Chapter 19Discharge of Contracts.ppt

(c) 2000 West Legal Studies Chapter 19 Chapter 19 Chapter 19Discharge of Contracts Twomey, Business Law and the Regulatory Environment (14th Ed.) Discharge of Performance Obligations [19-1] Discharge of Performance Obligations (cont’d) Causes of Contract Discharge Chapter 19 Summary Most contracts are discharged by performance. An offer to perform is called a tender of performance. If a tender of performance is wrongfully refused, the duty of the tenderer to perform is terminated. If the performance required was the payment of money, the refusal of a proper tender does not discharge the debt. Chapter 19 Summary [2] It does, however, prevent the creditor from recovering interest or costs if suit is thereafter brought against the tenderer to recover the amount owed. When the performance called for by the contract is the payment of money, it must be legal tender that is offered. In actual practice it is common to pay and to accept payment by checks or other commercial paper. Chapter 19 Summary [3] When the debtor owes the creditor on several accounts and makes a payment, the debtor may specify which account is to be credited with the payment. If the debtor fails to specify, the creditor may choose which account to credit. Chapter 19 Summary [4] When a contract does not state when it is to be performed, it must be performed within a reasonable time. If time for performance is stated in the contract, the contract must be performed at the time specified if such time is essential (is of the essence). Performance within a reasonable time is sufficient if the specified time is not essential. Ordinarily, a contract must be performed exactly in the manner specified by the contract. Chapter 19 Summary [5] A less-than-perfect performance is allowed if it is a substantial performance and if damages are allowed the other party. The other contracting party or a third person may guarantee a perfect performance. Such a guarantor is then liable if the performance is less tha