George Mason School of Law Contracts II Conditions This file may be downloaded only by registered students in my class, and may not be shared by them © F.H. Buckley fbuckley@gmu.edu 1

Kinds of Terms Consider: I promise to help you on your journey, the good Lord willin’ and the crick don’t rise. I’m going to drown 2

Kinds of terms Consider: I promise to help you on your journey provided the crick don’t rise. If the crick rises, am I in breach? 3

Kinds of terms Now consider: I promise to help you on your journey provided the crick don’t rise. So this is not a promise: let’s call it a condition If the event in question occurs, I am excused from performance 4

Kinds of terms Now consider: I promise the crick won’t rise. If the crick rises, am I in breach? 5

Kinds of conditions Now consider: I promise the crick won’t rise. Is there a problem about promising the occurrence of an event over which I have no control? 6

Kinds of conditions Now consider: I promise the crick won’t rise. Is there a problem about promising the occurrence of an event over which I have no control? Ever hear of earthquake insurance? 7

Kinds of conditions Now consider: I promise the crick won’t rise. Is there a problem about promising the occurrence of an event over which I have no control? Let’s call this a promise. Or a warranty. 8

Different kinds of terms Some are obligations, some not Other terms: definitions, recitals, conditions, etc. Promises Warranties 9

Express conditions: force majeur clauses A party is not liable for failure to perform the party's obligations if such failure is as a result of Acts of God (including fire, flood, earthquake, storm, hurricane or other natural disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalization, government sanction, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service.

When will a court to imply a condition, absent express language? What kind of gap-filling will the court do? 11

When will a court to imply a condition, absent express language? Paradine v. Jane at 77 Prince Rupert 12

How willing is a court to imply a condition, in the absence of express language? Paradine v. Jane at 77 “If a lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.” 13

How willing is a court to imply a condition, in the absence of express language? Paradine v. Jane at 77 “If a lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.” But “If a house be destoyed by tempest, or by enemies, the lessee is excused” (?!?) 14

How willing is a court to imply a condition, in the absence of express language? Paradine v. Jane at 77 “If a lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.” But “If a house be destoyed by tempest, or by enemies, the lessee is excused” (?!?) Does it matter that the leasehold interest had passed? 15

Stees p.74 What is the claim? Third and Minnesota, St Paul 16

Stees p.74 What are the possible legal outcomes? 17

Stees What are the possible legal outcomes? Builder assumes risk and is liable Owner assumes risk and is liable No one is liable 18

Stees What are the possible legal outcomes? Builder assumes risk and is liable in damages for non-completion as well as recovery of payments made and consequential losses 19

Stees What are the possible legal outcomes? Builder assumes risk and is liable in damages for non-completion If this seems hard, what might the builder do? 20

Stees What are the possible legal outcomes? Owner assumes risk And is liable for seller’s damages 21

Stees What are the possible legal outcomes? Owner assumes risk Cf. Restatement § 89 (Modification), Illustration 1: By a written contract A agrees to excavate a cellar for B for a stated price. Solid rock is unexpectedly encountered and A so notifies B. A and B then orally agree that A will remove the rock at a unit price which is reasonable but nine times that used in computing the original price, and A completes the job. B is bound to pay the increased amount. 22

Stees What are the possible legal outcomes? No one is liable The quicksand puts an end to the contract Let the loss lie where it falls 23

Stees What are the possible legal outcomes? Builder assumes risk and is liable Owner assumes risk and is liable No one is liable How would you express these difference in legal terms? 24

Stees What are the possible legal outcomes? Builder assumes risk and is liable: warranty Owner assumes risk and is liable: warranty No one is liable: condition 25

Stees What are the possible legal outcomes here? Can you tell which from the language of the contract? 26

Stees What doctrines might a court invoke to put an end to all obligations under the contracts? 27

Stees What doctrines might a court invoke to put an end to all obligations under the contracts? Mistake Frustration/Impracticability Condition 28

Stees Mistake Restatement § 152(1) Where a mistake of both parties at the time of contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake …. 29

Stees Mistake Restatement § 152(1) Where a mistake of both parties at the time of contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake …. 30

Stees Mistake No mistake if Assumption of risk Restatement § 154 A party bears the risk of mistake when the risk is allocated to him by agreement of the parties, or he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. 31

Stees Frustration or Impracticability Restatement § 261 Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary. 32

Stees Condition Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. 33

Stees Condition Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. Restatement § 225(3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that the condition occur 34

