Contract obligations may be absolute or conditional.
When a party is accused of failing to perform under a contract they may
respond that they have not breached the contract because any performance
they were to render was conditional, i.e., any duty they may have has not
yet arisen because some event has not yet occurred or any obligation they
were under has been discharged because some event has occurred. (See Calif.Civ.Code § 1434.)
"Condition" Defined
An act or event, not certain to occur, which
affects the duty of performance. (See, Rest.2d § 224.)
A condition
precedent is an act or event, not certain to occur, which the parties
intend must exist or take place
before there is a right to performance.
(See, Rest.2d § 224 and Calif.Civ.Code
§ 1436.) A condition
subsequent is an act or event, not certain to occur, which if it
occurs discharges a duty of performance which has already arisen.
(See, Rest.2d § 230 and Calif.Civ.Code
§ 1438.)
Dependent or Independent Promises?
There is a presumption that mutual promises
in a contract are dependent. Promises are dependent if the parties intend
performance by one to be conditioned upon performance by the other. (K&G Construction Co. v. Harris 223 Md. 305, 164 A.2d 451 (1960).) There
is a strong presumption that a promise in a contract is not intended to
be an independent promise unless a contrary intention is clearly manifested.
Although neither party expressly conditions his promise on performance
by the other, the law constructs a condition that performance or tender
of performance, by one party is a condition precedent to the liability
of the other party.
Conditions; Express or Constructive?
An express condition is one placed in the
contract by the parties. A constructive condition (sometimes called an
implied condition) is one imposed by law in order to do justice. Express
conditions must be literally performed. Constructive conditions may be
satisfied by substantial performance.
Neither Party May Hinder the Other Party's
Performance
If a party prevents or makes impossible the
performance or happening of a condition precedent, the condition is excused. (Iron Trade Products v. Wilkoff Co. 272 Pa. 172, 116 A 150 (1922).) In the case of every contract there is an implied undertaking on the part
of each party that he will not intentionally and purposely do anything
to prevent the other party from carrying out the agreement on his part.
Waiver and Estoppel
Where one party has indicated by words or
conduct that he will not require a condition to be satisfied, and the other
party materially changes his position in reliance, the first party is estopped
from insisting that the condition be satisfied. Thus, waiver, the voluntary relinquishment of a known right, may give rise to an estoppel, if the other party changes their position to their detriment in reliance on the waiver. The estopped party is precluded from taking advantage of the other party's change of position.
Restitution for
a Party in Default
A defaulting party who has not substantially
performed may nevertheless be entitled to restitution as a means of avoiding
unjust enrichment. A defaulting plaintiff, although unable to recover on
the contract, may recover under a theory of quasi contract for the reasonable
value of his services less any damages suffered by defendant. (Rest.2d § 374(1).)The general understanding of the community is that
payment should be made for services actually rendered. A party in default
is not necessarily deprived of all relief.
Material Breach
Material failure of consideration discharges the other party's duty; slight or partial failure may not have this effect. (Walker & Co. v. Harrison 347 Mich. 630, 81 N.W.2d 352 (1957).)
Actual and Anticipatory Breach
An unjustified or unexcused repudiation of or failure to perform a contract at the time performance is due is an actual breach. A repudiation which occurs before the time when performance is due is an anticipatory breach. (See, Franconia Associates v. U.S. 536 U.S. 129 (2002)) An express, unequivocal statement of an intention not to perform a duty at some time in the future operates as a repudiation and gives rise to an immediate action for breach. (Rest.2d § 243.) On a contract to do an act on a future day, a renunciation by one party dispenses with a condition to be performed in the meantime by the other party. There is no reason for requiring the other party to wait until performance is due before seeking his remedy. (Hochster v. De La Tour 2 E.&B. 678, 118 Eng. Rep. 922 (1853).) An express repudiation must be clear, positive and unequivocal in order to have the effect of an anticipatory breach. The doctrine of anticipatory breach has no application to money contracts where one party has fully performed and all that remains for the opposite party to do is to pay a certain sum of money at certain times. (Rest.2d § 243(3).) The rationale is that the aggrieved party has already fully performed and would not be harmed by awaiting counterperformance at the time promised. An anticipatory breach will also result from an implied repudiation, where the promisor puts it out of his power to perform. (See, Rest.2d § 250)
UCC
2-611 allows the seller an opportunity to retract his repudiation.
A repudiation may be retracted before a change of position in reliance
thereon. It is too late to retract a repudiation after the injured party
changes position. All that is required to close the door to retraction
is definite action indicating that the anticipatory breach has been accepted
as final. (See also, Rest.2d § 256(1).)
Waiver of Breach
Instead of treating a breach as a termination of the contract, the injured party may waive the breach by electing to treat the contract as still alive, and remaining ready and able to perform on his or her own part, thereby limiting the claim to damages caused by the breach. (See, UCC
2-607(3)(a).)
Anticipatory Breach: Damages
The measure of damages for nondelivery or
repudiation by the seller is the difference between the market price at
the time when the buyer learned of the breach and the contract price together
with an incidental and consequential damages. (UCC
2-713.) The aggrieved party may await performance for a commercially
reasonable time before resorting to his remedies of cover or damages. (UCC
2-610.)
Right to Assurance
of Due Performance
Where a party to a contract is guilty of serious
prospective inability or unwillingness to perform, the other party may
make a demand for "adequate assurances of due performance." UCC
2-609 provides: 1) the aggrieved party is permitted to suspend his
performance; 2) he is given the right to require adequate assurance; 3)
failure to supply adequate assurances may create an anticipatory breach
and thus give rise to all of the remedies available for such a repudiation. Some jurisdictions have extended the doctrine to contracts of all types, not just those for the sale of "goods." (See, Norcon Power Partners v. Niagara Mohawk Power Corp. 92 N.Y.2d 458, 705 N.E.2d 656 (1998)
Substantial Performance
A promisor who has rendered a "substantial performance" (albeit incomplete) can get judgment for the contract price, with a deduction for minor defects and nonperformance. I.e., the party who has substantially performed is limited to the contract price less the cost of completing the contract or correcting defects. (Jacob & Youngs v. Kent 230 N.Y. 239, 129 N.E. 889 (1921).) "Substantial performance" is defined as whether the performance meets the essential purpose of the contract.
Perfect Tender Rule
At common law, a buyer of goods possessed
a legal right to insist upon "perfect tender" by the seller. This rule
has been retained by the UCC. In a contract for the sale of goods, if the
goods fail to conform exactly to the description in the contract (whether
as to quality, quantity or manner of delivery) the buyer may reject the
goods and rescind the contract.
(UCC
2-601.)
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