Tuesday, March 22, 2011

Excuse of Performance

Once a contract is signed a party, unless it is either void or voidable the parties must discharge their duties to perform by either providing satisfactory performance or be excused from performance by certain conditions. Conditions that would excuse performance are:
  • Subsequently illegality such as a change in the law that makes the performance illegal,
  • Impossibility, where the work cannot be done.
  • Impracticability, where the work is not capable of being done
  • Frustration, such as one party failing to meet their obligations can frustrate the other party allowing them not to perform.  
  • Where the parties agree to rescind or stop the agreement.  
  • Novation, where the parties agree that another party will complete the work and the original party is excused from performance, and
  • Lapse; such as where the contract term may have lapsed without the work being completed

An assignment does not discharge the assigning party from their obligation to perform. The assigning party will remain secondarily liable for performance unless there is also a “novation” where the original contracting party excuses the assigning party from performance and agrees to only look to the new party for performance. Requirements for a novation will vary from location to location. For example under New York law for there to be a novation it must specifically state that it is a novation.

A force majeure is not an excuse to performing the Agreement, it excuses performance only during the term of the force majeure event.

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