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Management 3540 Chapter 16 business law


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Reasonable expectations test
The performing party is released due to complete performance when he meets the reasonable expectation of the other party in light of the entire contract
Substantial performance
The performing party may still collect on the contract, but the other party is entitled to a reduction of payment because of the immaterial breach
Material breach
A breach important in light of the entire contract
Immaterial breach
A breach that is unimportant in light of the entire contract
Consequences of a material breach
The non breaching party's performance is discharged
Three things affecting materiality of breach
1. Satisfaction clause
2. "Time is of the essence" clause
3. Anticipatory repudiation
Satification Clause
If contract is a matter of taste, then complete personal satisfaction is required.

If contract is a matter of function, only reasonable satisfaction is required
"Time is of the essence" clause
Converts an immaterial time delay into a material breach
Anticipatory Repudiation
One party tells the other they will not perform the contract prior to the time performance is due.

A material breach, even though there is time remaining for performance.
Condition precedent
Event must happen before a contractual duty arises.

Ex- collision claim, bonus incentive
Condition Subsequent
Contractual duty is relieved after an event

Ex- Drought notification
Concurrent condition
Each party's duty conditioned on the other's simultaneous performance
Voluntary recission
An agreement by the paries to cancel the contract
an agreement by the parties to cancel the old contract and enter a new one.
Accord and satisfaction
An agreement (accord) by one party to accept a performance which is different from that required by contract, followed by the completion (satisfaction) of that performance by the other party.
A voluntary acceptance of inadequate performance, or a pattern of conduct which implies a waiver of breach of contract.
Bankruptcy cancels most debts of the bankruptcy debtor

exceptions- student loans, child support and taxes
Statute of limitations
When the time period set by statute for filing a type of lawsuit expires, the breaching party's obligation is cancelled

Contract becomes unenforceable
Intentional material alteration by one party discharges the other
a.) Death or incapacity of an essential party
b.)Destruction of subject matter of contract
c.) Intervening illegality- the agreement becomes illegal between the time it is entered and the time the performance is complete
d.) Commercial frustration (common law)- A drastic unforseeable change in the circumstances that makes performance impossible
Commercial impracticability

An event occurred which parties assumed wouldnt occur as basic part of contract

Event has extreme effect on performance
Compliance with court ordered remedy.
Breach of contract suit followed by judgement and payment

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