Psychology Chapter 13 Homework The Parties Contract Are Free Change Their

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CHAPTER 13

TERMINATION OF CONTRACTS

Answers to Learning Objectives

1. A contract is terminated by performance, when all the terms of a contract have been fulfilled.

2. A contract will be discharged by operation of law as a result of bankruptcy; the running of

Lesson Outline

1. Contracts may be terminated by (a) performance, (b) operation of law, (c) voluntary

agreement of the parties, (d) impossibility of performance, and (e) acceptance of breach of

contract.

2. When all the terms of a contract have been fulfilled, the contract is discharged by

performance.

a. If the contract states when performance is to be rendered, the contract provisions must be

followed unless performance on the exact date specified is not vital.

3. Contracts may be terminated by operation of law.

a. Bankruptcy releases the debtor from most contracts to pay creditors.

b. If the innocent party in a breached contract delays too long in instituting court action, the

contract is terminated by the statute of limitations.

c. If one party to a written contract intentionally alters a written contract in a material

manner without the consent of the other party, the other party is released from the

contract.

Chapter 13 Termination of Contracts

6. When one of the parties fails or refuses to perform the obligations assumed under the

contract, there is a breach of contract.

7. A force majeure clause in a contract excuses performance because of an extraordinary event

outside the nonperforming party’s control.

Comments on Cases

(p. 133) Silvestri tried to argue that a more reasonable employer would have had a different

opinion about his job performance. The court pointed out that the test when a satisfaction

clause is involved is not whether the opinion of the employer was reasonable, but whether

it was genuine in its dissatisfaction. Silvestri v. Optus Software, Inc., 814 A.2d 602 (N.J.)

(p. 135) The court pointed out that performance of the contract was made impracticable for DC

without the fault of the district. Further, an event occurred that the parties, by making

the contract, had to assume could not occur. Hester v. District of Columbia, 505 F.3d

1283 (C.A.D.C.)

(p. 138) The court stated that in some cases a very small amount might constitute the trivial sum

contemplated by nominal damages while in others a much larger amount might measure

down to the same standard of triviality. MTW Inv. Co. v. Alcovy Properties, Inc., 616

S.E.2d 166 (Ga. App.)

Answers to Questions

(Page 140)

1. Parties to a contract are discharged by performance as soon as they have done all that they

have agreed to do. The other party or parties are not discharged if any material thing remains

to be done by them.

2. If a contract states no time for performance, performance must ordinarily be rendered within

a reasonable time.

by payment of the interest.

6. The parties to a contract are as free to change their minds by mutual agreement as they are to

agree in the first place so that whenever they agree not to carry out its terms the contract is

discharged.

7. Laryngitis would impair the singer’s ability to perform satisfactorily and renders the contract

void because of impossibility of performance.

8. A force majeure clause in a contract excuses performance by a party when an extraordinary

event outside the party’s control occurs that prevents the party’s performance of the contract.

9. A breach of a contract does not terminate the contract unless the innocent party accepts the

breach of the contract.

Answers to Case Problems

(Page 141)

Chapter 13 Termination of Contracts

1. The McCoys had breached the contract by failing to exercise “due diligence” in securing a

mortgage commitment because they did not inquire about any other financing alternatives.

The Browns were entitled to retain the $127,000 deposit as liquidated damages. McCoy v.

Brown, 24 A.3d 597 (Conn. App.)

4. Yes. The court pointed out that all the conditions required for setting liquidated damages had

been met. The parties intended to establish liquidated damages prior to the breach since there

was a clause providing for them in the contract. Orr and Bolstridge admitted that damages

would be difficult to ascertain and the court found the amount reasonable. Since Orr and

Bolstridge kept the deposit they had elected to keep the liquidated damages as their damages

for breach and could not recover more. Orr v. Goodwin, 953 A.2d 1190 (N.H.)

5. No. The court said that the brothers did not show that they were ready, willing, and able to

furnish unencumbered title and provide closing documents as required by the contract. Since

they did not tender performance, it could not be said that Olympia breached the contract.

Neither party was ready to close on the contract as required. The brothers were not entitled

to the earnest money. Radkiewicz v. Radkiewicz, 818 N.E.2d 411 (Ill.App.)

9. The DelGrecos should recover the $1,500 they paid the architect and the $18,500 they paid

the second architect to correct the job. However, since Shewmake and Kelly had had to

spend $19,100 on the job which they had not been paid, the $20,000 the DelGrecos should

recover should be reduced by the $19,100 they still owed Shewmake and Kelly. The

DelGrecos should recover $900. Shewmake v. DelGreco, 926 So.2d 348 (Ala. Civ.App.)

Answers to Summary Cases for Part Two

(Page 144)

1. In order to be a third party beneficiary, En-Staff had to show that the contracting parties

intended to benefit it. The court said that the language of the contract clearly showed that the

addition, Deborah, the joint owner of the resort, did not sign the document so even if it had

been a contract the statute of frauds would not allow its enforcement.

one year in this case, the statute of frauds did not ban enforcement of the contract.

5. No. The court relied on the doctrine that silence cannot constitute an acceptance and

reviewed the three exceptions to the rule. Karns did not give Antrim any reason to think that

silence could constitute acceptance and there was no previous course of dealing requiring

Antrim to notify Karns that he did not accept. Finally, following Karns’ offer, Antrim could

not have accepted Karns’ services with reasonable opportunity to reject them knowing

compensation was expected because Karns had already performed all his services. Antrim

did not have an opportunity to reject them after the offer was made.

6. No. The physician’s testimony alone was sufficient to demonstrate Robinson’s lack of

capacity.

7. Yes. Since C&W was a professional appraiser and knew Rodin would rely on its appraisal it

owed a duty to Rodin to make sure the appraisal was not negligently or fraudulently done.