Conditions/Default relationships Flashcards
Oppenheimer & Co. Inc. v. Oppenheim, Appel, Dixon, and Co.
Conditions for Performance!
Rule: No. A condition precedent is an act or event, other than a lapse of time, which must occur before a duty to perform a promise in the agreement arises unless the condition is excused.
TLDR: When a party has a conditional contract, they have to do what is expressed in the contract before a duty is put on the other party. Substantial performance is not enough to supersede the expressed condition precedent. The expressed condition precedent must be satisfied.
MidAmerica Construction Management v. MasTec North America
Rule: A pay-if-paid provision makes a general contractor’s receipt of the owner’s payment a condition precedent to the general contractor’s obligation to pay its subcontractor.
Facts: The subcontract expressly made all installment payments to MidAmerica contingent upon the contractors’ being paid by PathNet. The contractors stopped paying MidAmerica after PathNet declared bankruptcy and stopped paying them. MidAmerica sued to recover payment for the work it had performed. The federal district court ruled that the contractors did not have to pay MidAmerica unless and until PathNet paid the contractors what they were owed. MidAmerica appealed to the Tenth Circuit.
Reasoning: Yes. A pay-if-paid provision makes a general contractor’s receipt of the owner’s payment a condition precedent to the general contractor’s obligation to pay its subcontractor. Such a provision shifts the risk of the owner’s nonpayment to the subcontractor. A pay-if-paid provision is not the same as a pay-when-paid provision, which typically provides that the general contractor will pay the subcontractor within a certain time frame after receiving the owner’s payment.
Munro v. Beazer Home Corp.
Rule: A party may expressly or implicitly waive a contractual condition precedent.
Facts: Although the county had not yet required Munro to connect to the sewer line, Beazer disclaimed any obligation to pay for the hookup. Munro sued Woodring and Beazer in the Delaware Court of Common Pleas.
Reasoning: Here, the first Woodring-Munro contract’s condition precedent was a county sewer connection order that has not yet been issued. However, Woodring implicitly waived that condition by failing to file for Munro’s sewer-line exemption. Woodring also expressly waived the condition precedent by entering into a second contract, which removed the first contract’s condition precedent and made Woodring’s straightforward commitment to connect Munro to the sewer line at Woodring’s own expense.
Constructive Conditions
1) In what order must the duties be performed? The default doctrines that answer this question are called “constructive conditions of exchange”
2) If the party that must perform first breaches the contract by tendering incomplete or defective performance, what is the effect on the other party’s performance? The law addresses these questions through the default doctrines of material breach, substantial performance, and perfect tender.
3) If one party announces in advance their intention not to perform, what is the effect of the other party’s duty to perform? This situation is governed by the doctrine of anticipatory breach also known as ancitpatory repudiation.
Rule for default presumption:
Courts generally presume the time-consuming performance is a condition of the other party’s performance. In other words, “work first, pay later.”- RST 234
Cross promises
Promises that are exchanged for one another are mutually dependent. Treating cross promises independently requires affirmative evidence that the parties want the obligations to be independent.
The rule for performance and payment requirements
A party is required to pay when the court deems there is “substantial” performance on behalf of the other party. Perfect performance is not generally required of workers.
Material Breach in Insufficient Performance
A court may decide that the performance deviated so far from what was expected from a party’s expectation that there is a material or total breach of the agreement. A material or total breach allows a party to terminate, stop performing, or sue the other party.
Jacob & Youngs v. Kent
Rule: If a party substantially performs its obligations under a contract, that party will not be forced to bear the replacement cost needed to fully comply with the agreement but instead will owe the non-breaching party the difference in value between full performance and the performance received.
Facts: In March 1915, Kent noticed that some of the pipe was manufactured in other places besides Reading. Kent demanded the pipe be replaced. Replacement of the pipe, however, would require substantial additional work and expense by Jacob. Additionally, the existing pipe was of the same quality as Reading pipe and was supplied based on an innocent mistake by Jacob caused by the inattention of its subcontractor. Jacob left the existing pipe untouched and asked for a certificate from Kent that the final payment of $3,483.46 was due. Kent refused to supply the certificate, and Jacob brought suit to recover damages.
