Law School Resources

Performance and breach of contract

Express conditions

            A promisor is in breach if they have an absolute duty to perform and they do not. To determine if there is an absolute duty to perform you must consider the type and legal effect of conditions in a contract. If the duty is only a conditional one the promisor is bound only after the contingency has occurred.

Conditions Precedent, Concurrent, and Subsequent

1. Conditions precedent.  A condition precedent is one that must occur in order to create an absolute duty of performance.
   
    
2. Conditions concurrent. Conditions concurrent are mutually dependant performances capable of nearly simultaneous execution. The contract bind the parties to render performance at the same time, such as in an ordinary sales contract, in which payment and delivery are conditions concurrent; the conditions of payment must occur before the duty to delivery arises and, the conduction of delivery must occur before the duty of payment arises.
   
    
   1. Legal effect: the legal effect of a conduction concurrent is much the same as a conduction precedent. If the conditions occurs the other party’s duty to perform arises; if it does not occur the duty to perform does not arise.
      
       
3.  Conditions Subsequent. A conditions subsequent is one in which the occurrence of the conduction extinguishes a previously absolute duty to perform; An emplacement contract in which A agrees to work for B for a specified period of time unless A is called military service.
   
    
   1. Legal effect: Occurrence of the conduction subsequent extinguishes the other party’s absolute duty to perform.
      
       
4. True conditions subsequent vs. conditions subsequent in form only: The previous example is a true conduction subsequent. These are rear and generally frowned upon by the courts. Provisions that are worded as conditions subsequent but are really conditions precedent in effect must be distinguished. Fro example, I insures P against loss by fire ad the policy is discharged if either (i) proof of loss is not submitted within 30 days after the accident, or (ii) suit in not brought against insurer for the claimed loss within 12 months from the date of the accident.
   
    
   1. Submitting notice and proof of loss within 30 days is really a conduction precedent to the insurer’s duty to pay.
   2. But failure to sue within the 12 month period is a true condition subsequent, which extinguishes the company’s duty to perform, (payment.)
      
       

Conditions and Covenants Distinguished.

Provision may be both conditions and Covenants.

 

1. Covenants. A covenant is an absolute, unconditional promise to perform, (or refrain from performing,) some act. ( i. e. an contractual promise to which no conditions are attached). A failure to perform a covenant is always a breach of contract per se.
   
    
2. Conditions. A conditions is an fact of event , that happening or nonhappening of which creates or extinguishes a duty to perform on the art of the promisor. Failure of that which is merely a conduction is not a breach of contract.
   
    
   1. Conditions are of importance primarily in bilateral contracts. A unilateral contract leaves all the executory duties on the promisor.
      
       

Interpretation of doubtful provisions as conditions or covenants.

1. Parties’ intent controls: Ordinary the words used by the parties will indicate their intent.
   
    
2. Where parties’ intent is unclear: The ultimate test is the intention of the parties and thus each case must be decided on own facts. However, the following factors are usually determinatives of the parties’ intent:
   
    
   1. Words Used. Words such as ‘provided”, “if’, “when”, etc., usually indicate that a conduction rather than a covenant was intended. Word such as “promise” or “agree”, etc., generally indicate a covenant.
      
       
   2. Custom: Business custom in the community with regard to such contracts.
      
       
   3. Which interpretation best protects the expectancies of the parties: This is by far the most important factor to consider because the fundamental test is to determined the intentions of the parties.

                                                               i.      Effect: this means that doubtful provisions will ordinary be interpreted as covenants, rather than conditions.

                                                             ii.      Rational: This is to uphold the contract and preserve the expectances of the parties, since failure to perform a promise will entitle the other party to damages whereas failure of a conduction excuses the duty of counter-performance but other wise imposes no liability.

Procedural Concerns.

 

1.      Burden of proof that a condition has been satisfied:  

 

a.      Introduction: The procedural distinction between condition precedent ( conditions that must be satisfied in order to create a duty to perform) and conditions subsequent ( conditions that excuse an absolute duty to perform) is vital.

 

b.      Procedural effect of a condition subsequent: Although the burden of allegation and proof of the happening of all conditions precedent is upon the plaintiff-promisee, the burden of allegation and proof of the occurrence of a condition subsequent (or condition subsequent in form) is generally on the defendant-promisor.

 

                                                              i.      Affirmative defense: Thus, any time the contractual provision is worded so that it appears to, or actually does, extinguish as hitherto absolute duty of performance, the occurrence of the condition is an affirmative defense for the promisor, (i.e., he must plead and prove the he was no longer under a duty to perform because of the occurrence).

 

Implied conditions and the order of performance

 

1. Implied-in-fact Conditions: These are conditions that the parties would have agreed to if they had thought about. The law will imply whatever conditions are inherent in and necessary to the promises given to the performance of the contract. These are called “necessary conditions” and conditions of “good faith and cooperation.”
   
    
   1. Test for implied-in-fact conditions: Would a reason person feel that the parties had contracted with the understanding, even thou not expressly stated, that the certain facts would exist?
      
       

                                                               i.      Example: Loading dock --

 

2. Implied conditions of good faith: An extremely important ‘implied-in-fact” condition in most contracts is that neither party will act in bad faith so as to hinder or prevent the performance of the other party.
   
    

Implied in law conditions – “constructive conditions”

 

1. Modern View : Each parties’ performance, or tender of performance is deemed a implied-in-law (constructive) condition to the other’s obligation to perform. Thus, neither parties’ duty to perform arises until the other has performed or tendered performance.
   
    
2. Legal and procedural effects: are ordinary the same as it the conditions had been expressly set forth in the contract.
   
    
   1. Example: In a suit to enforce a land sale contract calling for a particular closing date (the law implying that the payment and tender of deed are constructive conditions concurrent,) the burden is on X to plead and prove that she tendered performance, even though her performance was not expressly made a condition of Y’s duty to perform.

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