Book Opener

CHAPTERASSESSMENTSection 11.1 Performance and Agreement● A reasonable time for completing a contractvaries, but it is generally defined as the time thatis suitable, fair, and proper to the objective of thecontract. For example, the reasonable time forselling perishable food would not be the same asthe reasonable time for selling a car or house. Ifthe parties specify a time limit for carrying outthe terms of the contract, the court will usuallyallow a longer time for performance unless timeis of the essence. Time is of the essence when itis a vital or essential element of the contract.● Satisfactory performance is completion of aservice that a reasonable person would deemperformed to his satisfaction. In determiningwhether satisfactory performance has beenmade, the court asks, “Would a reasonableperson consider the job to be completed in asatisfactory manner?” A judge or jury wouldthen decide the matter based on the answer tothis question. Unlike satisfactory performance,however, substantial performance is notcomplete performance. Nonetheless, if the majorrequirements have been fulfilled, the courts willallow the performer to recover the contractamount minus the cost of completing the job.● A tender of performance is an offer to perform acertain act to fulfill a contract. It is important tomake tender even if you know the other partywill not perform his or her part of the contract. Insome states, making tender is necessary to test theother party’s willingness and ability to perform.● Contracts can be terminated by mutual releaseand accord and satisfaction. A mutual release isan agreement between two parties to end anagreement. Whatever parties agree to do in thefirst place, they may later mutually agree not todo. Accord and satisfaction occurs when oneparty to an agreement agrees to accept performancefrom the other party that is different fromwhat was agreed upon in the original contract.Accord and satisfaction is often used to settlean honest disagreement or unforeseen circumstancesregarding an amount owed.Section 11.2 Impossibility of Performanceand Operation of Law● Some contracts come to an end despite whatthe parties intend or what they actually do. Acontract becomes legally impossible to performand becomes discharged in the case of (1) deathor illness that prevents the performance of apersonal service contract, (2) destruction of theexact subject matter or the means for performance,and (3) illegality. The death or illness of a partymay be an excuse for nonperformance only if thecontract requires the personal service of theperson who has died or become ill.● A contract may be discharged by operation oflaw in the following cases: (1) when one of theparties commits a wrongful act, (2) when thestatute of limitations has expired, and (3) whenthe debtor declares bankruptcy.● The statute of limitations limits the time withinwhich a legal action may be brought. The statuteof limitations for failure to perform contracts forthe sale of goods is four years in most states.● Educational loans, debts for taxes, alimony,support, and maintenance are not affected by ageneral discharge of debts in bankruptcy.236 Unit 2: Entering Into Contracts