Conditions: Has Duty to Perform Become Absolute? Flashcards
What is a “Condition” ?
Either:
- an event or state of the world that must occur or fail BEFORE a party has a duty to perform; OR
- an event or state of the world, the occurrence or nonoccurence of which releases party from duty to perform
What is the difference between failure of a condition and failure of promise?
failure of promise = breach of K and gives rise to liability
failure of condition = relieves a party of the obligation to perform
How do you determine if a provision is a “promise” versus “condition”?
- Look at the intent of the parties
(courts will look at words, prior practices, custom etc)
In doubtful situations, most courts will consider it a PROMISE
What are the 3 classifications of conditions?
- Condition Precedent
- Condition Concurrent
- Condition Subsequent
What is a “condition precedent”?
“condition precedent” = a condition that must occur BEFORE a duty of performance arises in other party
What is a “condition concurrent”?
“Conditions Concurrent” = conditions that are capable of occurring together, and that parties are bound to perform at same time. In effect, each is a condition precedent of the other
Example –> tender of cash for deed.
What is a “condition subsequent”?
“Condition subsequent” = one that, when it occurs, cuts off an already existing absolute duty of performance
What is an “express condition”?
“express condition” = explicit contractual provision
What is the rule re: promisor’s satisfaction as condition precedent?
- normally, a condition of satisfaction is fulfilled if it would satisfy a REASONABLE person
EXCEPTION: if the K involves personal taste or judgement, promisor must be PERSONALLY satisfied (note: if there is bad faith, the condition will be excused)
What is the rule if satisfaction of 3rd party is condition precedent?
most courts will require the actual personal satisfaction of the 3rd party
- condition will be excused if 3rd person’s dissatisfaction is not honest and in good faith
What is a “constructive or implied condition”?
- implied by courts
MOST common/important –> duty of each party to render performance is condition on the other party rendering his performance
Also common –> conditions requiring notice/cooperation
EXAMPLE –> if something needs repair, giving notice that repair is needed
What happens if K is not enforceable due to failure of condition, but one party has already fully or partially performed?
- can usually recover for unjust enrichment
NOTE: recovery may be less advantageous than the K price
What are the ways in which “Excuse” of a condition may arise (8)?
- hindrance or failure to cooperate
- actual breach
- anticipatory repudiation
- prospective inability or unwillingness to perform
- substantial performance
- divisibility of k
- waiver or estoppel
- impossibility, impracticability, or frustration
What is the rule re: excuse of condition due to “hindrance or failure to cooperate”?
if party protected by condition prevents condition from occurring, it will be excused if the prevention is WRONGFUL
What is the rule re: excuse of condition due to “actual breach”?
Actual breach of duty (when performance is due) will excuse duty of counter performance ONLY if the breach is MATERIAL
What is the rule re: excuse of condition due to “anticipatory repudiation”?
“anticipatory repudiation” occurs if promisor indicates that he will not perform when the time comes.
if following requirements are met, anticipatory repudiation will excuse conditions:
- must be a bilateral K w executory (unperformed) promises on both sides;
- must stem from words/conduct that UNEQUIVOCALLY indicates he CANNOT or WILL NOT perform;
What is the effect of an “anticipatory repudiation” ?
Non-repudiating party has 4 options:
- treat anticipatory repudiation as TOTAL REPUDIATION and SUE immediately;
- suspend his own performance and WAIT TO SUE until performance date;
- treat repudiation as OFFER TO RESCIND and treat K as DISCHARGED;
- IGNORE the repudiation and urge performance (note - this does not waive the repudiation. he can still sue for breach and is excused from performing unless promisor retracts repudiation)
What is the rule re: retraction of repudiation?
Repudiating party may, at any time before his next performance is due, withdraw repudiation UNLESS the other party has:
- canceled,
- materially changed his position in reliance on repudiation; OR
- otherwise indicated that she considers repudiation final
What form may retraction of repudiation take?
