section 11.1

Performance and AgreementPerformance and AgreementSection 11.1Section 11.1

Understanding Business and Personal Law

Performance and Agreement Performance and Agreement Section 11.1Section 11.1

How Contracts Come to an End

Section 11.1Section 11.1Performance and Agreement Performance and Agreement

Section 11.2Section 11.2Impossibility of Performance Impossibility of Performance

and Operation of Law and Operation of Law

1111ChapterChapter How Contracts ComeHow Contracts Cometo an Endto an End




What You’ll Learn

How to identify when time is important in How to identify when time is important in a contract (p. 224)a contract (p. 224)

How to distinguish between satisfactory How to distinguish between satisfactory and substantial performance (p. 226)and substantial performance (p. 226)




What You’ll Learn

How to explain tender of How to explain tender of performance (p. 228)performance (p. 228)

How to explain how contracts can be How to explain how contracts can be discharged by agreement (p. 229) discharged by agreement (p. 229)




Why It’s Important

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




Legal Terms

discharged (p. 224)discharged (p. 224)performance (p. 224)performance (p. 224)complete performance (p. 224)complete performance (p. 224)reasonable time (p. 224)reasonable time (p. 224)substantial performance (p. 226)substantial performance (p. 226)




Legal Terms

tender (p. 228)tender (p. 228)legal tender (p. 229)legal tender (p. 229)mutual release (p. 230)mutual release (p. 230)accord and satisfaction (p. 230)accord and satisfaction (p. 230)




Ending a Contract

Discharge by Performance Time for PerformanceSatisfactory PerformanceSubstantial PerformanceTender of Performance

Section OutlineSection Outline




Discharge by Agreement Mutual ReleaseAccord and Satisfaction

Section OutlineSection Outline




Pre-Learning Question Pre-Learning Question

How does a contract come to an end?




Ending a Contract Ending a Contract

When contracts eventually end, they When contracts eventually end, they are said to be are said to be dischargeddischarged..

Contracts can be discharged by Contracts can be discharged by performance and by agreement.performance and by agreement.





What do you think “discharged by performance” means?




Discharge by Performance Discharge by Performance

Most contracts are discharged by Most contracts are discharged by performanceperformance, meaning the parties , meaning the parties fulfill the terms of the contract by fulfill the terms of the contract by doing what they promised earlier.doing what they promised earlier.




Discharge by Performance Discharge by Performance

As long as all terms have been carried As long as all terms have been carried out properly and completely, the out properly and completely, the contract is discharged by contract is discharged by complete complete performanceperformance..




Time for Performance Time for Performance

The time for completing a contract The time for completing a contract may be important to one or both of the may be important to one or both of the parties.parties.





If the time is not stated in the contract If the time is not stated in the contract and there is a question of and there is a question of performance, the courts will say the performance, the courts will say the contract must be completed in a contract must be completed in a reasonable timereasonable time..





Reasonable time Reasonable time

Will vary with the circumstances.Will vary with the circumstances.Is defined as the time that is Is defined as the time that is suitable, fair, and proper to the suitable, fair, and proper to the objective in view.objective in view.





A contract will specify that time is of A contract will specify that time is of the essence when it is a vital or the essence when it is a vital or essential element of the contract.essential element of the contract.




How are most contracts discharged?




ANSWERANSWER

By performance




Satisfactory Performance Satisfactory Performance

When people perform services for When people perform services for others, the law requires that those others, the law requires that those services be done in a satisfactory services be done in a satisfactory manner.manner.





Regardless of whether a contract Regardless of whether a contract specifically states the work be specifically states the work be performed “in a satisfactory manner,” performed “in a satisfactory manner,” if one party believes the job is if one party believes the job is unsatisfactory, the court uses the unsatisfactory, the court uses the reasonable person test.reasonable person test.




11.111.1

Reasonable Person Test Reasonable Person Test

The court asks, “Would a reasonable person The court asks, “Would a reasonable person consider the job to be completed in a consider the job to be completed in a satisfactory manner?”satisfactory manner?”

I’m a reasonable person.

Has this job been completed in a

satisfactory manner?




Reasonable Person Test Reasonable Person Test

The dispute will then be settled based The dispute will then be settled based on the answer to this question as on the answer to this question as determined by a judge or jury.determined by a judge or jury.





If one party agrees to perform If one party agrees to perform services for another “to the other’s services for another “to the other’s satisfaction,” then the other party must satisfaction,” then the other party must be satisfied to be bound to the be satisfied to be bound to the contract.contract.




