Do It Yourself

a) Facts. Kingston (P) brought a cause of action for debt for nonperformance, claiming that he had begun performance and was willing to continue to perform but that Preston (D) refused to perform. The substance of the contract was that P would work for D for one and one-quarter years as a servant and then D, upon P's presenting good security, would transfer his business and stock in trade to P at a "fair valuation." D refused to perform the transfer and defended P's suit, claiming that P did not offer sufficient security.

b) Issue. Is the presenting of good security a condition precedent to D's obligation to perform?

c) Held. Yes. Judgment for D.

(1) Before delivering the business to P, P was to show good security for the payment of the money to be received by D. Since P failed to give good security, D had no obligation to perform.

d) Comment. The Kingston court delineated three types of covenants:

(1) Mutual and independent. Either party may recover damages from the other in the event of breach by the other, and an alleged breach by one party is no excuse to the other party.

(2) Conditional and dependent. Performance of one party depends on the prior performance of the other and, until the prior condition is performed, the other party will not be held to performance of his covenant.

(3) Simultaneous. If one party tenders and the other party refuses to perform, the first party has an action for default against the refusing party.

c. Modern view. Under modern law, however, each party's performance (or tender of performance) is deemed an implied- in-law ("constructive") condition to the other's obligation to perform. Thus, neither party's duty to perform arises until the other has performed or tendered performance. For example, B is under no duty to pay if S has not delivered or tendered delivery; and S is likewise under no duty to deliver the car if B has not tendered payment. [Restatement (First) §266]

All participants in the study group must always follow the BSL Honor Code.