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Performance and AgreementWhat You Will Learn:

Why It Is Important:

How to identify when time is important in a contract How to distinguish between satisfactory and substantial

performance How to explain tender of performance How to explain how contracts can be discharged by

agreement

Understanding when contracts come to an end will help you determine your legal rights and obligations in such situations

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• Ending a Contract– When a contract comes to an end it is referred to

as discharged• By performance or by agreement

• Discharge by Performance– Performance meaning the parties complete the

terms of the contract• You promised to paint my house• I promised to pay you

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– Time for Performance• If time not stated, performance must be completed in a

reasonable time– Reasonable time varies with the circumstances of each case

– Tender of Performance• A tender is an offer to do what you have agreed to do

under a contract– It is important to make tender even if you know the other party

will not perform their part of the contract

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– Satisfactory Performance• When services are preformed for others, the law

requires that they be done in a satisfactory manner• Court will use the “reasonable person test” if there is a

question as to the satisfactory performance• One party will agree to perform services for another “to

the other’s satisfaction.” If satisfied, the other party is bound to the contract

– Substantial Performance• Is performance that is slightly less than full performance• Fulfilled the major requirements, but has left only minor

details incomplete

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• Discharge by Agreement• Contracts may be terminated by mutual agreement

– Mutual Release• When two parties mutually agree to end their

agreement

– Accord and Satisfaction• When one contract is substituted for another• Often used to settle honest disagreements or unforeseen

circumstances regarding an amount owed

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• Reviewing What You Learned– What is reasonable time for completing a contract?– What is the difference between satisfactory and

substantial performance of a contract?– What is tender of performance?– How can contracts be discharged by agreement?

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Impossibility of Performance & Operation of LawWhat You Will Learn:

Why It Is Important:

How to explain situations in which the law will permit a discharge by impossibility

How to identify discharges that occur by operation of law How to define the statute of limitations How to identify debts that cannot be discharged in

bankruptcy

Understanding when contracts are discharged by impossibility and by operation of law will help you know your legal rights and obligations in such situations

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• Involuntary Discharge– Impossibility of Performance– Operation of Law

• Discharge by Impossibility of Performance– a contract the become impossible to perform may

be discharged and both parties released from their obligations• Death or Illness• Destruction of subject matter• Means of Performance• Illegality

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– Death or Illness in a Personal Service Contract• Contract will be discharged if the contract requires

personal service• Person selected for their ability

– Destruction of the Exact Subject Matter• If the subject matter that is destroyed through no fault

of either party• Must occur after the contract accepted, but before

carried out

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– Means of Performance• Sometimes the means for performance is destroyed and

the contract can not be completed.– You sign a contract to get a new roof, but your house burns

down before the job is started.– The house must exist for the contract to be performed

– Illegality• Contract is void if performance is illegal at initiation.• Same rule applies if performance becomes illegal after

initiation.

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• Discharge by Operation of Law• Sometimes the best interest of society demands that a

contract be terminated

– Wrongful Alteration• Altering or changing a contract after acceptance

– Statute of Limitations• When time voids your right to sue for performance• You can’t “sleep on your rights” and expect help • You can “stop the clock” and still collect damages

– Bankruptcy• Set up for the discharging of debt• Debtors used to go to prison

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• Reviewing What You Learned– When will the law permit a discharge by

impossibility?– When will the permit a discharge by operation of

law?– What is the statute of limitations?– What debts cannot be discharged in bankruptcy?