Discharge: Breach & Operation of Law

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来自 University of Illinois at Urbana-Champaign 的课程

Corporate & Commercial Law I: Contracts & Employment Law

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University of Illinois at Urbana-Champaign

Corporate & Commercial Law I: Contracts & Employment Law

38 个评分

This class deals with the business law topics that appear on the CPA exam: Agency, Contracts, Debtor-Creditor Relationships, Government Regulation of Business, and Business Organizations. Students will gain an understanding of how these areas of the law affect businesses and their operations, with an eye on preparation for the business law portions of the REG section of the CPA exam. By the end of the class, students will be able to identify the legal principles that govern various business situations and apply those principles to an issue to determine the outcome when the law is applied to the facts of a scenario.

从本节课中

Module 3: Enforcing Agreements

In this module, we continue our discussion of contract law by focusing on the enforcement of agreements. We begin by examining who can enforce contracts, then discuss when contracts can be enforced in court, and end by looking into what types of awards courts will grant when a party has been the victim of a breach of a contract. Throughout this module, we will call special attention to different rules that apply to contracts for the sale of goods.

Discharge: Breach & Operation of Law7:32

与讲师见面

Professor Michael R Fricke
Teaching Assistant Professor
Department of Business Administration

[SOUND] This

lesson is part two of our two part series on discharge from contractual obligations.

In this lesson we're going to talk about discharge when the other party

breaches a contract.

And also when the law states that because of some interesting sequence of events,

parties are just discharged from their obligations under a contract.

[MUSIC]

If the other party to a contract breaches the contract in a material way, not just

a minor way, in a material way that really frustrates the purpose of the contract.

If the other party commits a breach,

then you are discharged from any further obligations.

This makes sense, right?

You shouldn't be required to continue making payments, or

continue performing some duty, if the other party

hasn't done what they're supposed to do, in a significant and impactful way.

So for example, suppose your company wants to hire

a contractor to build them a new building for offices.

The contractor builds a building, and says, hey,

your building's done, come take a look at it.

And it doesn't work for any of the purposes it's supposed to be used for.

The foundation isn't strong enough to hold

all your equipment you want to put in there.

The conference rooms aren't big enough in accordance with the specifications.

That's a material breach, they didn't do what they were supposed to do,

so your duty to pay is discharged.

So it would be ridiculous to make you pay for

something when the other party didn't uphold their end of the contract.

So a material breach will discharge the other party,

the non-breaching party will be discharged.

Now, sometimes a material breach might not even have occurred yet and

you can be discharged, and this is what's called anticipatory repudiation.

This is one of my favorite legal terms, I just like saying it,

anticipatory repudiation, try saying it, it's fun, anticipatory repudiation.

>> Very flattering, Mr Peterson.

>> Now, anticipatory,

sometimes I can't even say it.

Anticipatory repudiation is when one party clearly tells the other

party that they're not going to perform their obligations under the contract.

And in that case as long as it's clear and unequivocal,

then the non-breaching party will be discharged from their obligations.

Now, it has to be clear and unequivocal.

One party can't say, it's going to be really hard for me to perform, or gosh,

I'm not sure if I'm going to be able to make the deadline.

That's not anticipatory repudiation.

It is anticipatory repudiation if one party says we are not able to do this,

or we will not be performing, or something along those lines.

In that case, the other party is relieved from their duties,

even though the actual breach may not have occurred yet.

Maybe their time for performance isn't due yet but if they tell you in advance,

they're not going to do it, you can be discharged at the time of the repudiation.

Okay, moving on to discharge by operation of law.

Now, there are several instances in which the law just says, if this happens,

then parties to a contract are released from their obligations.

Now, the first one of those instances is what's called impossibility.

If you have a contract and for some reason it becomes impossible for

you to fulfill your obligations under the contract, you are discharged.

Now, when we say impossible, it really means impossible.

Not just really, really, really, really hard or extremely impractical,

impossible means not physically possible.

So say you have a contract to build a building on some land,

and the land gets swallowed up by a sinkhole.

That is impossible for a building to be built upon that land,

because now it's a hole in the ground, discharge occurs.

But say you have a contract to remodel a building and

all of your equipment gets stolen and all of your employees quit.

Is it impossible?

No, it's just really, really impractical.

So the difference between a possibility and an extreme impracticality

can sometimes be pretty thin, but courts care a lot about that difference.

Impossibility will discharge you, extreme impracticality will not.

Now, a lot of contracts have what's called a force majeure clause in them,

to kind of ease this burden a little bit.

And force majeure clause and say, some sort of significant action beyond

the control of the parties causes it to become extremely impractical for

one party to fulfill its obligations, then they can be discharged.

So force majeure clause is sometimes known as sort of act of God clauses.

If a tornado comes along and sweeps up all of our equipment and

we don't have any money or equipment to do our job anymore,

the force majeure clause will relieve you from the liability there.

Okay, next type of discharge by operation of law is what's called the statute of

limitations.

All contracts are governed by a statue of limitations,

which depends on the state you're in, the type of contract it is sometimes.

But in most states, a contract can't be enforced after some period of time,

5 years, 10 years something like that, depending on where you live.

So if you signed a contract 13 years ago, and you haven't fulfilled your duties,

you're discharged from those duties, because the statute of

limitations has run and the other party is unable to enforce it.

Now, third type of operation of law, discharge,

is if the other party materially alters the contract in some way.

And this is pretty rare but you see it on occasion.

So maybe the other party is just kind of sneaky and forges

something on the contract, or changes one of the terms or something like that.

If that happens you're discharged from the entire contract.

It's not just that you have to go back to the way the contract originally

was written.

If one party is sneaky enough to materially alter the actual document,

you're discharged from the entire thing.

because who wants to do business with that person?

Nobody, and then finally, the bankruptcy filing of one

of the parties to a contract will usually discharge the duties of the other party.

So if you and I are in a contract for me to sell you my bicycle and you file for

bankruptcy, I am not able to enforce that contract for you to purchase my bicycle.

It will generally discharge your duties.

So discharge by breech, discharge by operation of law, those are two

ways besides actually performing your duties, which is what we like to do.

Those are two ways that you can be discharged from your duties under

a contract.

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