George Mason School of Law

George Mason School of Law Contracts II Conditions This file may be downloaded only by registered students in my class, and may not be shared by them F.H. Buckley fbuckley@gmu.edu 1

Kinds of conditions • What is a condition? 2

Kinds of conditions • Consider: I promise to help you on your journey provided the crick don’t rise. 3

Kinds of conditions • Consider: I promise to help you on your journey provided the crick don’t rise. • If the crick rises, am I in breach? 4

Kinds of conditions • Inside and Outside the contractual obligations Promises Other terms: non-promissory conditions, definitions, recitals, etc. 5

Kinds of conditions • Consider now: I promise to help you on your journey (which you can’t make it the crick rises) and I promise the crick won’t rise… 6

Kinds of conditions • Inside and Outside the contractual obligations Promissory Conditions Non-promissory Conditions 7

Another kind of conditionThe example at 623 • I agree to buy your dog for $400 at your house on Thursday. • I come to your house with $400 on Thursday, but you tell me you won’t give me the dog till Saturday • Do I have to pay you on Thursday?

What does “condition” mean here? • Tender of goods is a condition of buyer’s duty to pay • UCC §§ 2-507(1), 2-511(1)

What does “condition” mean here? • Tender of goods is a condition of buyer’s duty to pay • UCC §§ 2-507(1), 2-511(1) • Both parties to stand “ready, willing and able” to perform

Two kinds of conditions • A condition precedent is not a promise but an event which must occur before promissory obligations arise • A promissory condition is a promise which one party must be ready, willing and able to perform before the performance duties of the other party arise.

Stees p.73 • What are the possible legal outcomes here? Third and Minnesota, St Paul 12

Stees • What are the possible legal outcomes here? • Builder assumes risk and is liable in damages for non-completion • Cf. School Dist. v. Dauchy at 74 13

Stees • What are the possible legal outcomes here? • Owner assumes risk • And is liable for seller’s damages • Or must pay a higher price • Cf. Restatement § 89, Illustration 1 14

Stees • What are the possible legal outcomes here? • The quicksand put an end to the contract and no one is liable in damages 15

Stees What are the possible legal outcomes here? Can you tell which from the language of the contract? 16

Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) 17

Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) • Is this a case of Restatement § 154(b)? Or (c)? 18

Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) • Is this a case of Restatement § 154(b)? Or (c)? • Frustration: Restatement § 261 • Futurity? 19

Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) • Is this a case of Restatement § 154(b)? Or (c)? • Frustration: Restatement § 261 • Futurity? • Condition: Restatement § 224. 20

Stees • Condition: Restatement § 224. • Does this refer to a promissory or a non-promissory condition? 21

Stees • Condition: Restatement § 224. • Does this refer to a promissory or a non-promissory condition? • Cf. Restatement § 225(3) 22

Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) • Frustration: Restatement § 261 • Condition: Restatement § 224. • Should it matter which of these doctrines is invoked? 23

Stees • What did the court decide? 24

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? 25

Stees • How would one tell whether to invoke mistake, frustration or condition? • Restatement: The intentions of the parties governs • Mistake: Restatement § 154 • Frustration: Restatement § 261 • Condition: Restatement § 226-27 26

Stees • Suppose you knew or could reasonably predict how the parties would have bargained ex ante on formation of contract? • Would you have any reason to second-guess this? 27

Stees • And just how would the parties have bargained ex ante in Stees? 28

Stees • And just how would the parties have bargained ex ante in Stees? • Force majeur clauses • Assignment of risk 29

George Mason School of Law Contracts II Conditions F.H. Buckley fbuckley@gmu.edu 30

Next day • Scott 644-59 • Scott 659-82 • Next week: Scott 65-72

Defining Conditions • A condition which is not a promise, and to which no liability attaches on its occurrence

Defining conditions • Consider: I promise to help you on your journey provided the crick don’t rise. 33

Defining Conditions • Conditions precedent: The obligations of the parties will not arise if x has occurred. • Conditions subsequent: The obligations of the parties are suspended if x occurs.

A second kind of condition • Promissory Conditions: A condition which is also a promise, and to which liability attaches on its occurrence

Promissory conditions • Consider now: I promise to help you on your journey (which you can’t make it the crick rises) and I promise the crick won’t rise… 36

Promissory conditions • What happens when this kind of condition occurs? • The non-breaching party is excused from performance (absent waiver)

Promissory conditions • I agree to sell you my car, and tender delivery immediately. When do you have to pay if you want the car today? 38

Promissory conditions • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Tender of delivery by seller and tender of payment by buyer are mutual conditions • UCC §§ 2-507(1), 2-511(1) • Both parties to stand “ready, willing and able” to perform 39

Promissory conditions • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) 40

Promissory conditions • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) • When I agree to build you a house, when do you have to pay? 41

Promissory conditions • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) • When I agree to build you a house, when do you have to pay? • The “work before pay” rule of 234(2) 42

Work before Pay Stewart v. Newbury at 626 • What did the contract say about payment? • The presumption? 43

The duty to be ready, willing and ableBell v. Elder at 623 44

Bell v. Elder Elders land Bell Purchaser Bells sue to recover deposit because Elders failed to supply water 45

Bell v. Elder • What were the obligations of the parties as to performance? • Seller to provide the water, power and roads • Buyer to pay a hook-up fee and apply for a building permit 46

Bell v. Elder • How much of this had been done? • Seller to provide the water, power and roads • Buyer to pay a hook-up fee and apply for a building permit 47

Bell v. Elder Why did the buyer want to back out? 48

Bell v. Elder Could buyers recover purchase price because sellers had not provided water etc? 49

Bell v. Elder • Could buyers recover purchase price because sellers had not provided water etc? • Here there was no order as to when each party should do their work and “work before pay” applied to both parties • Presumption of simultaneous performances 50

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