Chapter 9: Conditions Precedent to Formation or Performance

Question 1

promise vs condition

Answer 1

promise: parties agree to do certain things in the future

condition: a term that relates to a certain state of affairs that needs to be present in order for promises/undertakings to be enforcable

Question 2

Wiebe v Bobsien (BCSC) Ratios

Answer 2

1. Whether a condition precedent prevents a binding agreement (CPF) or simply acts as an ingredient that suspends performance of an otherwise complete contract (CPP) depends upon the intentions of the parties as expressed in the contract itself and as shown by surrounding events.
2. A real estate contract containing a condition precedent will usually result in a binding agreement of sale and purchase. The obligation to perform or complete the contract is merely in suspense pending the occurrence of the event constituting the condition precedent and there is a duty to take reasonable steps to fulfill that condition (CPP)
3. In some instances, a condition may prevent the formation of a contract when the agreement and surrounding events indicate that the parties did not intend to bind themselves to a contract
   * eg. condition depends on whim, fancy or taste, like or dislike

Question 3

Wiebe v Bobsien (BC Court of Appeals) ratio

Answer 3

1. If condition precedent is clear, precise, and objective, it is a CPP - neither can withdraw, but performance is suspended until parties know whether condition precedent was fulfilled.
2. If condition precedent is imprecise or based on subjective state of mind of the purchaser, it is a CPF and the contract process must still be regarded as the offer stage
3. A third class of condition precedent: conditions which are partly subjective and partly objective. In these cases, we deal with it by implying the term that the purchaser will take all reasonable steps to ensure proper fulfillment and approval on the basis of what is necessary to be implied in order to give such business efficacy to the contract as must have been intended by both parties
   
   • in some cases, it won’t be possible to imply the missing term and the agreement will fail on uncertainty

Question 4

Pietrobon v McIntyre Ratios

Answer 4

in a real estate transaction, the condition “satisfactory personal financing” is similar to “suitable financing” and is too discretionary and therefore** too uncertain** to form a valid binding contract (CPF)

Question 5

Griffen v Martens Ratios (best efforts)

Answer 5

1. Courts should always try to give meaning to a “subject to” clause consistent with intent of the parties, but can’t create an agreement for the parties
2. When an agreement includes a condition that it is “subject to satisfactory financing” the agreement will not fail from uncertainty because court can imply a reasonable standard like “best efforts” (it should be interpreted as “Satisfactory to a reasonable person with all the subjective but reasonable standards of the particular purchaser”
3. additional words that a clause was for “sole benefit of the purchaser” doesn’t release the purchaser from an obligation to use “best efforts”

Question 6

Marshall v Bernard Place Ratios

Answer 6

1. The standard of reasonableness that must be met when a party is exercising their discretion pursuant to a sole discretionary clause falls into two categories: 1) objective; and 2) subjective
2. Look to the subject matter of the contract and the intention of the parties as evidenced by the contract’s language to determine whether standard of reasonableness is subjective, objective, or both
3. objective factors, if present, limit discretion under the condition
4. language of the condition establishes the latitutde or scope of a party
5. s discretion in determining what is/isn’t material, acceptable or significant to them
6. honesty and good faith requirmeents apply regardless if discretion is under objective or subjective standard

Facts: inspection condition: pruchaser given sole/absolute discretion

Question 7

Turney v Zhilka Ratio

Answer 7

1. Unilateral waiver by the party who the condition is supposed to benefit will not be permitted when the condition relates to a future uncertain event entirely dependent on the will of a third party. (Where there is a true condition precedent)