Stees What did the court decide? 35

Stees What did the court decide? The contractor must perform his engagement, unless prevented by an Act of God, the law, or the other party 36

Stees What did the court decide? A presumption against conditions that excuse performance The “sanctity of contracts” “The promisor should provide against contingencies” 37

Stees What did the court decide? The contractor must perform his engagement, unless prevented by an Act of God, the law, or the other party How would you define an Act of God? 38

Stees What did the court decide? He must perform his engagement, unless prevented by the act of God, the law, or the other party If the parties had bargained for an excuse, the courts would honor this. What if we thought we knew how they would have bargained had they put their minds to it? 39

Stees What did the court decide? He must perform his engagement, unless prevent by the act of God, the law, or the other party If the parties had bargained for an excuse, the courts would honor this. What if we thought we knew how they would have bargained had they put their minds to it? And just how do you think they would have bargained? 40

Stees What did the court decide? Quicksand as an informational problem Who was in the best position to discover or know of the problem? 41

Stees What if one party is contractually bound to perform according to specifications that are defective? U.S. v. Spearin at 78 42

Stees If contractors are liable for breach of promise, what remedies might be available to plaintiff homeowners? 43

Stees If contractors are liable for breach of promise, what remedies might be available to plaintiff-homeowners? Damages for breach (give plaintiff the benefit of the bargain less the contract price) 44

Stees If contractors are liable for breach of promise, what remedies might be available to plaintiff-homeowners? Damages for breach (give plaintiff the benefit of the bargain less the contract price) Set aside (rescind) the contract (absolve plaintiff from paying the price) on a breach of a condition 45

Stees But observe that the condition was also a promise 46

Now it gets confusing So the term condition can mean two entirely different things That wasn’t very smart, was it? 47

Two kinds of conditions Non-promissory conditions are not promises and excuse performance by either party on their occurrence No right to claim for damages

Two kinds of conditions Promissory Conditions are warranties (for which the innocent party may receive consequential damages on breach) and conditions (which excuse performance by the innocent party)

Different kinds of conditions Some are obligations, some not Non-promissory Conditions Promissory Conditions 50

Promissory conditions: The example at 615 I agree to sell you my dog for $400, delivery at your house on Thursday. I come to your house with my dog on Thursday. You tell me you want it but that you can’t pay me till Saturday Do I have to deliver the dog on Thursday?

Promissory conditions UCC § 2-511(1). Unless otherwise agreed, tender of payment is a condition to the seller's duty to tender and complete any delivery.

Promissory conditions UCC § 2-511(1). Unless otherwise agreed, tender of payment is a condition to the seller's duty to tender and complete any delivery. This is a condition (i.e., seller doesn’t have to deliver if buyer doesn’t pay)

Promissory conditions UCC § 2-511(1). Unless otherwise agreed, tender of payment is a condition to the seller's duty to tender and complete any delivery. And also a promise (i.e., a warranty in which seller is in breach if he doesn’t deliver when buyer pays)

Promissory conditions Turn this around I agree to buy your dog for $400 at your house on Thursday. I come to your house with $400 on Thursday, but you tell me you won’t give me the dog till Saturday Do I have to pay you on Thursday?

Promissory conditions UCC § 2-507(1). Tender of delivery is a condition to the buyer's duty to accept the goods

What does “condition” mean here? Not every promise is a promissory condition, but only those promises which must be performed as a condition of the other party’s duty of performance Tender or delivery and payment as mutual conditions Both parties to stand “ready, willing and able” to perform

Promissory and non-promissory conditions In what respect do promissory and non-promissory conditions resemble each other?

Promissory and non-promissory conditions In what respect do promissory and non-promissory conditions resemble each other? The non-breaching party is excused from performance of a promissory condition, and both parties are excused on the occurrence of a non-promissory condition

Promissory and non-promissory conditions In what respect do promissory and non-promissory conditions NOT resemble each other?