Substantial Performance Substantial Performance

An exception to the rule of discharging An exception to the rule of discharging a contract by complete performance is a contract by complete performance is substantial performancesubstantial performance..





Substantial performance is slightly Substantial performance is slightly less than full performance.less than full performance.Someone who has fulfilled the Someone who has fulfilled the major requirements of a contract in major requirements of a contract in good faith, leaving only minor good faith, leaving only minor details incomplete, has substantially details incomplete, has substantially performed. performed.





The courts will allow the person to The courts will allow the person to recover the amount agreed upon recover the amount agreed upon under the contract, minus the cost under the contract, minus the cost of completing the job.of completing the job.Substantial performance is often Substantial performance is often applied to construction contracts.applied to construction contracts.




Tender of Performance Tender of Performance

A A tendertender is an offer to do what you is an offer to do what you have agreed to do under a contract. have agreed to do under a contract.





For example:For example:

If buying a car—offering to pay If buying a car—offering to pay money to the seller at the agreed money to the seller at the agreed timetimeIf selling a car—offering to give the If selling a car—offering to give the car to the buyer at the agreed time car to the buyer at the agreed time





If neither party has made tender, then If neither party has made tender, then neither party is in a position to bring neither party is in a position to bring suit against the other.suit against the other.





The person offering to pay the The person offering to pay the required amount of money must required amount of money must offer offer legal tenderlegal tender—U.S. coins or —U.S. coins or currency.currency.Offering a check, even if it is Offering a check, even if it is certified, is not a valid tender of certified, is not a valid tender of payment.payment.




Judy Anfinson agreed to create a garden landscape for Bill MacArthur “to his satisfaction” for $1,200.




When it was complete, Bill noticed Judy had planted some shrubs around the patio to which he was highly allergic. Is Judy required to replant the shrubs? Why or why not?




ANSWERANSWER

Yes. The contract requires Judy to complete the project to Bill’s satisfaction.





What do you think “discharged by agreement” means?




Discharge by Agreement Discharge by Agreement

Contracts are created by mutual Contracts are created by mutual agreement and may be terminated by agreement and may be terminated by mutual agreement.mutual agreement.




Mutual Release Mutual Release

A A mutual releasemutual release is an agreement is an agreement between two parties to end an between two parties to end an agreement. By mutual agreement, the agreement. By mutual agreement, the contract no longer exists.contract no longer exists.




Accord and Satisfaction Accord and Satisfaction

A contract can also be discharged A contract can also be discharged when one party to an agreement when one party to an agreement agrees to accept performance from agrees to accept performance from the other party that is different from the other party that is different from what was agreed upon in the original what was agreed upon in the original contract.contract.




Accord and Satisfaction Accord and Satisfaction

In effect, one contract is substituted In effect, one contract is substituted for another, which is known as for another, which is known as accord accord and satisfactionand satisfaction. It is often used to . It is often used to settle an honest disagreement or settle an honest disagreement or unforeseen circumstances regarding unforeseen circumstances regarding an amount owed.an amount owed.




Reviewing What You Learned

1. What is a reasonable time for completing a contract?

Section 11.1 Assessment





The time that is suitable, fair, and proper to the objective in view.


Answer





2. What is the difference between satisfactory and substantial performance of a contract?






The standard for satisfactory performance is reasonableness. Substantial performance is slightly less than full performance.


Answer





3. What is tender of performance?






An offer to do what a party has agreed to do under a contract.


Answer





4. How can contracts be discharged by agreement?






By mutual release and accord and satisfaction


Answer





Critical Thinking ActivityDischarge by Agreement

Why does the court permit certain contracts to be discharged by accord and satisfaction?





Critical Thinking Activity AnswerDischarge by Agreement It is used to settle an honest disagreement or unforeseen circumstances regarding an amount owed.





Legal Skills in ActionAccord and Satisfaction Last week, your friend Cynthia used a credit card to purchase a snowboard for $277.89. This week she saw the same snowboard on sale for $250.43 at another store.





Legal Skills in ActionAccord and Satisfaction Cynthia believes she can use accord and satisfaction to pay the lesser amount when her credit card comes in the mail.





Legal Skills in ActionAccord and Satisfaction Send Cynthia an e-mail message explaining why accord and satisfaction will not work in this case.





Legal Skills in Action AnswerAccord and Satisfaction Accord and satisfaction cannot be used because the lower price does not meet the criteria of unforeseen circumstances or disagreement about the amount that she originally bought the snowboard for.

Performance and AgreementPerformance and AgreementEnd of Section 11.1End of Section 11.1

section 11.1

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