Question 1

The majority of courts hold that the running of the statute of limitations operates to discharge a contract.

Accepted Answer

The running of the statute of limitations does not discharge a contract; it merely bars the remedy to enforce the contract through the court system. The obligation or debt still exists, but cannot be legally enforced after the statute of limitations has expired.

Question 2

A contract may condition the duty of one contracting party to accept and pay for the performance of the other contracting party upon the approval of a third party who is not a party to the contract.

Accepted Answer

Contracts can include terms that make the duty of one party to accept and pay for the performance of the other contingent upon the approval of a third party, even if that third party is not directly involved in the contract. This is often used in contracts involving quality standards or specialized services where the third party's expertise or approval is necessary for the performance to be deemed satisfactory.

Question 3

Paul, a contractor, has a contract to build a new office building for Bill. The contract contains a provision requiring Paul to furnish a certificate of occupancy from the building inspector before Bill is required to pay. This provision is:
A) an express condition.
B) an implied-in-fact condition.
C) an implied-in-law condition.
D) a condition subsequent.

Accepted Answer

This provision is an express condition because it is explicitly stated in the contract that Paul must furnish a certificate of occupancy before Bill is required to pay. Express conditions are clearly set out in the contract terms.

Question 4

Concurrent conditions occur when mutual duties of performance are to take place simultaneously.

Accepted Answer

Concurrent conditions require mutual duties of performance to take place simultaneously.

Question 5

Tender is the full performance of an obligation by one party of a contract.

Accepted Answer

Tender refers to the offer of performance (such as payment or delivery) by one party of a contract in accordance with the terms of the contract, not the actual full performance of the obligation.

Question 6

A novation is an agreement between two parties to have one substitute for the other in a contract.

Accepted Answer

A novation involves three parties: the original contracting parties and a third party who replaces one of the original parties in the contract, with all parties agreeing to the substitution.

Question 7

If a party's principal purpose is substantially frustrated without his fault by the occurrence of an event whose nonoccurrence was a basic assumption on which the contract was made, the party's remaining duties to render performance are discharged, unless the party has assumed the risk.

Accepted Answer

This statement reflects the legal doctrine of frustration of purpose, which allows for the discharge of contractual duties when unforeseen events fundamentally alter the circumstances of the contract in a way that defeats the contract's original reason for being, provided that the affected party did not assume the risk of the event occurring.

Question 8

The Code and the Restatement have no provisions for discharge of contractual duties in cases involving commercial impracticability.

Accepted Answer

Both the Uniform Commercial Code (UCC) and the Restatement of Contracts have provisions for discharge of contractual duties in cases involving commercial impracticability (also known as impracticability of performance or frustration of purpose). The UCC has provisions in Section 2-615, while the Restatement has provisions in Section 261.

Question 9

Carl, a contractor, has a contract with Ron, a realtor, to construct a new condominium complex. The contract provides that Carl must furnish a certificate of occupancy and conformity with the local fire code before Ron has an obligation to pay. The furnishing of the certificate is an implied-in-fact condition subsequent to the construction of the building.

Accepted Answer

The furnishing of the certificate is a condition precedent to Ron's obligation to pay, not a condition subsequent. This means Carl must fulfill this condition before Ron is obligated to pay, rather than after some other event or condition has been satisfied.

Question 10

Natalie owes Nathan $1,200 and they agree that Natalie will repair Nathan's fence in satisfaction of the debt. The debt is not discharged until Natalie performs the substituted agreement by completing the fence repairs.

Accepted Answer

The debt is not considered discharged until Natalie fulfills the agreed-upon substitute performance, which in this case is the completion of the fence repairs.

Question 11

The Restatement and the Code have made the traditional test of objective impossibility more stringent by requiring that the performance must be actually or literally impossible in order to excuse a party from contractual duties.

Accepted Answer

The Restatement and the Code have not made the traditional test of objective impossibility more stringent; rather, they recognize that performance can be excused not only when it is literally impossible but also under circumstances where performance has become impracticable due to extreme and unreasonable difficulty, expense, injury, or loss involved.

Question 12

Belinda has a household insurance policy, which requires that she notify the insurance company within 30 days of any loss before she is eligible to receive payment for her loss. The notification requirement is a condition precedent to the insurance company's obligation to perform, even though the notification must occur subsequent to the loss.

Accepted Answer

The notification requirement is indeed a condition precedent to the insurance company's obligation to perform because it is a condition that must be fulfilled before the insurance company is required to pay for any loss, despite the fact that this action (notification) takes place after the loss has occurred.

Question 13

A contract may condition the performance of a party upon the approval of a third party.

Accepted Answer

Contracts can include terms that make the performance of one or more parties contingent upon the approval or consent of a third party, often to ensure that certain standards or conditions are met.

Question 14

Luke and Grace have an executory contract for the sale of some goods. Luke files for bankruptcy and is then discharged by the bankruptcy court. Luke has no obligation to perform under the contract with Grace.

Accepted Answer

In bankruptcy, a discharge releases the debtor from personal liability for certain debts, meaning they are no longer legally required to pay them. This can include executory contracts, which are often rejected in bankruptcy proceedings.

Question 15

An implied-in-law condition and constructive condition are the same.

Accepted Answer

An implied-in-law condition, also known as a constructive condition, is a legal term where the court imposes a condition in a contract to ensure fairness and justice, even if it was not explicitly stated by the parties involved.

Question 16

If the performance of a contract that was legal when formed becomes illegal because of a subsequently enacted law, the duty of performance is discharged.

Accepted Answer

When a contract that was legal at the time of formation becomes illegal due to a law enacted afterward, the parties are no longer obligated to perform the contract, as performance would be illegal. This principle discharges the parties from their contractual duties.

Question 17

Objective impossibility occurs if a particular contracting party is unable to perform because of financial inability or lack of competence.

Accepted Answer

Objective impossibility refers to a situation where it is physically or legally impossible for anyone to perform the contract, not due to personal incapacity like financial inability or lack of competence.

Question 18

After the coronation of Edward VII was postponed and parties who had entered into contracts in anticipation of the event filed numerous suits, the doctrine of frustration of purpose evolved.

Accepted Answer

The coronation of Edward VII was postponed due to his appendicitis, leading to the cancellation of events and contracts made in anticipation of the coronation. This situation led to the landmark case of Krell v Henry (1903), which significantly contributed to the development of the doctrine of frustration of purpose in contract law, recognizing that contracts could be voided if their fundamental purpose was frustrated by unforeseen events.

Question 19

Which of the following is a contract with a condition subsequent?
A) Rhonda enters into a contract to buy a new car conditional upon her getting a loan from her bank.
B) Roger bought a smartphone but he may return the phone within ten days and get all of his money back.
C) Susanne and Ethan sign a contract to buy a new home, on the condition that their current home sale is finalized in the next 30 days.
D) All of these are examples of condition subsequent.

Accepted Answer

A condition subsequent is a condition that, when it occurs, can end a party's contractual obligation. Option B describes a situation where the continuation of the contract (keeping the smartphone) is dependent on a condition not occurring within a specific time frame (returning the phone within ten days). If the condition occurs (the phone is returned), the contractual obligation ends, which fits the definition of a condition subsequent. Options A and C describe conditions precedent, where the contract's obligations only begin if a condition is met.

Question 20

A breach of contract always gives rise to a cause of action for damages by the injured party.

Accepted Answer

A breach of contract gives rise to a cause of action for damages because the injured party has suffered a loss as a result of the breach.

Quiz 17: Performance Breach and Discharge