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Contracts II
University of Toledo School of Law
Tierney, James Edwin

1. What are the consequences of non-performance? Chapter 10 – 4 ways

1. Should Expectation Damages be paid? Chapter 11 – Keep goals in mind

1. Should an alternative to Expectation Damages be paid? Chapter 12 – 4 ways

1. Should we avoid enforcement? Chapter 7 – 8 ways

1. Is there a justification for non-performance? Chapter 8 – 5 ways + modification

1. Are there rights and duties of third parties? Chapter 9 – 3 ways

1. IS THERE A CONDITION?

REMEMBER: EXPRESS CONDITIONS – NO POSSIBILITY OF SUBSTANTIAL PERFORMANCE
CONSTRUCTIVE CONDITIONS/IMPLIED IN FACT- SUBSTANTIAL PERFORMANCE

Thinking through conditions and breach
1. Are there any express conditions?
2. If there are any express conditions, did they occur?
3. If they did not occur, were they excused?
4. What is the exchange of promises?
5. What is the exchange of performances?
6. When are the exchange of performances due?
7. Did the exchange of performances occur when due?
8. Was there an uncured material failure (Rst) material breach (Jacobs and Young)?
9. If a breach, who breached first?
10. Was the non-breaching party ready willing able to perform?
11. What was the reaction to the breach by the non-breaching party?
12. Was the reaction of the non-breaching party to lock in the situation (e.g. notice, change position in a substantial manner)?
13. Repeat 6, 7, 8, 9, 10, 11, and 12 as needed?
14. If locked in, is the breach a partial breach or a total breach?
15. What kind of remedies?(we will get to this in Chapters 11 and 12)

[Rst. §224] – Condition defined
A condition is an event, not certain to occur, which must occur, unless non-occurrence is excused, before performance under a K becomes due.
*Look at the lang. of the K to determine whether condition is express or constructive.
**The passage of time is not a condition
EX: A tells B “if you will paint my house, I will pay you 1,000 on condition that 30 days have passed after you have finished.” B paints A’s house. Although A is not under a duty to pay B 1,000 until 30 days have passed, the passage of time is not a condition of A’s duty to pay B 1,000. Even though it is called a condition, it is just setting a time for payment.
(1) Express Condition = What the parties write in the K; Strict performance required. The idea of Substantial performance has no significance for a condition that was established by the parties.
(2) Constructive Condition = A condition the Ct. puts in place when there is no express condition put into the K; Must consider substantial performance: When enough of the K has been performed by one party that the non-breaching party is still obligated to perform their part of the agreement but can sue for damages from the partial breach.
****It is very important to determine who’s promise the condition belongs to. Ex. A contracts to sell and B to buy a house. The contract contains the provision “this contract is conditional on approval by X bank of B’s pending mortgage application. Approval by X bank is a condition of B’s duty but not of A’s duty.
*There can be cumulative conditions where multiple conditions need to be satisfied before they are obligated to go forward with the contract.
(a) Uncured material failure = Non-performance.
(b) Uncured immaterial failure = Substantial performance.
****If both parties waive a condition, then performance is still due****
[Rst. §225] – Effect of Non-Performance of a Condition
(1) Performance of a duty subject to a condition cannot become due unless the condition occurs or its non-occurrence is excused.
(2) Unless it has been excused, the non-occurrence of a condition discharges the duty when the condition can no longer occur.
(3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that the condition occur.
[Rst. §226] – How an Event May be Made a Condition
An event may be made a condition either by the agreement of the parties or by a term supplied by the court.
[Rst. §227] – Standards of Preference w/ Regard to Conditions
(1) In resolving doubts as to whether an event is made a condition of an obligor’s duty, and as to the nature of such an event, an interpretation is preferred that will reduce the obligee’s risk of forfeiture, unless the event is within the obligee’s control or the circumstances indicate that he has assumed the risk.
(2) Unless the contract is of a type under which only one party generally undertakes duties, when it is doubtful whether;
(a) a duty is imposed on an obligee that an event occur, or
(b) the event is made a condition of the obligor’s duty, or
(c) the event is made a condition of the obligor’s duty and a duty is imposed on the obligee that the event occur, the first interpretation is preferred if the event is within the obligee’s control.
(3) In case of doubt, an interpretation under which an event is a condition of an obligor’s duty is preferred over an interpretation under which the non-occurrence of the event is a ground for discharge of that duty after it has become a duty to perform.
§228. WHAT IS INTEGRATION
An agreement is integrated where the parties thereto adopt a writing or writings as the final and complete expression of the agreement. An integration is the writing or writings so adopted.
[Rst. §229] – Excuse of a Condition to Avoid Forfeiture
To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.
Disproportionate forfeiture:
When a party loses all benefit of K from the non-occurrence of a condition that is not material to the exchange.
Disproportionate test: Does the conditions enforcement result in an unfair, disproportionate, and harsh deprivation of rights or property of the party who expects performance, and a windfall or unfair benefit to the party whose performance is subject to the condition.
REMEMBER EXCUSE OF CONDITIONS RST 84(1), 229, 245, 246, 247, 248
WAIVER OF CONDITION
ESTOPPEL
PREVENTION TYPE NOTIONS
FORFEITURE
INTERPRETATION
Excuse of Conditions
Important to note who the condition is designed to protect. If it is designed to protect a buyer of a home to get financing, if they want to waive that condition and get financing from another source, that is fine. The seller cannot rescind the contract just because the buyer did not get the financing from a specific place.
Waiver of Condition
(1) If the waiver is of a material condition, it probably cannot be waived w/o consideration.
(2) If the waiver is of a material condition and is made in return for consideration, it should be effective and non-retractable.
(3) If the condition is non-material, waiver does not have to be supported with consideration, but whether it is retractable or not depends on the timing.
Retraction-A waiver not supported by consideration can be retracted prior to the due date for the condition’s fulfillment upon giving notice to the other party of such a retraction.
Definition- Voluntary abandonment of a known contractual rightBEFORE performance is due (Benefiting party)
Legal effect of waiving a condition -No longer a condition precedent AND duty to perform arises.
Waiver v. Modification
(1) Waiver contains no new consideration – benefiting party unilaterally gives up rights.
(2) Modification requires new consideration to be valid unless –
Must be fair and equitable in light of unanticipated circumstances if provided for under statute or if party relies (promissory estoppel).
(3) Can retract a waiver anytime up to reliance à if specific time for performance (time is of the essence) is waived a reasonable time will be supplemented.
(4) If the condition benefits only one party, that benefited party can always waive condition; other party cannot cancel K, due to condition not being met.
Analytical Outline
1) Was there a waiver to the terms?
If so, may still be da

