Contracts April 19 2016 Conditions Express Constructive Express conditions Clear conditional language It shall be a condition of buyers performance under this contract that buyer obtain suitable financing for the purchase of Owners house ID: 573284
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Constructive Conditions
Contracts
April 19, 2016Slide3
Conditions
Express
ConstructiveSlide4
Express conditions
Clear conditional language
“It shall be a condition of buyer’s performance under this contract that buyer obtain suitable financing for the purchase of Owner’s house”Slide5
Express conditions (cont’d)
Other language that creates a condition
E.g.,
Internatio-Rotterdam
: “delivery in December with 2 weeks call”Slide6
Express conditions
Language creating a condition
Must be seen in light of all facts and circumstances: CONTEXT matters
Presumption
against
construing language as a condition:
Peacock
as an example of whySlide7
Mitigating Doctrines
Prevention
: Luttinger calls bank, says “do not approve our loan”
Waiver
: Luttinger says “Don’t worry about the loan rate, we will buy”
Interpretation to avoid a forfeiture:
Peacock
;
Jacobs & YoungSlide8
Constructive Conditions
Explicit condition:
(
Luttinger
): “subject to and conditional upon”
Constructive condition:
When a court believes the same effect as an explicit condition – discharge –
is warranted by the facts, even though there is no express condition in the KSlide9
Terminology
“Independent Covenants” – old Yearbook discussion from 1500
Two interlocking promises; each must be treated as independentSlide10
Uncle
NephewSlide11
Uncle
Nephew
“K-1”
“K-2”Slide12
“Dependent promises”
My duty to perform
depends
upon your prior performance
If you do not perform, my remedy is
nonperformance
, as opposed to suit for breachSlide13
Mansfield’s 3 categories –
Mutual and independent
“Conditions and dependent”
Mutual, to be performed at the same timeSlide14
Category 3: Mutual, performed at same time
Sometimes called “simultaneous”
Only difference:
Party asserting nonoccurrence must show (1) Nonoccurrence,
PLUS (2) that he/she was “ready, willing and able to perform”Slide15
Category 3: typical at closing
If seller has bad title at closing, buyer must show (1) good title was a condition, and (2) buyer was “ready, willing and able” to perform at closing
No one will lend to buyer? No excuse, no remedy in breachSlide16
Ready, Willing and Able doctrine
Hellrung v. Hoechst
, 384 SW2d 561 (Mo. 1964)
Buyer who says “I will give you the money if you will give me title,” did not have money in possession:
no discharge for buyer,
no breach by sellerSlide17
Substantial performance
Described as a “mitigating doctrine”
What does it “mitigate”?
The harsh impact of a constructive conditionSlide18
Constructive condition not met . . .
Results in excused performance on the part of the contracting party in whose favor the constructive condition runs
His may be harsh; may work a “forfeiture” in the words of the older casesSlide19
What is forfeited?
The right to compensation for your performance
The money due to you from having
almost precisely
performed (and hence complied with the constructive condition)Slide20
What is “substantial performance”?
Step 1: There is a constructive condition – A excused from performance when B’s performance not perfectly rendered
Step 2: B
almost completely
complied with the condition; failed in a small or minor respectSlide21
Jacob & Youngs v. Kent
Stated in terms of constructive conditions:
The completion of the house with all specifications complied with, including Reading pipe, is a constructive condition of the owner’s obligation to perform
Condition not met; owner need not perform (make final pmt)Slide22
Kirkland v. Archbold
Restitution: another mitigating doctrine
Why needed here?
Failure to comply with a constructive condition; K performance excusedSlide23
Restitution
A “mitigating” remedy – mitigates the harshness of the constructive condition doctrine
Otherwise, party in whose favor a condition runs can keep all benefits if condition not met in some minor respectSlide24
Kirkland
Plaintiff/builder wanted to be excused from continued performance, and collect the 1
st
$1000 payment
Not permitted; K not “severable” (1st pmt not a constructive condition)
But: restitution for part performance