Conditions & Excuses

Question 1

Condition (Rest 224)

Answer 1

An event not certain to occur, which must occur, unless it’s nonoccurrence is excused before performance under a contract becomes due

Occurrence of condition —> duty; nonoccurrence extinguishes duty

Question 2

Duty (Rest 235)

Answer 2

When a contract obliges a party to perform an act; failure to perform his breach of contract—> remedy

• sometimes duty is not absolute, but rather conditional on the occurrence of an event event triggering duty (event triggering duty, Rest. 224)
• circumstances that excuse duty: doctrine of mistake, impact and frustration of purpose (Rest 152, 153, 261, 265)

Question 3

Types of Conditions

Answer 3

Ordinary= Event beyond control of either party (ex: fire insurance. Fire is precedent on duty for insurance)
- when not satisfied, neither has legal cause of action

Promissory= Duty of one party and condition of other party’s duty (ex: when tenant posts security deposit—> landlord furnishes property. tenant has duty to post and this performance is a condition of the landlord’s duty to furnish.
- when not satisfied, there’s a breach

Subsequent= Occurs after the duty arises or duty will be extinguished (ex: notifying insurance company of fire)

Precedent=Occurs before duty arises (ex: fire)

Express = Condition created by the parties (question of contract interpretation)

Constructive = Created through the operation of law rather than parties’ intention; question of contract interpretation

Question 4

Rest 225: Effects of Non-Occurrence of a Condition

Answer 4

1) performance of a duty, subject to a condition cannot become due unless the condition occurs or non-occurrence is excused

2) unless it has been excused the occurrence of a condition discharges duty when the condition can no longer occur

3) occurrence of a condition is not a breach unless he is under duty that condition occur

Question 5

Rest 226, How an Event May Be Made a Condition

Answer 5

An event may be made a condition either by the agreement of the parties or by a term supplied by the court

Question 6

Rest 234, Order of Performance

Answer 6

1) where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language circumstances indicate the contrary.

2) except in instances (1) where performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than the other party unless the language circumstances indicate the contrary

Question 7

Did D’s snowplowing contract with P at a reduced amount discharge the town’s duty for the original price, given that the contract amount was contingent upon voter approval and the voters amended the amount to the reduced price?

Answer 7

Yes. Townes voters approval of the contract is written was a condition precedent that had to be fulfilled before the contract became valid and enforceable.

Condition did not happen —> Duties are discharged.
- Ordinary condition: no one is under an obligation to make a condition happen

Irving v. Town of Clinton (1998)

Question 8

Was D’s duty to deliver his silk business to his nephew discharged, given that the nephew did not provide D security for for payment of €250 a month so that D could transfer his silk business after one and a fourth years as promised at an earlier time?

Answer 8

Yes. D’s transfer of the business was dependent on P satisfying the condition precedent of providing adequate security.

Conditional agreements discharge duty when the condition isn’t met.

Kingston v. Preston (1773)

Question 9

When the estate owner did not convey his estate to the buyer, was the buyers obligation to pay a fine in lieu of the estate payment discharged? Considering that the promises for the estate and exchange for 210 pounds, failure of either resulting in fines, were mutually dependent on each other?

Answer 9

Yes. Goodisson did not complete as promised under the contract so Nunn is not required to pay 21 pounds to Goodison = reciprocal failure to come through.

When a contract contains promises that are mutually dependent on one another, failure to execute a promise by one party relieves the other party of his own promised obligations.

• All contract duties are conditioned on some performance

Goodisson v. Nunn (1792)

Question 10

Material Breach Doctrine (229)

Doctrine of Substantial Performance (237)

Answer 10

MBD: one party’s breach of a promissory condition = not meeting that condition only if the breach is material.

• if not material, non-breaching party may sue but still has to perform its subsequent duties

DSP: substantial but incomplete performance—insubstantial breach—satisfies the condition, but injured party may be entitled to damages for harm caused by the breach

Question 11

UCC’s Perfect Tender Rule (2-601)

Answer 11

Grants the buyer the right reject goods that do not conform to exact contractual requirements

• if buyer does not reject imperfect goods within a reasonable time after delivery, the buyer must pay for the goods but consume for damages due to any breach
• UCC dilutes harshness of rule by allowing the seller an opportunity to correct any breach if time remains performance on the contract

Question 12

Did the international shipping line’s failure to tender payment of their loans accrued interest on or before November 15 constitute material breach, entitling the bank to call in the loan which made the personal guarantors responsible, given that the deadline of payment was undisputed and the bank had previously accepted late payments in the course of dealings?

Answer 12

No. The one day delayed did not prejudice the bank, the bank previously accepted late payments, and the banking industry does not ordinarily consider such a brief delay to be a material breach. Bank is required to keep the bargain and forbear on collecting.

Substantive performance = no material breach —> duties subsequent

Sahadi v. Continental Illinois National Bank & Trust Co. of Chicago (1983)

Question 13

Did the contractor’s recasing of only 2/5s of the iron pipes with the Redding manufacturing brand meet the doctrine of substantial performance, satisfying its obligation to galvanize all iron pipes with said manufacturer? Considering that the usual cost of replacement is the difference in value not reconstruction, and the substituted brands were of the same quality, appearance, and value as Readings?

Answer 13

Yes, Jacob substantially performed his contract with Kent with only a trivial defects and is thus is entitled to receive their remainder of the amount owed under the contract.

The need for fairness and equity in the enforcement of contracts outweighs the need for consistency and certainty and legal principles as a policy matter.

• we want the purpose to be served and not to blow up every contract on nominal mistakes; this is inefficient

Jacob & Youngs v. Kent (1921)

Question 14

Did the roofing company substantially perform its obligations to install a new roof with a uniform “reset glow” color when the house owner later realized there were yellow streaks due to differently shaded shingles? Also, considering that after the company replaced the nonconforming shingles they’re still remained patchy portions, where the only remedy would be to install a completely new roof.

Answer 14

No. Cope had the right to contract for the exact type in color roof she wanted.

Cannot argue substantial performance where the only remedy would be completely redoing the work.

O.W. Grun Roofing & Construction Co. v. Cope (1975)

Question 15

Was the lumber companies contract, severable, consisting of several distinct items and the price paid to the shipmaster portion to each item delivered? Considering that it’s load on board of hemp and iron was reduced to half due to a Russian embargo, resulting in the freighter’s refusal to pay the stipulated price upon delivery.

Answer 15

Yes, it is several and payment is required on a per unit basis. Entitled to payment for the logs that were delivered. However, is not entitled for payment for logs that were not delivered even though Gil drove logs part of the way.

Where consideration is aportioned this supports the inference of the contract is divisible (which makes more clear with the duties are) and specific performance owed on that part of K.

• If that happens by casus (happens by chance), the delivery is prevented, the carrier cannot recover pro tanto (for so much; to that that extent) for fright on part of the goods that were taken

Gill v. Johnston Lumber Co. (1892)

Question 16

Did the contractors completion of 98% of the first phase of excavation and grading work fall under the doctrine of substantial performance? Considering that it’s failure to complete the last 2% of work in the first phase, and the second phase arose out of its divisible, two-part contract with the owners, the owners change of plans following a dispute regarding payment, immediately employing others to finish the job?

Answer 16

Yes. Two parts of the contract and the owners breached by hiring other contractor to finish the remaining 2% of excavation —> disallows contractors to fully perform.

Where grading is divisible and substantially performed, and non-performance unintentional, grader gets contract price for grading

• a contract is divisible when it appears divisible by both parties

Lowy v. United Pacific Insurance (1967)

Question 17

Mistake

Doctrine of Mutual Mistake (152)

Answer 17

A belief that is not in accord with the facts (vs. misrepresentation is an assertion)

DoMM allows a party to avoid enforcement of a contract when 3 criteria are met:

1. Both parties must be mistaken at time of contracting as to a basic assumption of the contract
2. Mistake must have a material effect on the bargain
3. Party who is adversely affected by the mistake (weasel) must not “bear the risk” of that mistake

Courts will consider the risk of mistake to be allocated to the adversely affected party (weasel) whenever that party is aware of limited knowledge but proceeds anyway (Rest. 154)

Question 18

Did the inadvertent taking of two aircraft engines by the junk dealer fall under the doctrine of mutual mistake, disallow allowing the transfer of their titles? Considering that the airline company was the exclusive owner of the engines and their associated records, and that neither party was aware of the taking nor intended their inclusion in the sale?

Answer 18

Yes, the an airline intended to sell scrap metal, not brand new jet engines worth 1000s of dollars. The engines were not part of the agreement.
- Airline did NOT want to bear the risk of selling the aircrafts.

A contract of sale like any other contract, must rest upon the mutual agreement of the parties on all essential elements of the sale. Here, there was no meaning of the minds.

West Coast Airlines, Inc. v. Miner’s Aircraft & Engine Service, Inc. (1965)

Question 19

Did the sale of a safe estate auction with unknown contents of $32,207 inside fall under the doctrine of mistake disallowing its transfer of sale? Considering the sale is final the auctioneer disclosed the safety compartment required a locksmith to access and he may know rights to any contents of the sale to the estate?

Answer 19

No. Regardless of what the estate objectively intended to sell, the estate’s outward words and actions objectively indicated that he was agreeing to sell both safe and its contents.

• here, the auctioneer induced the buyers to buy the risk of a “never opened before” safe

Where the seller (implicitly) allocate risk of uncertainty (especially where a seller seems to induce purchase of uncertainty) there is no mutual mistake

City of Everett v. Estate of Sumstad (1981)

Question 20

Rest 2d: 154: When One Party Bears the Risk of the Mistake

Answer 20

a) the risk is allocated to him by an agreement of the parties, OR

b) he is aware at the time the contract is made, that he has limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, OR

c) the risk is allocated to him by the court

Question 21

Did the selling of a small stone to a jewelry business appraised at one dollar at the time but then later ascertain to be worth $700 constitute fraud or mistake in sale, allowing the seller to rescind?

