conditions and performance Flashcards
condition
future event that must take place before rights or obligations are created, destroyed, or enlarged
condition - failure of a condition
relieves a party of the obligation to perform
condition - express condition
- K includes words like “on the condition that” or “provided that”
- Condition must be complied with fully unless excused; substantial performance will not
suffice - Enforceable even when the failure to meet the condition results in the denial of
compensation
condition - implied condition
those deemed to be part of K because agreement suggests that parties truly
intended the condition but failed to expressly include it, or because fairness requires its
inclusion
* Only substantial performance required to satisfy condition
* UCC—implies duty of cooperation when performance of one party depends on the
cooperation of the other party
timing of conditions - condition precedent
condition precedes the obligation to perform
timing of conditions - condition subsequent
condition excuses the duty to perform after a particular event occurs
timing of conditions - concurrent conditions
each party’s duty to perform is conditioned on the other party’s duty to perform (each party must perform simultaneously)
satisfaction of conditions
examined against objective, reasonable person standard unless aesthetic taste is involved (then subjective standard; the party must use good faith when assessing satisfaction; dissatisfaction must be honest, but may be unreasonable)
performance of contractual duty - order of performance
Order of performance—unless the language or circumstances indicate otherwise,
performance is due:
* When one party’s performance requires a period of time—that party must complete his performance before the other party is required to perform
* When both parties’ performance can be rendered at the same time—both parties must perform at the same time; one party’s failure to perform excuses the other party’s performance
performance of contractual duty - substantial performance: Ks for sale of goods
substantial generally does not apply to Ks for sale of goods
performance of contractual duty - substantial performance: express condition precedent
parties are generally held strictly to the condition; full compliance is required before other party’s performance is due
performance of contractual duty - substantial performance: implied or constructive condition precedent
a party who substantially complies with the condition can trigger the other party’s obligation to perform
performance of contractual duty - substantial performance: damages
K price minus any amount it will cost other party to obtain complete performance as promised:
o Even if no substantial performance, potential recovery through restitution
o Failure to substantially perform is a material breach
performance of contractual duty - substantial performance: willful breach
more likely to be treated as a material breach (i.e., substantial performance is less likely to be found when the breach is willful)
perfect tender under the UCC - in general
the UCC requires perfect tender
- perfect goods
- perfect delivery
Seller must transfer ownership and tender goods conforming to warranty obligations
perfect tender under the UCC - inspection of goods
Buyer may inspect goods and, upon acceptance, has an obligation to pay for them
perfect tender under the UCC - substantial performance
substantial performance insufficient (except for installment Ks and when parties agree)
perfect tender under the UCC - transferring ownership
o Automatic warranty of good title, rightful transfer, and goods free of security
interest of which buyer is unaware
o Actual knowledge of security interest nullifies warranty of title
perfect tender under the UCC - seller’s obligation to tender the goods
must be in accordance with K provisions or
with UCC if K is silent on tender
perfect tender under the UCC - method of tender: seller’s place of business
seller must place goods at the disposition of the buyer and give the buyer notice, if necessary
perfect tender under the UCC - shipment contract (e.g., “F.O.B. seller’s place of business”)
seller must deliver goods to a carrier and make a contract for their shipment; when the K is silent, a shipment K is presumed when the K requires shipment by third-party carrier
perfect tender under the UCC - destination contract (e.g., “F.O.B. buyer’s place of business”)
seller must deliver goods to the place specified in contract and tender them there by holding them at the buyer’s disposition
perfect tender under the UCC - buyer’s obligations
once conforming tender is made, buyer generally obligated to accept and pay K price; rejection amounts to breach of K
perfect tender under the UCC - buyer’s right to inspect before payment
generally, a right to inspect goods that
are tendered, delivered, or identified to the K for sale, unless K provides otherwise
perfect tender under the UCC - contract specifications left to one party
otherwise valid K not invalid merely by
omitting details to be specified by one of the parties; specifications must be commercially reasonable and made in good faith
divisible or installment Ks - common law
various units of performance divisible into distinct parts
o Recovery limited to amount promised for the segment of K performed
o Damages recoverable for breach of other segments
divisible or installment Ks - UCC
goods delivered in multiple shipments, each to be separately accepted
o Perfect tender rule does not apply
o Right to reject determined by “substantial conformity” standard—buyer can only
reject if nonconformity substantially impairs the value to buyer and cannot be cured
o Buyer may cancel K only if nonconforming tender substantially impairs the value of the entire K
implied duty of good faith and fair dealing
- Imposed on each party in any contract (common law or UCC)
- “Good faith”—“honesty in fact and the observance of reasonable commercial
standards of fair dealing”
suspension or excuse of conditions - waiver
party whose duty is subject to a condition can waive a nonmaterial condition by words or conduct; conditions material to party’s primary purpose may be reinstated by the party; nonmaterial condition may be reinstated if:
* The waiving party communicates the retraction of the waiver before the condition is
due; and
* The other party has not suffered detrimental reliance.
suspension or excuse of conditions - wrongful interference
if party whose duty is subject to a condition wrongfully prevents or interferes with occurrence of that condition, then the condition is excused and interfering party has absolute duty to perform (per implied duty of good faith and fair dealing)
suspension or excuse of conditions - election
a party who chooses to continue with a K after a condition is broken effectively waives that condition
suspension or excuse of conditions - estoppel
once a party waives condition, he can be estopped from using that condition as a defense if other party reasonably relied on waiver
suspension or excuse of conditions - forfeiture
court may excuse nonmaterial condition if non-occurrence would cause disproportionate forfeiture