Reasoning (Cardozo): No. Jacob substantially performed its contract with Kent with only trivial defects and is thus entitled to receive the remainder of the amount owed under the contract. A party that substantially performs its obligations under a contract may recover expectation damages for any remaining payment owed under the contract, minus an offset for defects in the party’s performance. “Substantial performance” is a question of degree and is appropriate for determination by a trier of fact. The trier of fact appropriately concluded that the defect in the pipes supplied by Jacob is insignificant in relation to the overall project. Thus, even though full performance of the contract was not completed, principles of fairness and equity justify not penalizing Jacob significantly by withholding payment when the effect of the defect itself was so insignificant.
Dissent: Because Kent contracted for Reading pipe, that is what he should have received. The majority of the pipe was not manufactured by Reading, meaning that Jacob’s mistake was either willful or grossly negligent. In either case, Jacob should not avoid liability. Jacob failed to install the agreed-upon pipes, and thus the contract was breached whether or not the other pipes were of equivalent quality. There was no evidence showing the cost of complying with the contract and installing the correct pipes, or explaining why the wrong pipe was used.
American Standard, Inc. v. Schectman
Rule: In a construction contract, the injured party may recover the cost of completing unfinished work even if the value of the property as a whole is not diminished by the unfinished work.
Facts: American Standard, Inc. (American Standard) (plaintiff) owned property that had been the site of various industrial operations. American Standard decided to sell the property and entered into a contract with Harold Schectman (defendant) to demolish all existing structures, remove equipment, and grade the property as specified in the contract. Schectman failed to grade the property as specified in the contract. American Standard brought an action against Schectman for breach of contract. Schectman argued that American Standard had not suffered any loss as a result of the breach because American Standard was able to sell the property for only $3,000 less than fair market value. The cost for Schectman to complete the grading work as specified was $90,000. After a trial, American Standard recovered a jury verdict of $90,000 for Schectman’s failure to complete the work. Schectman appealed.
Issue: In a construction contract, can the injured party recover the cost of completing unfinished work if the value of the property as a whole is not diminished by the unfinished work?
Reasoning: Yes. In a construction contract, the injured party may recover the cost of completing unfinished work even if the value of the property as a whole is not diminished by the unfinished work. For breach of a construction contract, the injured party may generally recover all damages that are direct, natural, and immediate consequences of the breach and were reasonably within the parties’ contemplation at the time they entered the contract. If the contractor fails to perform or incompletely performs, damages should be measured by the reasonable cost of replacement or completion.
Main conclusion: The damages sought by American Standard flow naturally from Schectman’s failure to do the specified work, and the damages thus were reasonably within the parties’ contemplation when the contract was made. Accordingly, American Standard can recover all damages sought. Because Schectman failed to complete the work, the measure of damages is the reasonable cost of completion, unless he can show that he substantially completed the work or that his failure to complete did not concern the main purpose of the contract.
Ramirez v. Autosport
Rule: A party may rescind a contract when the goods delivered do not conform precisely to the contract and the seller has not cured the defects within a reasonable time.
Facts: The Ramirezes (plaintiffs) purchased a camper from Autosport (defendant). The delivery date was set and the Ramirezes arrived to get the camper on that date. However, they noticed several defects with the camper and did not accept it that day. The Ramirezes wanted the camper for summer vacation and contacted Autosport several times to inquire as to when it would be ready. Each time they called they were told the camper was not ready. The Ramirezes visited Autosport on the date on which they were told they could finally pick up the camper, but when they arrived to do so they were left to wait in Autosport’s showroom for over an hour. The Ramirezes visited Autosport one more time, but the parties could not reach an agreement. The Ramirezes filed suit seeking rescission of the contract. Autosport counterclaimed. The trial court held in favor of the Ramirezes, awarding them their trade-in van. Autosport appealed. The Appellate Division affirmed. Autosport appealed to the Supreme Court of New Jersey.
Issue: Can a party rescind a contract when the goods delivered do not conform precisely to the contract and the seller has not cured the defects within a reasonable time?
Facts: the camper
The statute of fraud is a defense to enforcement. When there is a statute of fraud, there is no contract. If you don’t have a contract, you don’t have reliance damages. Unjust enrichment exists outside the scope of an explicit contract under restitution damages.
Expectation damages:
A condition is an event, not certain to occur, which must occur
