I) Performance & Breach
1) Express Conditions (No Breach/Compliance): Was performance due?
A) R § 224: A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before performance under a contract becomes due.
(i) Condition Subsequent: Occurrence of an event, after performance is due, which extinguishes that duty along with any claim of breach.
(a) Must be proved by party owing the duty
(ii) Condition Precedent: A condition other than a lapse of time which must occur before performance is due. (R2 calls this simply a ‘condition’)
(a) Must be proved by party making claim (all conditions must be met to show breach/compel performance)
B) Effects of Conditions
(i) If condition is not met, then 1 party has a no breach compliance response. Read strictly.
(ii) Luttinger – Real estate loan at 8.5%; Buyer wins on express condition that they get financed at that rate (condition precedent).
(a) Judge decides if it is language of duty or condition, never the jury.
(iii) Internatio – rice shippers, must give notice by certain date, didn’t so D recind.
(a) Mere passage of time is not a condition, but occurrence within a specified time is.
C) Problems of Interpretation: Condition, duty or both?
(i) Aim is to avoid forfeiture. Read conditions strictly, otherwise it’s just a duty.
(ii) Peacock – b/c subcontractors rely on payment from GC whether or not owner pays , intent between owner and GC is treated as a duty rather than condition. This shifts the risk of noncompliance from subs to GC.
(iii) Cranage – painting not good case?
(a) A subjective condition precedent is implied to be made in good faith so as to not become illusory. Marketing ploy makes it likely that the artist assumed the risk. Even if 1000 experts like the art, the condition was on the party to the contracts satisfaction.
(1) Reliance can’t be a way out of every bad deal.
D) Mitigating Doctrines
(i) Prevention – one who prevents the occurrence of a condition of their own duty may be precluded from later asserting the non-occurrence.
(a) Duty of good faith performance requires at least that you do nothing to impede occurrence.
(ii) Waiver, Estoppel and Election
(a) A party that with consideration has waived a condition that is within the other party’s control BEFORE the time for occurrence of that condition can retract the waiver and reinstate the requirement that the condition occur unless the other party has relied to such an extent that retraction would be unjust.
(1) Such reliance would produce estoppels to preclude retraction.
(b) If the condition is waived after the time of occurrence, waiver cannot be retracted, even if the absence of reliance.
(c) Election refers to the choice of whether to take advantage of a nonoccurrence and treat the duty as unconditional. If disregarded, the party is bound by the election to treat the duty as unconditional.
(d) McKenna – refused to pay at end of build because of architect certs missing. Had previously paid and not asked for them.
(1) Repeatedly ignoring nonperformance of a condition is the same as waiver. Performance ended the condition.
(iii) Interpretation and Avoidance of Forfeiture: Courts strongly prefer interpreting to avoid forfeiture, but it cannot be prevented if the drafter made clear that forfeiture was intended.
(a) Hicks – Merger stock transfer case. Hicks transferred his stock, others didn’t. Claimed and oral condition existed (raise capital) and had not been reached, and merger was conditioned on all persons transferring after funds were raise.
(1) Parole evidence is not permitted if it creates a contradiction (express) to the terms of the written agreement.
2) Implied Conditions (Constructive Conditions of Exchange)
A) Intended to create fairness in contracts.
B) Traditionally, mutual covenants are independent unless expressed to be otherwise. One is not a constructive condition of the other. There might only be a spate claim for breach.
C) Ki
ment and an entire contract. 2-601, 508, 608, 612.
B) Divisibility – when contract performance is divided into units or installments, in such a way that each part performance is the rough compensation for a corresponding part performance by the other party.
(i) If divisible, it is treated as a series of small contracts.
(ii) Look to the nature of the contract… is it divisible or entire?
(a) Severable – a contract in which one party’s performance is of several and distinct items, the price is either:
(1) Apportioned/apportionable to each item performed; OR;
(2) Left to be implied by law.
(b) Entire – Consideration is to be paid singly, even if the subject is of several and distinct items.
C) Restitution – Remedy in Quazi-Contract (we have dropped out of the contract analysis).
(a) Based on value of resitutionary interest value of benefit conferred, from perspective of the recipient of the benefit.
(1) Value is Not determined by contract price – if it could be done cheaper, that is what you get in restitution.
(b) Party performances are constructive conditions of each other, so there is potential for immense enrichment.
(c) Efficient Breach – Circumstance in which one party is better off and the other party is no worse off if the other party breaches.
(d) Strict Costruction still applies to express conditions – it is possible to contract yourself out of any recovery.
(e) Britton – worker contracted for 1 year lump payment. Left before completion of contract. By voluntarily breaching contract, worker can’t recover on it, but is owed reasonable value for work completed.