Promissory and non-promissory conditions In what respect do promissory and non-promissory conditions NOT resemble each other? The breaching party is liable for damages on breach of a promissory condition, but not on the occurrence of a non-promissory condition

What about non-sale of goods When does a promise amount to a promissory condition? 62

What about non-sale of goods § 234(1). Order of Performances--Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate the contrary. 63

What about non-sale of goods § 234(1). Order of Performances Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate the contrary. I.e., a presumption of promissory conditions 64

What about non-sale of goods § 234(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary. 65

What about non-sale of goods § 234(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary. So he has to do everything before the other party has to perform 66

What about non-sale of goods § 234(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary. “Work before pay” 67

Promissory conditions When I agree to build you a house, when do you have to pay? 68

Work before Pay Stewart v. Newbury at 619 What did the contract say about progress payments? 69

Work before Pay Stewart v. Newbury at 619 What did the contract say about progress payments? The presumption: If you want progress payments, you have to bargain for them 70

The duty to be ready, willing and able Bell v. Elder at 616 71

Bell v. Elder What were the obligations of the parties as to performance? 72

Bell v. Elder What were the obligations of the parties as to performance? Seller to provide the water, power and roads Buyer to pay a hook-up fee and apply for a building permit 73

Bell v. Elder Elders land Bell Purchaser Bell sues to recover deposit because Elders failed to supply water 74

Bell v. Elder Was the buyer acting opportunistically? 75

Bell v. Elder Here there was no order as to when each party should do their work and “work before pay” applied to both parties Presumption of simultaneous performances 76

Divisibility Can a party in breach of a promissory condition resist forfeiture by asserting that conditions are divisible? 77

Divisibility Suppose that a builder contracts to build seven motels in seven different cities, the same charge of $100K for each Builder defaults on last motel. Could buyer rescind on all? 78

Divisibility Restatement § 240. If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performance of his part of such a pair has the same effect on the other’s duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised. 79

Divisibility Restatement § 240. If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performance of his part of such a pair has the same effect on the other’s duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised. 80

Divisibility Same case, but now: All motels built to the same specifications Builder to be paid $700K for the seven motels. 81

Divisibility Same case, but now: Restatement § 240, illustration 5 All motels built to the same specifications Builder to be paid $7M for the seven motels Restatement § 240, illustration 5 82

John. v. United Advertising 620 Are highway signs different? Englewood CO 83

John v. United Advertsing Are highway signs different? Is this like losing your GPS signal at a crucial point? “Take the first available U-Turn” 84

John v. United Advertsing What are the options for the court? 85

John v. United Advertsing What are the options for the court? Set aside the entire contract Set aside the severable parts of it 86

John v. United Advertsing A “material failure” of the entire contract? Restatement § 237. Except as stated in § 240, it is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time. 87

John v. United Advertsing A severable contract Sever the breaches and enforce as to the rest? Supposing the contract had omitted the divisibility clause? 88

Divisibility in the UCC UCC § 2-307 Delivery in Single Lot or Several Lots. Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot. A presumption of non-divisibility 89

Divisibility in the UCC UCC § 2-307 Delivery in Single Lot or Several Lots. Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot. But this might be rebutted if separate deliveries contemplated 90

UCC § 2-612: Installment Contracts § 2-612(1) An "installment contract" is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause "each delivery is a separate contract" or its equivalent 91

UCC § 2-612: Installment Contracts § 2-612(2) The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents 92

UCC § 2-612: Installment Contracts § 2-612(3) Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. 93

Promises vs. Conditions Promissory Conditions Non-promissory Conditions Bare promises, warranties 94

Three different kinds of terms Non-promissory conditions On its occurrence both parties excused Promissory conditions On its breach, innocent party may either rescind or sue for damages Bare promises or warranties On its breach, innocent party can sue for damages, but not rescind 95

Howard at 625 96

Howard What are the farmer’s remedies if he did not comply with clause 5(b)? 97

Howard What are the farmer’s remedies if he did not comply with clause 5(b)? Could he be sued for failure to comply with it? 98

Howard What are the farmer’s remedies if he did not comply with clause 5(b)? Could he be sued for failure to comply with it? So a non-promissory condition 99

Howard And for non-compliance with Clause 5(f)? 100

Howard Qu. Clause 5(f) If this is not met, Can Howard still recover? If this is not met, is Howard liable in damages? 101

Howard What are the options? 102

Howard What are the options? Bare promise, warranty: Not a condition precedent, but a promise that the event will happen, breach of which gives FCIC a damages remedy at best Promissory condition: A promise that the event will happen plus non-occurrence excuses the other party from performance Condition precedent: No promise that event will happen, but non-performance excuses both parties 103

Howard What are the options? Held a Bare promise 104

What are the presumptions in the Restatement? Restatement § 227(1) In resolving doubts as to whether an event is made a condition of an obligor's duty, and as to the nature of such an event, an interpretation is preferred that will reduce the obligee's risk of forfeiture, unless the event is within the obligee's control or the circumstances indicate that he has assumed the risk. 105

What are the presumptions in the Restatement? Restatement § 227(1) In resolving doubts as to whether an event is made a condition of an obligor's duty, and as to the nature of such an event, an interpretation is preferred that will reduce the obligee's risk of forfeiture, unless the event is within the obligee's control or the circumstances indicate that he has assumed the risk. So a presumption against promissory and non-promissory conditions 106

What are the presumptions in the Restatement? Restatement § 227(2) Unless the contract is of a type under which only one party generally undertakes duties, when it is doubtful whether (a) a duty is imposed on an obligee that an event occur, or (b) the event is made a condition of the obligor's duty, or (c) the event is made a condition of the obligor's duty and a duty is imposed on the obligee that the event occur, (a) = bare promise by obligee (b) = non-promissory condition (c) = promissory condition by obligee 107

What are the presumptions in the Restatement? Restatement § 227(2) Unless the contract is of a type under which only one party generally undertakes duties, when it is doubtful whether (a) a duty is imposed on an obligee that an event occur, or (b) the event is made a condition of the obligor's duty, or (c) the event is made a condition of the obligor's duty and a duty is imposed on the obligee that the event occur, the first interpretation is preferred if the event is within the obligee's control. I.e., bare promise 108

Conditions precedent and subsequent What’s the difference? 109

The special case of insurance contracts See Rohde at 631 What’s the difference? 110

Defining Conditions Conditions precedent: The obligations of the parties will not arise if x has occurred. Conditions subsequent: The obligations of the parties are suspended if x occurs.

Conditions precedent and subsequent Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. 112

Conditions precedent and subsequent Conditions subsequent Restatement § 230 “the occurrence of an event is to terminate an obligor’s duty” Cf. Restatement § 224 cmt e 113

Conditions precedent and subsequent Conditions subsequent Restatement § 230 “the occurrence of an event is to terminate an obligor’s duty” But not under 230(2) if the obligor is in breach of duties of good faith and fair dealing or no undue hardship to obligor 114

What are the presumptions in the Restatement? Restatement § 227(3) An interpretation is preferred under which an event is a condition of an obligor’s duty is preferred over an interpretation under which the non-occurrence of the event is a ground for discharge of that duty after it becomes a duty to perform That is, a presumption of a condition precedent over a condition subsequent 115

Conditions precedent and subsequent Gray v. Gardner at 633 116

Conditions precedent and subsequent Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year Buyer to pay a premium if a shortage 117

Conditions precedent and subsequent Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year If a condition precedent, onus on seller to show that the condition occurred 118

Conditions precedent and subsequent Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year If a condition subsequent, onus on buyer to show the condition occurred 119

Conditions precedent and subsequent Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year Held a condition subsequent: onus on defendant buyer who wants out of the contract 120

Attorney-approval clauses at 635 I agree “subject to my lawyer’s approval.” Gaglia v. Kirchner at 635 If a buyer has an attorney approval clause, can the seller back out before such approval is given? 121

Recall the different kind of terms in Howard Promissory Conditions Bare promises, warranties Non-promissory Conditions 122

How do you tell them apart? When a condition precedent and when a promissory condition?

How do you tell them apart? When a condition precedent and when a condition subsequent?

How do you tell them apart? When a promissory condition and when a warranty?

Promises and Conditions Conditions Precedent Promissory No liability if non-occurrence Liability if non-occurrence Restatement § 224 Restatement § 225(3)

Promises and Conditions Promises Conditions Bare Promises (Warranties)

Promises and Conditions Conditions Warranties Election Damages Damages only Forfeiture

When is compliance excused? When is a condition no longer operative? When is performance of a promise excused?

Modification, Waiver, Estoppel: Clark v. West at 636 The dirty little secret of textbook publishing revealed 130

Modification, Waiver, Estoppel Distinguish Modifications, waiver, estoppel 131

Modification, Waiver, Estoppel Modifications are bilateral agreements to vary obligations under a contract Promises are modified 132

Modification, Waiver, Estoppel Modifications are bilateral agreements to vary obligations under a contract Waivers are unilateral acts by one party to excuse another’s performance of an obligation Conditions are waived 133

Modification, Waiver, Estoppel Modifications are bilateral agreements to vary obligations under a contract Waivers are unilateral acts by one party to excuse another’s performance of an obligation (Promissory) Estoppel bars a promisor from enforcing a right where he knows that a promisee has detrimentally relied on him. 134

Modification, Waiver, Estoppel at common law Agreement Required? Reliance required? Modification Waiver Estoppel

Modification, Waiver, Estoppel at common law Agreement Required? Reliance required? Modification yes no Waiver Estoppel

Modification, Waiver, Estoppel at common law Agreement Required? Reliance required? Modification yes no Waiver Estoppel

Modification, Waiver, Estoppel at common law Agreement Required? Reliance required? Modification yes no Waiver Estoppel

Clark v. West What was the promise? Now you know why textbooks are so long. 139

Clark v. West What was the promise? Facts alleged on 636 Now you know why textbooks are so long. Facts alleged on 636 Would this be enough for an estoppel? A waiver? 140

Clark v. West The bias against forfeiture—with conditions so easily waived 141

UCC § 2-209. Modification, Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

UCC § 2-209. Modification, Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

UCC § 2-209. Modification, Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

UCC § 2-209. Modification, Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

UCC § 2-209. Modification, Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

UCC § 2-209. Modification, Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

Wisconsin Knife Works at 639 What was the contract?

Wisconsin Knife Works at 639 What was the contract? Metal Crafters Spade bit blank Wisconsin Spade bit Black & Decker Spade Bits

Wisconsin Knife Works What was the contract? Wisconsin orders 280,000 blanks from Metal Crafters in Aug-Sept 1981 for delivery in Oct-Nov New purchase orders in July 1982 Seller not able to deliver until December 1982—13 months late Jan 1983—144,000 blanks produced but Wisconsin rescinds 150

Wisconsin Knife Works What was the evidence of modification and what are the problems under the UCC? 151

Wisconsin Knife Works What was the contract? Wisconsin orders 280,000 blanks from Metal Crafters in Aug-Sept 1981 for delivery in Oct-Nov New purchase orders in July 1982 Seller not able to deliver until December 1982—13 months late Jan 1983—144,000 blanks produced but Wisconsin rescinds 152

The UCC: Consideration is out 2-209(1) An agreement modifying a contract within this Article needs no consideration to be binding. Posner: Replaced by good faith § 1-304. Obligation of Good Faith. Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement.

What was the problem with UCC 2-209(2)? A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

What was the problem with UCC 2-209(2)? Was there a signed modification here? Why would Wisconsin have wanted a “no modification” clause and why are they standard?

What does the proviso do? A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

Posner on modifications How did Posner decide on modifications?

Posner on waiver How did Posner decide on waiver?

How did Posner decide on Waiver? 2-209(4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.

Wisconsin Knife Works When does something which fails as a modification succeed as a waiver in 2-209(4)? “can operate as a waiver” 160

Wisconsin Knife Works Does something which fails as a modification always succeed as a waiver in 2-209(4)? 161

Wisconsin Knife Works When does something which fails as a modification succeed as a waiver in 2-209(4)? Posner: so as not to render 2-209(2) otiose, let’s add a reliance requirement to 2-209(4) 162

Wisconsin Knife Works When does something which fails as a modification succeed as a waiver in 2-209(4)? Posner: so as not to render 2-209(2) otiose, let’s add a reliance requirement to 2-209(4) But is 2-209(5) then otiose? 163

Wisconsin Knife Works But is 2-209(5) then otiose? 2-209(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver. 164

UCC § 2-209. Modification, Rescission and Waiver (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded… (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) … it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

Wisconsin Knife Works Why does Easterbrook dissent? 166

Wisconsin Knife Works Why does Easterbrook dissent? Waiver has never required reliance 167

Wisconsin Knife Works Why does Easterbrook dissent? Waiver has never required reliance Waiver in 2-209(4) might encompass either past or future performance Estoppel in 2-209(5) refers only to future (executory) performance 168

Wisconsin Knife Works UCC § 1-107. Waiver or Renunciation of Claim or Right After Breach. Any claim or right arising out of an alleged breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party. 169

Wisconsin Knife Works So how would Easterbrook prevent 2-209(2) from being otiose? 170

Wisconsin Knife Works So how would Easterbrook prevent 2-209(2) from being otiose? A stricter standard of proof as to intention? Suzuki at 646 171

Avoiding forfeiture: Common Law Agreement Required? Reliance required? Modification yes no Waiver Estoppel

Avoiding forfeiture: UCC Agreement Required? Reliance required? Modification no consideration needed 2-209(1) Good Faith in § 1-304 But no modification clause enforced 2-209(2) no Waiver Estoppel

Avoiding forfeiture: UCC Agreement Required? Reliance required? Modification Waiver No Yes: Posner No: Easterbrook, tho’ a bar to retraction under 209(5) Estoppel

Avoiding forfeiture: UCC Agreement Required? Reliance required? Modification Waiver Estoppel No Yes