Maturity of obligations (conditions)

Conditions vs. covenants Conditions allocate risk in the event of breach and determine breach. Vague language is construed as a covenant.

Types 1. Precedent Contingency must be satisfied before absolute present duty to perform the modified or dependent promise. Shifts risk of breach to other party. "I am not liable on this promise until …" or "I’ll do B, provided that you do A" (A is both a covenant and a condition) If the condition is to be satisfied by the subjective personal satisfaction (taste, aesthetics) of a party, in good faith, then the test is whether a reasonable person would be satisfied. Exception: K names specific third party expert to make a good faith professional approval, if that person withholds approval in good faith, condition not satisfied.

2. Concurrent 3. Subsequent Contingency must be satisfied simultaneously with maturity of liability. Usually implied-at-law, not express. Used to regulate performance when parties did not otherwise specify. If performance obligations are physically capable of being performed at the same time, then mutual tenders (ready, willing and able to perform) are required. 3. Subsequent Always express, never implied. Operates as an affirmative defense to breach. Occurrence will extinguish a present liability to perform promise. Example: Your attempted assignment of rights extinguishes my liability.

Forms Express Implied-in-fact Inferred from physical necessity and reasonable assumptions of the parties (you can’t paint a house that just burned down – although that would not cause a breach because no fault). Promise to cooperate in good faith in receiving other party’s performance.

3.Implied-at-law(constructive): Applies when parties failed to fix an order of performance. If performance can physically be rendered concurrently, then performance is a condition concurrent. If one party’s performance takes time, and other party’s can be performed quickly, the first party’s performance is a condition precedent. If terms set date for performance by one party but not the other, first party must perform as condition precedent to other party’s performance. Substantial performance is adequate. Conditions of exchange: Excuse or suspension by material breach Immaterial breach and substantial performance Constructive conditions of non-prevention, non-hindrance, and affirmative cooperation

Has the condition been satisfies? Express condition must be satisfied precisely. Constructive conditions require only substantial performance.

Has the condition been excused? Doctrine of prevention: Party can’t hinder other party’s performance. Waiver: Once covenant or condition is knowingly waived, it cannot be reclaimed. Express or implied from behavior. Equitable estoppel: Can be reversed before other party relies to his detriment.

Prospective inability to perform; effect on other party. 1. Anticipatory repudiation Definite, unyielding refusal to perform is treated as a breach, even before liability to perform matures. His conditions precedent are excused, my covenants are discharged, immediate COA for breach exists. Or, I can affirm the K in face of anticipatory breach by notice that I am awaiting your repentance or performance under the K.

2. Voluntary disablement Credible information learned that other party has taken some action which puts his performance beyond his control. All covenants of non-breaching party discharged; non-breeching party must bring immediate COA. Breaching party cannot remedy. 3. Failure to give adequate assurances of performance (UCC only) In face of reasonable insecurity that merchant seller is unlikely to be able to perform, you can make written demand for adequate assurances of performance, and unless merchant gives adequate assurances within commercially reasonable time, you can treat as present breach.

Has nonperformance been excused? 1. Objective impossibility Subsequent to formation of bargain Physical or legal barriers Objective: No person on the face of the earth could perform. 2. Commercially impracticable. Cannot be performed except by economic expenditure grossly beyond what is commercially reasonable. Unanticipated by either party at formation date. 3. Frustration of purpose. Subsequent to formation of bargain, circumstances are such that your performance is of no utility to me, and therefore I seek to have my performance to you excused.

Breach 1. UCC Duty to promptly inspect goods tendered. Prompt and specific notice of nonconformance. Perfect tender rule Buyer may reject all, some or none of the goods for any nonconformity, and pay for goods accepted. If seller tendered early, he has until K date deadline to perfectly perform (unless he states he won’t), and nonbreaching party must cooperate. If seller got most of the goods, he can request extra time and buyer has to cooperate, but doesn’t have to prejudice commercial interests. Failure to follow above procedures = waiver.

2. Material 3. Minor 4. Evaluation Essence of the bargain Breach results in immediate COA. Common Law: Non breaching party must stop his performance, and must mitigate damages. 3. Minor Impaired bargain only in insignificant sense re: quality, quantity or time. Nonbreaching party must continue with performance. Sue for provable damages. 4. Evaluation Commercially reasonable expectations of the parties Consequences of breach Effect of consequences on expectations

5. Remedies (focus) ① Money damages Loss of bargain (expectation): Puts non-breaching party in position had there been full and timely performance. Measured by K-FMV. Damages must have been directly caused by breach. Costs of entering into K can’t be recovered because they weren’t caused by breach. Damages must have been reasonably foreseeable at time of bargain as the probable damages resulting from breech of the terms of the K (or damages resulting from special needs of party known to breaching party). has duty to reasonably mitigate damages. Losses must be proven to a certain dollar amount.

②Nominal $1 money damages. Equity, if no adequate remedy at law Specific performance Injunction against breach Declaratory judgment Restitution and reimbursement Reliance: Out of pocket losses reimbursed, based on theory of promissory estoppel.

④ Liquidated damages Cannot be a penalty clause, which is void against public policy. Breach must have been anticipated, and foreseen that legal damages would not be sufficient because amount would be difficult to estimate, and therefore liquidated damages are adopted as a remedy. Damages must be remedial in nature: Not to deter the person from breech.