e obligee in believing that subsequent performances will be accepted in spite of that non-occurrence.
[Rst. §248] – Effect of Insufficient Reason for Rejection as Excusing the Non-Occurrence of a Condition
Where a party rejecting a defective performance or offer of performance gives an insufficient reason for rejection, the non-occurrence of a condition of his duty is excused only if he knew or had reason to know that non-occurrence and then only to the extent that the giving of an insufficient reason substantially contributes to a failure by the other party to cure.
UCC 1-201(19)
(19) “Good faith” means honesty in fact in the conduct or transaction concerned.
UCC 2-103 (1)(b)
(b) “Good faith” in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
A. Analytical Outline
1. Is there a condition?
a. If yes, is it express or constructive?
1. Did the condition occur?
a. If yes, then performance is due.
b. If not, then is the condition excused?
i. If not, then is there a breach?

REMEMBER PROMISSORY CONDITION

2. IS THERE A REQUEST FOR ASSURANCES?

[Rst. §251] – When Failure to Give Assurance may be Treated as a Repudiation
(1) Where reasonable grounds arise (when the obligee believes that the obligor will commit a breach by non-performance that would be give the obligee a claim for damages for total breach under §243), the oblige may demand adequate assurance of due performance and may, if reasonable, suspend any performance of which he has not already received the agreed exchange until he receives such assurance.
(2) The obligee may treat as a repudiation the obligor’s failure to provide within a reasonable time such assurance of due performance.
If a party demands and receives assurances, then absent a further change of circumstances, the assurances received are adequate and thus the demanding party is bound to proceed with his performance.
[Rst. §243] – Effect Of A Breach By Non-Performance As Giving Rise To A Claim For Damages For Total Breach
(1) A breach by non-performance gives rise to a claim for damages for total breach only if it discharges the injured party’s remaining duties to render such performance, other than a duty to render an agreed partial performance.
(2) Except as stated in Subsection (3), a breach by non-performance accompanied or followed by a repudiation gives rise to a claim for damages for total breach.
(3) Where at the time of the breach the only remaining duties of performance are those of the party in breach and are for the payment of money in installments not related to one another, his breach by non-performance as to less than the whole, whether or not accompanied or followed by a repudiation, does not give rise to a claim for damages for total breach.
(4) In any case other than those stated in the preceding subsections, a breach by non-performance gives rise to a claim for total breach only if it so substantially impairs the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance.