Contracts - Chap 5 Conditions

Front 1

To effect a condition, what are the requirements for a waiver?

Back 1

1. voluntary
2. relinquishment of right
3. revivable WITH NOTICE unless
4. reliance on it
**Waiver only suspends the cond. unless their is detrimental reliance, then it obliterates the cond. clause. Gilbert v. Globe Rutgers Fire Ins. Co)
**Waiver may be inferred form conduct (Porter v. Harrington - time of the essence clause)

Front 2

What is a "time of the essence" condition/clause?

Back 2

A "time of the essence" clause means that timely performance by one party is a condition of the other party's performance.
*Court's usually won't imply time of essence clause b/c it would often lead to forefeiture

Front 3

How do you imply waiver to a "time of the essence" clause?

Back 3

It can be waived by course of conduct, but it requires repeated conduct.

If clause is waived, presume condition (Lemler's 3rd way to distinguish cond) UCC§2-209

Front 4

How are adhesion contracts affected by conditions?

Back 4

In adhesion ks involving forefeitures, the cond. will be excused if the dominant party can be protected w/out the forefeiture (Aetna Casualty and Surety Co. v. Murphy - not complying w/policy left insured w/nothing - not fair b/c its an adhesion k)

Front 5

What does a satisfaction clause do for the contract?

Back 5

It requires some performance to be done to the satisfaction of a party to the K or some 3d party.

Front 6

How does the court review a satisfaction clause/condition and determine if the clause should be excused?

Back 6

1. The rule for court review of a decision rendered against a satisfaction clause is to excuse the clause if the decision was UNREASONABLE (obj standard) or made in BAD FAITH (subj test)

Front 7

In reviewing a satisfaction clause, why would the court use a reasonable test?

Back 7

The court will use an obj standard if the clause involves market standards:
1. operative fitness
2. utility
3. marketability
**Ks designed to meet market standards need only satisfy a reasonable person. Would a reasonable person accept or refuse performance?

Front 8

What constitutes unreasonable in a decision rendered against a satisfaction clause?

Back 8

Unreasonable means w/out subst evidence (documentation) and without any logical reason; a reasonable person would have accepted performance. (Nolan v. Whitney)

Front 9

In reviewing a satisfaction clause, why would the court use a bad faith test?

Back 9

The court will use a SUBJ standard (bad faith) if the clause involves: (1) fancy; (2) taste; (3) sensibility; (4) judgment (Furschmidt v. Hotel Abbey Holding Corp.)
If a K is designed to satisfy an individual's taste, it doesn't matter what a reasonable person would accept performance.

Front 10

Where is the satisfaction review rule applicable?

Back 10

The REVIEW RULE is part of a rule applicable to situations including buyer's satisfaction under UCC, fiduciary discretion under trust law, and plan administrator discretion under pension law.

Front 11

What is construction of condition and when do they arise?

Back 11

A constructive condition is one imposed (implied) by the court and not contained in the k. It fixes the order of performance.

When parties make covenants and a dispute arises as to who must perform first, the court IMPLIES conditions fixing order of performance.

Front 12

What is the effect of an independent promise as opposed to a dependent promise?

Back 12

A independent promise is one on which suit may be brought regardless of whether another promise has been performed.
A dependent promise is one which suit CANNOT be brought unless P has performed the other dependent promise; that is dependent promises are CONDITIONS PRECEDENT to the performance of each other.

Front 13

What is the old common law rule regarding construction of conditions?

Back 13

Courts held that all mutual promises were generally deemed independent. Suit could be brought on one w/out performance of the other (i can sue w/out having performed myself) Nichols v. Raynbred

Front 14

What is the first modern construction of condition rule?

Back 14

Mutual promises that provide for simultaneous performance (as determined by custom, if need be) are deemed by the court to be DEPENDENT promises. Kingston v. Preston

Front 15

What is the second modern construction of condition rule?

Back 15

If the time of performance for one mutual promise may arrive, and does arrive, BEFORE the other, the court will deem the mutual promises to be INDEPENDENT promises. (Price v. Van Lint - promise to loan money for constr. indep on promise to get mortgage is indep)

Front 16

What is the exception to the Second Modern Construction of Condition Rule?

Back 16

Where the performance of one promise depends on the prior performance of the other (that is, where performance of one promise is a condition precedent to perf. of the other) the court will deem the mutual promises to be dependent

Front 17

For land contract, what is the rule for Construction of Conditions?

Back 17

1. The suing party must TENDER performance and DEMAND the other's performance on law day before she may sue successfully(Ziehen v. Smith).
2. Buyer cannot sue before closing dt, b/c seller does not have to have clear title until closing dt (Cohen v. Krantz)

Front 18

What is the effect of a curable defect on a land sale contract?

Back 18

if defects are curable, no anticipatory breach. Buyer must NOTIFY seller of the defects and give REASONABLE time to fix, even if this means postponing law day. Then Buyer must TENDER & DEMAND at closing to hold seller in breach.

Front 19

What is the effect of an incurable defect on a land sale contract?

Back 19

if defects are incurable, seller anticipatorily breaches, and buyer DOES NOT have to tender and demand on law day to hold seller in breach (although buyer should to be safe). However, buyer must show that he could have performed to hold seller in anticpatory breach.

