Performance - Conditions

Question 1

Conditions - Basic Concept

Answer 1

• contract may provide that party doesn’t have duty to perform unless some condition is fulfilled
• in that case, party’s failure to perform is justified if the condition wasn’t fulfilled

Question 2

Distinction Between Promise and Condition

Answer 2

• basically, important to know b/c if you made an absolute promise, you need to perform, vs. it’s possible you’re bound by the K but don’t have to perform unless some specified condition occurs

Question 3

Promise - Definition

Answer 3

• commitment to do or refrain from doing something
• if promise is unconditional, failure to perform according to its terms = breach of K

Question 4

Condition

Answer 4

Normally means either:
1) event or state of world that must occur or fail to occur before a party has a duty to perform OR
2) event or state of the world, the occurrence or nonoccurrence of which releases a party from their duty to perform

• “promise modifier” -> no breach of promise until the promisor is under an immediate duty to perform

Question 5

Failure of Condition vs. Breach of Contract

Answer 5

• failure of a contractual provision that is only a condition is NOT a breach of contract
  -> BUT still discharges the liability of the promisor whose obligations on the conditional promise never mature
• vs. failure of a promise WOULD be breach of K -> gives rise to liability

Question 5

Interpretation of Provision as Promise or Condition

Answer 5

• determined by “intent of the parties”
• in doubtful situations, more likely to hold it’s a promise

Courts look at:
- words + phrases used by the parties
- prior practices
- custom in the business community wrt the provision
- whether performance is needed from a third party (if so, more likely a condition than absolute promise)

Question 6

Factors That Might Discharge Duty Re Absolute Promise

Answer 6

• performance
• impossibility
• impracticability
• frustration of purpose
• mutual rescission
• release
• modification
• accord + satisfaction
• novation
• lapse

Question 7

Exam Tip - Words + Promise vs. Condition

Answer 7

• condition indicated by words like “provided”, “if”, + “when”
  -> “when” can be tricky though - if the event following “when” isn’t w/in obligee’s control, courts prefer to interpret as indicating a time for performance, rather than a condition of performance
• “promise” + “agree” usually indicate promise

Question 8

Express Condition

Answer 8

• normally refers to an explicit contractual provision

Express statement in K providing that either:
1) a party doesn’t have duty to perform unless some event occurs or fails to occur OR
2) if some event occurs or fails to occur, obligation of party to perform one of more of his duties is suspended or terminated

Question 9

Promisor’s Satisfaction as Condition Precedent

Answer 9

• many Ks include express condition that party will pay only if “satisfied” w/ other party’s performance
  -> b/c a condition, promisor is under no duty to pay unless they’re satisfied

Question 10

Promisor’s Satisfaction as Condition Precedent - Mechanical Fitness, Utility, Or Marketability

Answer 10

• in Ks involving mechanical fitness, utility or marketability, condition of satisfaction is fulfilled by a performance that would satisfy a REASONABLE person
  -> ex: construction or manufacturing Ks
  -> therefore immaterial that promisor not personally satisfied if reasonable person would’ve accepted + approved the performance tendered

Question 11

Promisor’s Satisfaction as Condition Precedent - Personal Taste or Judgment

Answer 11

• if K involves personal taste or judgment, condition of satisfaction fulfilled only if promisor is PERSONALLY satisfied
  -> ex: portraits, dental work
• BUT even if condition requires personal satisfaction, promisor’s lack of satisfaction must be honest + in good faith
  -> if promisor refuses to examine performance or rejects in bad faith, condition of satisfaction will be excused

Question 12

Satisfaction of Third Person as Condition

Answer 12

• construction Ks often include condition requiring satisfaction of owner’s architect or engineer
• in such cases, most courts required actual personal satisfaction of that person
• BUT condition would still be excused if third person’s dissatisfaction not honest + in good faith

Question 13

When Purpose of Condition Is to Benefit One Party

Answer 13

• when clear that purpose of a condition is to protect or benefit only one of the parties, the other party’s duty won’t be subject to the condition

Question 14

Classification of Conditions

Answer 14

• condition precedent
• conditions concurrent
• condition subsequent

Question 15

Condition Precedent

Answer 15

• one that must occur before an absolute duty of immediate performance arises in the other party

Question 16

Conditions Concurrent

Answer 16

• those that are capable of occurring together, + that the parties are bound to perform at the same time
  -> means that each is effectively a condition “precedent” to the other

Question 17

Condition Subsequent

Answer 17

• one that, when it occurs, cuts off an already existing absolute duty of performance

Question 18

Constructive Conditions of Performance

Answer 18

• most common implied condition = that the duty of each party to render performance is conditioned on other party either rendering their performance or making a tender of their performance

Question 19

Constructive Conditions of Cooperation + Notice

Answer 19

• common
• constructive condition of cooperation: ob of one party to render performance is impliedly conditioned on other party’s cooperation in that performance
• also often a condition to one party’s performance that the other party give notice that the performance is due
  -> typically implied where a party couldn’t reasonably be expected to know a fact that triggered duty to perform unless notice given

Question 20

Order of Performance - Conditions Concurrence

Answer 20

-if both performances can be rendered at same time, they’re constructively concurrent
-> each precedent to other
- absent excuse, each party must first tender own performance if wish to put other under duty of immediate performance (which would then result in breach if other fails to perform)

Question 21

Order of Performance - Conditions Precedent

Answer 21

• if one performance will take a period of time to complete while other can be rendered in an instant, completion of the longer performance = a constructive condition precedent to execution of the short performance

Question 22

Effect of Condition - Equitable Remedy

Answer 22

• if K not enforceable due to failure or occurrence of a condition, + one party has fully or partially performed, can usually recover under unjust enrichment theories
  -> although measure of damages in that case may be less advantageous than K price