PROMISES AND CONDITIONS
1. Promise / covenant
a. Defined: Contractual undertaking, breach of which leads to liability for damages
i. Pay when paid are almost always promises
1. If the general contractor never gets paid, use a reasonable time to gauge when you get paid
ii. Independent promises are not equal to constructive conditions
iii. Dependent promises
1. The performance of one leads to the promised performance of another promise
2. This leads to constructive conditions
3. Promises are assumed dependent
a. Dependent promise test: intent of the parties
b. Exceptions presumed independent
i. Real estate leases: tenant rent is not dependent on landlord’s upkeep – Tenant can’t withhold rent just because the roof leaks
ii. Child support: dad promises to pay support, mom gives kids every other weekend – if dad doesn’t pay mom still has to give kids
iii. When it is expressly stated: write it so it’s independent if you don’t like the general rule
2. Condition v. Promise
a. A promise that is not fulfilled only leads to liability for damages, but the other party must still perform on the contract
b. A condition that is not fulfilled allows the other party not to perform, and can sometimes lead to forfeiture if the breaching party relied on the promise and prepared to or performed the contract
c. Guidelines to determine if it is a promise or condition
i. Look for words of condition:
1. Provided that
2. On condition
3. When
4. So that
5. While
6. As soon as
7. Shall be a condition precedent
8. Shall not be payable until
ii. Ambiguous contract language is generally construed against the drafter (they wrote it, so they should put in what they mean)
iii. When there is doubt whether words are condition or promise, they will be construed as promise
iv. There is a general legal policy opposed to forfeitures
v. Evaluate the intent of the parties by viewing contract as a whole and considering all circumstances
3. Express conditions
a. Defined: Event, occurrence or nonoccurence of which determines whether a party must perform
i. Breach of condition voids a contract
ii. Look for very specific language that leads a person to infer nothing but a condition from the plain language of the clause
1. ‘Provided that,’ ‘is a condition precedent that’ almost always lead to condition
b. Common express conditions
i. Satisfaction clauses
1. Always a condition
2. Measurement of satisfaction (two standards of review)
a. Objective standard (Hutton)
i. What would be satisfactory to a reasonable person?
b. Subjective standard
i. Is the person actually satisfied?
ii. Look at subject matter (commercial contracts are usually objective)
1. Personal taste / aesthetic value
2. Specific language
· Personal judgment
· ‘Sole arbiter’
3. Facts make it impractical to use objective standard
4. Independent third party can measure using subjective standard
ii. Pay when paid clauses
1. Not usually a condition — construed as promise
2. If the general contractor never gets paid, must use reasonable time to pay subcontractors
iii. Time is of the essence clauses
1. If a contract specifies that time is of the essence, then it is!
2. If it’s not specified, though, then failing to meet timeline in contract is not grounds for forfeiture
c. Conditions are always linked to a duty
d. Passage of time is never a condition!!! (not an unforeseen future event)
e. If it is ambiguous whether something is a condition or a promise, promise prevails
i. Guidelines
1. Courts are opposed to forfeiture
a. Forfeiture: the denial of promised compensation after substantial reliance by the performance or preparation to perform by a party, following the nonoccurence of the condition of an event
2. Construed against the drafter
3. Doubtful clause = promise
4. Relationship / subject matter of case
f. Types of conditions
i. Condition precedent: an event, the occurrence of which ‘triggers’ a duty
1. P has burden of proof to show that event happened
ii. Condition subsequent: an event, the occurrence of which ‘relieves’ a duty
1. D trying to escape burden has burden of proof to show that event happened
iii. Condition concurrent: conditions must occur at same time
4. Implied condition: implied in fact
a. Legal effect is no different than express condition
b. Court may have leeway in interpreting if there are alternative meanings
i. Can choose meaning that avoids harsh result
c. Arise out of certain types of relationships (master / servant)
d. Very rare
5. Constructive condition:
ii. Substantial performance is not performance under UCC (perfect tender rule)
6. UCC Tender-Acceptance-Revocation rules
a. UCC 2-307: Divisibility of Delivery and Payment
i. Unless otherwise agreed, all goods called for by a contract must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot
ii. Basically — prefers delivery in single lots… don’t divide it unless everyone is okay with dividing it
b. UCC 2-601: Perfect Tender Rule – the doctrine of substantial performance does not apply to the UCC
i. Governs how the court will measure performance of Ks under UCC
ii. If the goods you are expecting as a buyer fail to conform in any way, you can:
1. Reject the bulk
2. Accept the bulk
3. Accept a commercial unit and reject the rest
a. The buyer’s reason doesn’t matter in most jurisdictions
iii. Exceptions
1. Installment contracts
2. Where the parties or contracts specify otherwise
3. Right to Cure (2-508) applies
c. UCC 2-508: Right to Cure
i. Where any tender or delivery by the seller is rejected because it is non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery
ii. Right to cure of the seller?
1. Seller gives notice that the nonconformities will be cured AND
2. Due by time performance was called for via contract
3. The other way:
a. Goods are nonconforming, but seller truly believes buyer will accept them, due to history of dealing and type of goods
b. Must seasonably notify the buyer
c. Give a reasonable time to cure
d. UCC 2-606: Acceptance Rule
i. A reasonable opportunity to inspect AND
1. The buyer fails to tell the seller that the goods are nonconforming OR
2. The buyer will take them in spite of the nonconformity OR
