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Divisible Contract

DEFINITION

Contract that holds multiple agreements within the same contract without each agreement relating or affecting one another.

EXPLANATION

A divisible contract is an agreement that possesses multiple parts in which each party’s obligations are performed independent of the other party’s obligations. Each party has the right to demand performance by the other party. However, a violation of one part of the contract does not excuse a refusal to complete the other parts.

In other words, a divisible contract is a contract whereby party’s roles are divided into various phases or portions independent of one another meaning that a failure to perform one element of the contract does not make the violating party in breach of the whole of the contract.

The parts of a divisible contract are divided, unlike a standard contract where all parts are contained within one agreement. While there are multiple segments of the contract, each portion of it are independent of one another.

Example of Divisible Contract

A common type of divisible contract is an installment contract whereby each installment has an obligation that must be fulfilled

For example, assume Aaron Mendez hires Ludwick Contracting to develop his large estate. Aaron wishes to develop three properties on his land. Ludwick Contracting finishes the first property however have massive delays on the second property. The delays on the second property do not forfeit Mendez’ duty to pay for the construction of the second and third property and also does not terminate Ludwick’s requirement to finish all three properties.

Another example might be a two party’s that enter a contract that has various phases such as a construction project. Each portion of the agreement is divisible between each other, meaning the first phase of the agreement would be in one contract and the other portions expressed in a separate contract.

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