- may be made in any manner that clearly indicates intention to perform, BUT must include any assurances justifiably demanded
What is the rule re: excuse of condition by “prospective inability or unwillingness to perform”?
Occurs when party has REASONABLE GROUNDS to believe that the other party will be unable or unwilling to perform when performance is due.
(Distinguish from “anticipatory repudiation”)
EFFECT –>
1. innocent party may suspend further performance on her side until she receives ADEQUATE ASSURANCES that performance will be forthcoming.
- IF other party FAILS to provide adequate assurances, innocent party may be excused from her own performance and may treat failure to provide assurances as a REPUDIATION
What is the difference btwn excuse of condition by “prospective inability or unwillingness to perform” and “anticipatory repudiation”?
- anticipatory repudiation must be UNEQUIVOCAL
- prospective inability or unwillingness to perform involves conduct or words that merely RAISE DOUBTS that the party will perform
What is the rule with regards to “retraction” and “prospective inability or unwillingness to perform”?
- As with anticipatory repudiation, retraction is POSSIBLE if defaulting party regains his ability/willingness to perform.
- HOWEVER –> this fact must be communicated to innocent party in order to be effective
What is the rule re: excuse of condition by “substantial performance”?
- IN general, condition of complete performance may be excused if the party has rendered SUBSTANTIAL PERFORMANCE
- In this case, other party’s duty of counter-performance becomes absolute
EXCEPTIONS:
- will generally only apply to implied/constructive conditions
- not applicable if breach is WILLFUL or MATERIAL
- not applicable to SOG, which require perfect tender
NOTE ALSO: “damages offset” - even though party who has substantially performed is entitled to enforce K, other party will be able to mitigate by deducting damages due to incomplete performance
What is the rule re: excuse of condition by “divisibility of k”?
IF:
- K is DIVISIBLE; and
- party performs one of the units of K
..he is entitled to the agreed upon equivalent for that unit, even if he fails to perform the other units.
EFFECT: it is NOT a condition precedent to the other party’s liability that the whole K be performed
HOWEVER –> other party has COA for failure to perform the other units and may withhold his counter-performance for those units
What is a “Divisible K” (common law)?
THREE REQUIREMENTS:
- performance of each party is divided into two or more parts under the K;
- number of parts due from each party is the same; AND
- performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party (ie.. each performance is the quid pro quo of the other)
What is a “Divisible K” (UCC Art 2 Installment K) ?
Art 2 assumes K is NOT divisible unless it authorizes delivery in several lots. In this case, it’s called an “installment K”
In installment Ks, the price, if it can be apportioned, may be demanded for EACH LOT, UNLESS a contrary intent appears
What is the rule re: excuse of condition by estoppel ?
- if party indicates she is waiving a condition before it is to happen AND other party DETRIMENTALLY RELIES on waive, this will be a binding waiver
- No consideration is needed
- HOWEVER –> promise to wave condition may be retracted at any time PRIOR to detrimental reliance
What is the rule re: excuse of condition by waiver?
When condition does not occur or duty of performance is broken, beneficiary of condition/duty must make an election:
- terminate her liability; or
- continue the K
If she chooses to continue, she will be deemed to have waived the condition.
This DOES NOT require consideration or estoppel, and CANNOT be withdrawn
HOWEVER –> if no consideration is given for the waiver, it must be ancillary or collateral to the main subject of K. In other words, one cannot waive entitlement to the entire or substantially entire return performance
NOTE –> waiver severs only the right to treat failure of the condition as total breach excusing counter-performance. Waiving party does NOT waive right to damages.
What is the special rule re: waiver in installment K’s?
In an Installment K –> if waiver is not supported by consideration, beneficiary of waived condition can insist on strict compliance with the terms of the K for future performance (so long as there is no detrimental reliance on waiver) by giving notice that he is revoking the waiver
What is the rule re: excuse of condition by impossibility, impracticability, or frustration?
Conditions may be excused by impossibility, impracticability, or frustration
- impossibility must be objective
- ## must arise after K