Answer 21

No. Would fail to make out a case of either fraud or mistake and sale to allow her rescission to recover. “He is aware that he has limited knowledge..” (Rest 2d 154) true even if one party is more knowledgeable = bore the risk = not mistake

No mistake where both parties were manifestly uncertain about what was being sold

(Only reason for ascending (1) vendee is guilty of fraud or (2) there was a mistake made by the vendor and delivering an article which was not the article sold)

Wood v. Boynton (1885)

Question 22

Did the coin retail dealers $500 purchase of a reportedly Denver mended coin, constitute mutual mistake, allowing rescission of the contract? Considering that it was later discovered the coin was counterfeited and at the time of purchase neither party questions is genuineness.

Answer 22

Yes. Beachcomber may rescind the contract with Bossett due to a mutual mistake of fact

Where both parties are certain about a fact that turns out to be wrong, K is voidable by either party.

• Negligent failure of a party to know, or to discover the facts as to which both parties are under a mistake does not preclude (prevent) rescission or reformation on account there of
• but if they assumed the risk (knew there was doubt to its genuineness—basked K on that assumption) then rescission would not be appropriate

Beachcomber Coins, Inc. v. Boskett (1979)

Question 23

Doctrine of Impracticability

Answer 23

Facts were unanticipated at the time of contracting prove to be detrimental to one parties interests (the seller’s)

• vs. mistake: facts that were in existence at time of contracting but were unknown
• impracticability from unexpected change in circumstances after contracting —> performance on one part impossible or far more difficult (Resr 261)
• non-occurrence of supervening event must be a basic assumption of the contract, and the occurrence of the event must not be the fault of the adversely affected party (Rest. 261)

Question 24

Force Majeure (“Act of God”) Clause

Answer 24

IDs variety of natural disasters, sometimes human-caused doctrines, that they were to occur, would excuse the performance of obligations of one or both parties

Question 25

D let P rent Surrey Gardens and Music Hall for four days to give a series of four grand concerts. One day before the concert the hall is destroyed by fire.

Can we invoke the doctor of impracticability, issuing their contract as impossible to fulfill under the implied condition at the hall exists, and excuse the parties from performance and entirety ?

Answer 25

Yes. The continuing existence of the halls essential to performance of the contract —> destruction of the excuses performance by both parties. Implied condition that exists at time of performance.

If at T1, neither party or the risk of an unforeseeable event making performance impossible, the parties are off the hook

Taylor v. Cardwell (1863)

Question 26

Frustration of Purpose

Answer 26

Duty to perform should be discharged because the purpose for which they entered into an agreement to procure a good or service no longer exists (for buyers)

• superseding event renders performance difficult for sellers of a service or good —> reduces value to buyers of executing contract
• excuse is proper of the non-occurrence of the event in question was a “basic assumption” of the contract unless the circumstances indicate otherwise and the claimant bears no fault for the occurrence of the event (Rest 265)

Question 27

Apartment owner advertises rooms for a good view of the royal coronation processions. coronation got canceled.

After an apartment owner agrees to lease his rooms advertising a good view of the royal coronation processions , does the coronations non-occurrence frustrate the purpose of the contract which relies on the implied condition of the coronations occurrence, thereby relinquish the renting premises and the renter from paying?

Answer 27

Yes. If a condition that is not expressly mentioned, but is implied the non-occurrence of the condition may excused on performance of the contract by both parties. The cancellation frustrated the purpose of the contract and is capable of excusing nonperformance.

If the event prevented performance is not considered by the parties (they didn’t beat the risk) at time of contracting, they can get off the hook.

Krell v. Henry (1903)

Question 28

Electric company contracts with the coal company to purchase a set amount of coal every year for 20 years at a certain rate. Price goes up and electrical company’s regulatory commission says they can no longer pass increase cost onto customers. company find the cheaper source and wants to avoid contract for frustration of purpose

Is the company excused from their obligation to buy coal under the force majeure clause or frustration of purpose after realizing the increased cost in finding cheaper electricity elsewhere, and being prevented from passing on higher fuel cost to their customers ?

Answer 28

No. NIPSCO entered into a fixed price contract that explicitly assigned the risk of market price decreases, and the risk of cheaper energy sources being developed during the term of the contract.

• Performance cannot be excused under a force majeure clause due to change market prices

Neither price change that makes long-term contract a bad deal nor regulated utilities’ inability to pass along excessive cost to its customers constitutes an occurrence, the non-occurrence of which permits the company to stop taking coal for any cases beyond its reasonable control.

Northern Indiana Public Service Co. v. Carbon County Coal Co. (1986)