Heather Garretson Contracts II May 2011
Thursday, May 05, 2011
5:26 PM
1. Conditions and Promises: Performance and Breach
a. Conditions Generally
i. Definition
1. Is an event, the occurrence or non occurrence of which determines when and if a party must perform.
2. A condition that is not met may give rise to forfeiture
b. Promise
i. Generally
1. A promise is a contractual undertaking to do or refrain from doing something
a. A breach of which leads to liability for damages or equitable relief
b. Always see if the excuse doctrine applies?
2. Dependent Promises
a. Express promises in bilateral contracts are construed as dependent promises
b. Dependent promises give rise to constructive conditions
c. These are covenants which are conditions and dependent, in which performance of one depends on the prior condition is performed –> give rise to a constructive condition
d. ” In determining “who goes first” absent a clear intention to the contrary, the court will presume the promises in a bilateral K are dependent. This is because courts have a general policy against forfeiting contracts and will bend over backwards to find a promise in order to prevent forfeiture.
3. Independent Promises
a. One where the promises must be performed even though the other party has not performed
3. Condition v. Promise
a. It is of considerable importance whether any given contractual provision is to be interpreted as a promise or condition – the basic test is one of the intent of parties the courts employ several basic criteria (Must talk about these 4 every time!!!)
b. In determining whether a clause is a promise or condition the court looks at the intent of the parties, the circumstances surrounding the contract and follows these guidelines
c. Only go through these if there is no express language for either a condition or a promise
i. If a clause is ambiguous then it is interpreted as a promise
1. Because this result will serve to support the K, thereby preserving the expectancy of the parties
ii. Courts abhor forfeiture
1. There is a general policy against them
iii. Contracts are always construed against the drafter (common maxim of contract law, we will assume you knew what you meant)
iv. The inclusion of one thing is the exclusion of another thing (expressed condition v. promise)
1. If you know how to create an express condition than you should
2. And since you know how to create one then if you do not it will be assumed you did not intend to have it interpreted as one
v. These are from Supplements
1. Words of agreement
a. Both specific words of the phrase and the words of the rest of the agreement will be examined
2. Prior practices
a. Will be taken into consideration
3. Custom
a. The custom with respect to that business in the community will be examined
4. 3rd Party performance
a. If performance by a 3rd person it is more than likely to be a condition than an absolute promise
5. Courts Prefer Promise in Doubtful situations
vi. Look for language that clearly states this is a promise like the following:
1. Promise
2. Shall not be destroyed until
3. Shall be submitted
4. Shall be responsible for
vii. Language for a condition:
1. Shall not be payable until
2. Shall be a condition precedent
3. Provided that
4. On condition
5. When
6. So that
7. While
8. As soon as (see if the words are linked to a duty)
9. If and only if
10. After (only a condition when they are linked to a duty)
4. TYPES OF CONDITIONS
a. Express Condition
i. Occurs when parties explicitly agree that a duty is a conditional upon the happening of some event, that event is an express condition
ii. Performance for these is 100%!!!!
1. No room for substantial performance
iii. Failure to perform may result in forfeiture it just depends…
iv. Always look for the possibility of an excuse
b. Implied Conditions
i. Not spelled out by the parties but is implied by their conduct
c. Condition Precedent
i. An event must occur before performance is due
ii. There are no magic words but the test is whether one of the parties has basically state that he will not be bound under the promise unless a specific condition occurs
iii. TRIGGERS a DUTY
iv. P has the burden of proof
d. Conditions of Satisfaction
IF it can be “apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalent
d. Employment Ks
1. Are looked at as being divisible because the Ks will be divided into lengths of time equal to the time between payments
e. Fairness
1. The court will not find the K divisible if this would be unfair to the non-breacher
vii. How to Measure performance
1. Only deals with constructive conditions
a. Never applies to an express condition
2. This is the substantial performance test (Cardozo test)
a. Purpose to be served
1. What does the non-breacher hope to have done
b. Desire to be gratified
1. How strong is the non-breacher desire to get paid
c. The excuse for deviation
1. What causes the deviation, was it bad faith or good faith, out of their control
d. The cruelty of enforced adherence
1. What will it take for the breacher to remedy the situation
e. Wilful transgression or good faith
1. Did she intentionally breach, usually found when project is abandoned
2. Bad faith trumps all other factors
f. When the court finds that there was substantial performance the breach was minor
1. The partial breacher can recover on the K less any damages
g. If there was no substantial performance then there was a material breach
1. The breacher can only recover for the value of services rendered or quantum meruit damages, there does not have to be a K to recover under quantum meruit
8. Kingston v. Preston
a. Case is credited with creating constructive conditions
9. Forms a Quasi K
10. Constructed with regard to the parties intent, to ensure that both parties receive the performance for which they bargained
vi. Condition Subsequent
1. Performance obligation will cease to exist upon the occurrence of a specified event that terminates performance
2. Relatively rare, but they present themselves when one party has declared to the other that he is not liable for performance if a certain fact occurs
3. TERMINATES a DUTY or cuts off an already existing absolute duty to perform
4. Duty to perform is excused
