Conditions and Performance

Question 1

What is a condition?

What happens if there is failure of a condition?

Answer 1

A future event that must take place before rights or obligations are created, destroyed, or enlarged

Failure of a conditions relieves a party of the obligation to perform.

Question 2

What is an expressed condition?
-> what are the words used to create such a condition
-> does substantial performance suffice to meet expressed condition
-> is an express condition enforceable

Answer 2

Expressed 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
-> express condition is enforceable even when the failure to meet the condition results in the denial of compensation

Question 3

What is an implied condition?
-> does substantial performance suffice to meet implied condition

Answer 3

Implied - 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

Question 4

What kind of condition does the UCC imply?

Answer 4

UCC - implies duty of cooperation when performance of one party depends on the cooperation of the other party

Question 5

What is a condition precedent?

What is a condition subsequent?

What are concurrent conditions?

Answer 5

Condition precedent - condition precedes the obligation to perform

Condition subsequent - condition excuses the duty to perform after a particular event occurs

Concurrent conditions - each party’s duty to perform is conditioned on the other party’s duty to perform (each party must perform simultaneously)

Question 6

Do you use an objective standard or a subjective one to determine whether a condition has been satisfied?

What standard do you use when a condition is based on aesthetic taste?

Answer 6

Conditions are examined against an objective standard.
-> reasonable person standard

UNLESS aesthetic taste is involved
-> then subjective standard;
-> the party must use good faith when assessing satisfaction;
AND
-> dissatisfaction must be honest, BUT MAY be unreasonable

Question 7

How is order of performance determined
-> when one party’s performance requires a period of time
-> when both parties’ performance can be rendered at the same time?

Answer 7

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

Question 8

What happens when parties expressly agree to a condition precedent?

What must a party do to trigger the other party’s obligation to perform under an implied or constructive condition precedent?

How are damages calculated if breach?

Answer 8

Express condition precedent
-> parties are generally held strictly to the condition;
-> full compliance is required before other party’s performance is due

Implied or constructive condition precedent
-> a party who substantially complies with the condition can trigger the other party’s obligation to perform

Question 9

What is the doctrine of substantial performance?

What kind of damages can a party get who has substantially performed?

What kind of damages can a party get who has NOT substantially performed?

Is it a material or regular breach when a party fails to substantially perform?

Answer 9

The doctrine of substantial performance permits a party who substantially performs to recover on the contract even though that party has not rendered full performance.

Party who has substantially performed
-> Damages are K price minus any amount it will cost other party to obtain complete performance as promised

Party who has NOT substantially performed
-> generally can’t recover damages under the K BUT CAN recover damages via restitution

Failure to substantially perform is a material breach.

Question 10

When is a substantial performance found to be a willful breach?

Is it a material or regular breach when a party willfully breaches?

Answer 10

Substantial performance is more likely to be considered a willful breach when
-> a party intentionally furnishes services that are materially different from what he promised

Willful breach is treated as a material breach.

Question 11

What is the general rule of the Perfect Tender Rule under the UCC?

What are the buyer’s rights and obligations under the Perfect Tender Rule?

Is substantial performance sufficient under the perfect tender rule? Is there an exception to this?

Answer 11

General rule
-> Seller must transfer ownership of the goods to the buyer
AND
-> tender goods conforming to warranty obligations.

Buyer’s rights and obligations:
-> Buyer MAY inspect goods
AND
-> Upon acceptance, has an OBLIGATION to pay for the goods to the seller.

Substantial performance is INSUFFICIENT
-> EXCEPT for installment Ks and when parties agree.

Question 12

When does the UCC imply a warranty of good title?

What happens to the warranty of title if the buyer has actual knowledge of a security interest on the goods?

Answer 12

The UCC implies a warranty of title in all sales contracts, providing that the seller automatically warrants that
-> she is conveying good title,
-> the transfer is rightful,
AND
-> the goods are delivered free from any security interest of which the buyer has no knowledge at the time of the contract.

Actual knowledge by the buyer of a security interest on the goods nullifies the warranty of title.

Question 13

What right does the seller have if the buyer rejects the goods as nonconforming and there is still time to perform?

Answer 13

The seller has a right to cure and tender conforming goods.

Question 14

What is the seller’s obligation to tender goods? What happens if the K is silent?

What are the three methods of tender?

Which is the default method of tender if it isn’t specified in the K?

Answer 14

Seller’s obligation to tender goods - must be in accordance with K provisions OR with UCC if K is silent on tender

Method of tender:
-> seller’s place of business
-> shipment K
-> destination K

Default method of tender is
-> shipment K

Question 15

What kind of language is used to differentiate between a shipment K and a destination K?

Answer 15

Shipment K
-> FOB seller’s place of business

Destination K
-> FOB buyer’s place of business

Question 16

How do the following three methods of tender work:
-> seller’s place of business
-> shipment contract
-> destination contract

Answer 16

Seller’s place of business
-> seller must place goods at the disposition of the buyer
AND
-> give the buyer notice, if necessary to enable the buyer to take delivery.

