date the discharge.

>     Unlike promises to pay or partial payment of a debt barred by limitations, promises to pay or partial payment of a debt following discharge does not revive the debt.

IMPOSSIBILITY OF PERFORMANCE 4326.07

•     A party may be relieved of his contractual duties when performance becomes either impossible or impracticable through no fault of either party. The following will generally excuse performance as objectively impossible or impracticable:

(1)   Death or incapacitation prior to performance of a personal services contract;

(2)   Destruction of the subject matter of the contract prior to performance;

(3)   A change in the applicable law which renders performance illegal;

(4)   Changing market conditions make performance commercially impracticable; and

(5)   Frustration of Purpose -- supervening circumstances making it impossible for both parties to achieve the purpose of the contract.

•     Temporary Impossibility: A change in circumstances that makes performance temporarily impossible will act to suspend, but not excuse performance.