George Mason School of Law

George Mason School of Law Contracts II Conditions F.H. Buckley fbuckley@gmu.edu 1

Stees • What are the possible legal outcomes here? Third and Minnesota, St Paul 2

Stees • What are the possible legal outcomes here? • The quicksand put an end to the contract and no one is liable in damages 3

Stees • What are the possible legal outcomes here? • The quicksand put an end to the contract and no one is liable in damages • Builder assumes risk and is liable in damages for non-completion 4

Stees • What are the possible legal outcomes here? • The quicksand put an end to the contract and no one is liable in damages • Builder assumes risk and is liable in damages for non-completion • Owner assumes risk • and is liable for seller’s damages • or for contract price 5

Stees What are the possible legal outcomes here? Can you tell which from the language of the contract? 6

Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) 7

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)? 8

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)? • See Illustration 5 9

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? 10

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? Sed Restatement § 266(1) 11

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? Sed Restatement § 266(1) • Condition: Restatement § 224. 12

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? Sed Restatement § 266(1) • Condition: Restatement § 224. • Futurity? See § 224 cmt b. 13

Stees • Condition: Restatement § 224. • What kind of a condition? • Condition Precedent • Condition Subsequent • What’s the difference? • Restatement § 224, cmt e; Restatement § 230. 14

George Mason School of Law Contracts II Conditions F.H. Buckley fbuckley@gmu.edu 15

Stees • On a “regret contingency,” what are the possible legal responses? • A taxonomy of remedies • Of promises and conditions 16 16

Stees • What are the possible legal outcomes here? Third and Minnesota, St Paul 17 17

Stees • What are the possible legal outcomes here? • The quicksand put an end to the contract and no one is liable in damages • Builder assumes risk and is liable in damages for non-completion • Owner assumes risk • and is liable for seller’s damages • or for contract price 18 18

Putting an end to the contract • 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? 19

Stees • What did the court decide? 20

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? 21

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo at p. 66: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • And what does that mean? 22

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo at p. 66: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • And what does that mean? • It overlaps with our sense of fairness? 23 23

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo at p. 66: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • Explicit bargains: CP Clare at p. 79 24

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • Restatement: The intentions of the parties governs • Mistake: Restatement § 154 • Frustration: Restatement § 261 • Condition: Restatement § 226-27 25

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • 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? 26

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • And just how would the parties have bargained ex ante? 27

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • And just how would the parties have bargained ex ante • Force majeur clauses • Assignment of risk 28

Stees • What did the court decide? • If no mistake, frustration or condition is invoked, how would you decide who is liable? • Cardozo: “Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable” • When to gap-fill? 29

Stees • What did the court decide? • Why not split liability down the middle? 30

Stees • What did the court decide? • Why not split liability down the middle? 31

Stees • I agree to sell you my car, and tender delivery immediately. If no more is said, when do you have to pay? 32

Stees • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) 33

Stees • 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 34

Stees • 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? 35

Stees • 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? • Restatement § 234(2), illustration 9 • The “work before pay” rule 36

Paradine v. Jane I agree to rent your house, but am prevented from doing so by war Prince Rupert 37

Ready, willing and able:Bell v. Elder • What was the risk in question? 38

Bell v. Elder • What was the seller’s obligation in question? 39

Bell v. Elder • What was the seller’s obligation in question? • To supply water • It didn’t do so but was “ready, willing and able” to do so on tender of the price • And that’s all that was needed 40

What does a promise mean? • Jacob & Youngs v. Kent • What was the breach? • What remedy does the Π seek? 41

What is a condition? What are Dependent vs. Independent Promises? Benjamin Cardozo 42

What is a condition? • What are Dependent vs. Independent Promises? • Dependent promises as “conditions” • Tender of price and of delivery under Article 2 • Independent promises as mere “promises” 43

What is a condition? • What are Dependent vs. Independent Promises? • Dependent promises as “conditions” • Tender of price and of delivery under Article 2 • Independent promises as mere “promises” • I know Cardozo called it a “promise” but I’m going to call it a “warranty”. 44

What is a condition? • What are Dependent vs. Independent Promises? • Why did it matter whether the obligation to supply Reading Pipe was a condition or a warranty? 45

What is a condition? • Why did it matter whether the obligation to supply Reading Pipe was a condition or a warranty? • So how does one tell? 46

What is a condition? • Why did it matter whether the obligation to supply Reading Pipe was a condition or a warranty? • Wait a minute—what about Coasian bargaining? 47

What is a condition? • Why did it matter whether the obligation to supply Reading Pipe was a condition or a warranty? • Wait a minute—what about Coasian bargaining? • Assume: • Value of house with Reading pipe is $77,000 • Value of house with Cohoes pipe is $76,900 • Cost of replacement is $10,000 48

What is a condition? • Why did it matter whether the obligation to supply Reading Pipe was a condition or a warranty? • Assume: • Value of house with Reading pipe is $77,000 • Value of house with Cohoes pipe is $76,900 • Cost of replacement is $10,000 • So what would a Coasian bargain look like, given those numbers? 49

What is a condition? • What are Dependent vs. Independent Promises? • So how does one tell? • Just what do you think the parties intended? • Venial faults and oppressive retribution 50

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