Front 20

For installment contracts, what is the rule for Construction of Conditions?

Back 20

In installment ks, each payment is an INDEPENDENT promise, seller can sue for breach of any of them when they become overdue. (Beecher v. Conradt - executory k for deed of land, buyer late, but plf waived right. Plf is now trying to sue on entire thing - crt says no b/c each installment is an indep promise)

Front 21

For missing payment times, what is the rule for Construction of Conditions?

Back 21

1. For construction ks, the court will impose a payment time of when the promisor has substantially completed performance(Steward v. Newbury)
2. For sale of goods k, the court will impose a payment time of when delivered UCC§2-307 (Tipton v. Feitner)

Front 22

To protect the exchange, what must be looked at to determine if non-breaching party must continue performance?

Back 22

Have to determine if the breach is material vs. minor breach. If it is a minor breach, the non-breaching party is not excused. If it is a material breach, the non-breaching party is excused.

Front 23

What does protecting the exchange on breach mean?

Back 23

Best if breach is looked at in two sections: (1) who is at fault in suspending or ceasing performance and (2)is the effect of nonperformance sufficient to justify the other side in responding in the manner it did?

Protecting the breach ensures that the harm was sufficient to discontinue all performance.

Front 24

What is the perfect tender rule?

Back 24

For a sale of goods k, teh seller must perform exactly as called for in the k (meet specifics of all conditions); otherwise, the buyer may rescind the k (UCC§2-601). This rule applies for LATE DELIVERIES (Oshinky v. Lorraine Mfg Co.) and delivery of incorrect amounts (Prescott & Co. v. Powles & Co)

Front 25

What is an exception to the perfect tender rule?

Back 25

1. The seller does not have to perform exactly if the goods are specifically designed for the buyer
2. The seller has a right to cure (re-tender perfectly) if the time for performance has not passed OR he had reason to believe the incorrect performance would be accepted. (Bartus v. Riccardi)

Front 26

What constitutes acceptance under the perfect tender rule?

Back 26

Acceptance of the goods occurs when the buyer indicates the buyer will take the goods in spite of any non-conformity or fails to make an effective rejection or does an act inconsistent w/seller's ownership

Front 27

What constitutes rejection under the perfect tender rule?

Back 27

An effective rejection requires a notice by buyer to seller of the ground for the non-conformity. Acceptance may be revoked: (1) if the non-conformity substantially impairs the value of the whole contract &(2)if he accepted on (a)reasonable assumption the non-conformity would be corrected or(b)w/out discovering the non-conformity if induced by (i) the difficulty of discovery the non-conformity or (ii) seller's assurances (Plateq Corp.of North Haven v. Machlett Lab,s Inc.) UCC§2-602,2-605,2-606,2-608

Front 28

What is the substantial performance rule?

Back 28

For non-goods Ks (service and construction Ks) to prevent recsission, the worker need only substantially comply with the terms of the K rather than perform exactly. If a party substantially performs, the K is enforced w/damages subtracted for: (1) Cost of replacement (2)DIV (if COC is waste)

Front 29

Will the courts allow an equitable action for non-goods ks?

Back 29

Most courts will deny equitable remedy, even though the worker has not substantially complied, in the absence of a repudiation of the contract by the worker. (Worcester Heritage Society, Inc. v. Trussell)

Front 30

What is anticipatory breach?

Back 30

An unequivocal manifestation of an intent that the repudiator will not perform the contract (Wholesale Sand & Gravel, Inc. v. Decker)

Front 31

Where there is prospective inability to perform the k, can vendee file suit for anticipatory breach?

Back 31

Where one party makes it appear that he won't be able to perform, this has the same effect of anticp. breach. However, mistaken belief of other's inability WILL NOT justify one party's non-performance. (Hathaway v. Sabin - k for use of opera house, def thought blizzard would cause antic. breach by plf, so he turned off heat, plfs' made it & sued b/c they couldn't perform)

Front 32

Can a party request assurances to avoid anticipatory breach?

Back 32

Yes - if an unsure party has reasonable grounds to doubt the other party is capable of performing, the unsure party may demand reasonable assurances that the party can perform. Failure to give reasonable assurances constitutes breach (Hathaway v. Sabin) UCC§2-609

Front 33

What is the special exception for anticipatory breach when dealing with installment contracts?

Back 33

1. When a breach goes to the whole of the k, the k is not divisible and the breach amounts to a total breach.(Cherwell-Ralli Inc. v. Rytman Grain Co. Inc)
2. UCC 2-612(3) say installment k is materially breached when there is subst breach
3. when no subst. breach in installment k, non breacher can only sue for the installments due, and the rest of k is still in force

Front 34

What is the special exception for anticipatory breach when dealing with a unilateral contract?

Back 34

Even if an antic. breach amounts to whole breach, the non-breacher can only sue for damages DUE TO DATE (installments due). Greguhn v. Mutual of Omaha Ins. Co. - to avoid continual lit., some crts devise unusual judgments (give SP, but call it damages)

Front 35

Substantial performance of a land sales k, can SP be recovered?

Back 35

Yes, for a lank k in which the seller is capable of subst performance (subst providing the Buyer w/what she expected to receive) either party may obtain a decree of SP w/abatement (purchase price reduction)