Chapter 7

CONDITIONS, BREACH, AND OTHER ASPECTS OF PERFORMANCE

ChapterScope

This chapter deals with the performance of contracts. In particular, it deals with when and how the parties owe each other performance under the contract, and with how the existence of a breach of contract is determined. Key principles and terms:

• Condition: A “condition” is an event which must occur before a party’s performance is due. Conditions can be either “express” or “constructive.”
  • Express:An “express” condition is a condition on which the parties have agreed (either explicitly or implicitly). When a party’s duty is subject to an express condition, strict compliance with the condition is ordinarily required before the performance will be due.
  • Constructive:A “constructive” condition is a condition that was not agreed upon by the parties, but that is supplied by the court to ensure fairness. Only substantial (not strict) compliance with constructive conditions is generally required.
    • Exchange of performances:In most cases, each party’s substantial performance of any promises that have come due is a constructive condition to the performance of any subsequent duties by the other party. (Example: If A hasn’t substantially performed his duty to paint B’s house, B’s duty to pay for the painting doesn’t come due.)
• Right to cancel for material breach:When a party has failed to “substantially perform” her obligations under a contract, she is said to have committed a “material” breach. The other party is then entitled to cancel the contract (as well as to recover damages).
  • Factors for determining material breach:Only “material” breaches, not lesser ones, allow the nonbreaching party to cancel. The more the breach defeats the entire purpose of the contract and the expectations of the nonbreaching party, the more likely it is to be considered “material.”
• Anticipatory repudiation:When a party indicates that she will certainly be unable or unwilling to perform in the future, this is called an “anticipatory repudiation.” The other party may respond to an anticipatory repudiation by immediately cancelling the contract.