Contracts II, Kearney, Spring 2014
I. Contract Performance and Breach
a. Conditions
i. Types of Conditions
1. Express: explicitly stated by the parties.
1. Types of Express Conditions
1. “Pay when paid”
1. Pay when paid clauses are not conditions. By the language “pay WHEN paid”, they are simply a timeline for payment.
1. May become conditions with a change in the language
1. “Pay IF paid”
2. “Time of the Essence”: clause that explicitly states that the party performing must do so in a timely manner in order to receive performance from the other party.
1. Failure to perform within the time requirements may result in breach of contract.
1. Also waives any duties of the other party.
2. Most courts view “time of the essence” clauses as boiler plate and will look to the intent of the parties.
1. Minority opinion is to uphold these clauses if they appear in the K.
3. “Satisfaction” clauses: conditioning performance by one party on their satisfaction of the performance of the other party
1. Satisfaction clauses are ALWAYS conditions.
2. Types of satisfaction clauses
1. Reasonable efforts conditions
1. Commercial properties
2. Reasonable person standard used to determine satisfaction
2. Good faith conditions
1. Things purchased “on a whim”
2. Dissatisfaction may be held as a defense to an action on the K.
2. Constructive: Created by the courts
1. Courts will only do so when it is absolutely necessary
2. Constructive Conditions are ALMOST always done for the purpose of ordering performance
3. Types of constructive conditions
1. Independent
1. Must be performed no matter what. Not contingent upon any other occurrences.
1. Failure to perform by either party may result in breach
2. Constructive condition precedent
1. Determines who must act first
1. If first party does not act, second party is not required to act and first party may be in breach
3. Constructi
2. R2d § 241 – Circumstances Significant in Determining Whether a Failure is Material
1. – MOST IMPORTANT FACTOR –
(a) Extent to which the injured party will be deprived of the benefit which he reasonably expected.
1. Will the injured party be substantially harmed?
1. More harm = less likely to find substantial performance
2. (b) Extent to which injured party can be adequately compensated for the part of that benefit of which he will be deprived
1. Can courts compensate victim to give her the benefit of her bargain?
1. More likely to compensate = more likely to find substantial performance.
3. (c) Extent to which party failure to perform or to offer to perform will suffer forfeiture.
1. How much is on the line for the breaching party?
1. More it hurts breaching party = less likely to find substantial performance