Shipment contract (e.g. “FOB seller’s place of business”)
-> seller must deliver goods to a carrier
-> make a contract for their shipment;
-> obtain and deliver any document necessary for the buyer to obtain possession of the goods,
AND
-> give the buyer notice that the goods have been shipped

Destination contract (e.g. “FOB buyer’s place of business”)
-> seller must deliver goods to the place specified in contract
-> tender them there by holding them at the buyer’s disposition
AND
-> give buyer notice.

Question 17

What are the buyer’s obligations under a conforming tender?

What happens if buyer rejects a conforming tender?

What are the buyer’s rights under a conforming tender? Can such a right be contracted out?

Answer 17

Buyer’s obligation - once conforming tender is made, the buyer generally obligated to accept and pay K price;

Rejection of a conforming tender amounts to breach of K.

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

Question 18

What happens if there are contract specifications left out that need to be made by one party?

What does UCC require the buyer and seller to specify omitted specifications?

Answer 18

Otherwise valid K not invalid merely by omitting details to be specified by one of the parties.

The UCC implies an obligation of good faith within the parameter of “commercial reasonableness.”
-> when a contract fails to specify the assortment of goods, the UCC imposes a duty on the buyer to specify,
-> whereas arrangements relating to shipment are the seller’s duty to specify

Question 19

How does the CL deal with divisible or installment Ks with regard to recovery and damages?

How does the UCC deal with divisible or installment Ks?
-> must each segment be separately accepted?
-> does the perfect tender rule apply?
-> when is payment due?

Answer 19

CL - various units of performance divisible into distinct parts
-> recovery limited to amount promised for the segment of K already performed
-> damages recoverable for breach of other obligations under other segments

UCC
-> goods delivered in multiple shipments, each segment to be separately accepted
-> perfect-tender rule does not apply
-> payment is due upon receipt of each segment unless payment cannot apportioned into each segment

Question 20

When does the buyer have the right to REJECT a nonconforming segment of a divisible K or an installment K?

What happens if the seller makes adequate assurances that he can cure the nonconformity?

When can a buyer CANCEL a K due to a nonconforming segment of a divisible K or an installment K?

Answer 20

If the seller makes a nonconforming tender or tenders nonconforming goods under one segment of an installment contract, the buyer CAN REJECT only if the nonconformity:
-> Substantially impairs the value of that shipment to the buyer;
AND
-> Cannot be cured.

If the seller makes adequate assurances that he can cure the nonconformity,
-> THEN the buyer must accept the shipment.

When there is a nonconforming tender or a tender of nonconforming goods under one segment of an installment contract, the buyer may cancel the contract only if the nonconformity substantially impairs the value of the ENITRE contract to the buyer.

Question 21

When is the implied duty of good faith and fair dealing imposed?

What does “good faith” mean?

Answer 21

Imposed on each party in any contract (CL or UCC)

“Good faith” - honesty in fact and the observance of reasonable commercial standards of fair dealing

Question 22

What does it mean to suspend a condition?

What does it mean to excuse a condition?

Answer 22

If a condition is suspended, then the condition is restored upon expiration of the suspension.

If the condition is excused, then the party having the benefit of the condition can never raise it as a defense.

Question 23

What are the different ways to suspend or excuse a condition?

Answer 23

Though
-> waiver (suspend or excuse)
-> wrongful interference (excuse)
-> election (excuse)
-> estoppel (excuse)
-> forfeiture (excuse)

Question 24

Who can waive a condition and how?

How can you reinstate a material condition after waiver?

How can you reinstate a nonmaterial condition after waiver?

Answer 24

Waiver
-> party whose duty is subject to a condition can waive a condition by words or conduct

Reinstate material condition
-> conditions material to party’s primary purpose may be reinstated by the party

Reinstate a nonmaterial condition - 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.

Question 25

How is a condition excused under wrongful interference?

What happens to the interfering party’s duty to perform based on the condition?

Answer 25

If party whose duty is subject to a condition wrongfully prevents or interferes with occurrence of that condition, THEN the condition is EXCUSED.

Interfering party has absolute duty to perform DESPITE condition not being met (per implied duty of good faith and fair dealing).

Question 26

How is a condition excused under an election?

Can the election of a condition be used to seek damages?

Answer 26

Election- a party who chooses to continue with a K after a condition is broken effectively waives that condition as justification for the party’s own nonperformance of a contractual duty.

Although the party may be able to seek damages resulting from the non-occurrence of the condition.

Question 27

When can a party be estopped from using a condition as a defense, when that same party waived the condition?

Answer 27

A party who indicates that a condition will not be enforced may be estopped from using that condition as a defense IF
-> the other party reasonably relied on the party’s words or conduct that the condition had been waived.

Question 28

What is a forfeiture?

When can a court excuse a condition under forfeiture?

Answer 28

Forfeiture is the harm that would be suffered by a party who has failed to perform according to a condition.

To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the condition unless its occurrence was a material part of the agreed exchange.