Also known as: datio in solutum · payment in lieu · substitute performance
Written by attorneys · grounded in primary & secondary sources — see below
Payment or satisfaction of an obligation through delivery of substitute performance accepted by the obligee in place of the performance originally promised.
Select any source to read its text and confirm it supports the definition.
Icarus Aviation agreed to deliver cargo to a specific port using a designated carrier. When the agreed carrier became unavailable without fault of either party, Icarus tendered a commercially reasonable alternative vessel. Integrity Partners accepted the substitute shipment and treated it as full satisfaction of the delivery obligation.
Interlink Communications contracted to unload goods at a specified dock. After the dock failed without fault of either side, Interlink offered an alternative unloading site that was commercially reasonable. Ivy Investments accepted the new location and treated the performance as complete payment of the delivery duty.
Isla Ireland hired Ibrahim Iqbal to build a custom structure. After the original performance became impracticable, Iqbal tendered a commercially reasonable substitute. Ireland accepted the replacement work and treated it as full satisfaction of the construction obligation.
Transatlantic Financing agreed to carry goods by a direct route. When the customary route became unavailable, the carrier completed delivery by a longer commercially reasonable path. The United States accepted the altered performance and treated it as satisfaction of the carriage obligation.
It refers to satisfaction of an obligation by means of substitute performance that the obligee accepts in place of the performance originally promised.
Supporting sources
When the obligee accepts a commercially reasonable substitute, the original duty is treated as discharged to the extent the substitute satisfies the promised exchange.
Temporary impracticability suspends the duty during the period of impracticability but does not discharge it. Once the impediment ends, the obligor may still render substantial performance including any required substitute.
…agreed manner of delivery becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.” (Emphasis added.) Compare Mr. Justice Holmes’ observation: “You can give any conclusion a logical form. You always can imply a condition in a contract. But…