Download - Conditions Being What They Are .
![Page 1: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/1.jpg)
Conditions Being What They Are . . .
Contracts – Prof. Merges
April 18, 2011
![Page 2: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/2.jpg)
Agenda
• Language of conditions
• Effect of a condition – discharge of duty
• Interpretation issues
![Page 3: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/3.jpg)
![Page 4: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/4.jpg)
Lutinger v. Rosen
![Page 5: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/5.jpg)
Lutinger v. Rosen
• Facts
• History
![Page 6: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/6.jpg)
§ 224. Condition Defined
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.
![Page 7: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/7.jpg)
A condition is an event . . . which must occur . . . before performance under a contract becomes due.
![Page 8: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/8.jpg)
Formation Condition Performance
![Page 9: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/9.jpg)
Formation Condition Performance
![Page 10: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/10.jpg)
Formation Condition Performance
Nonoccurrence of condition excuses performance
![Page 11: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/11.jpg)
Luttinger
• Very common provision: financing term
• What is at stake when the court asks, “is it a condition?”
![Page 12: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/12.jpg)
What is Defendant (seller’s) argument?
“The defendants claim that the plaintiffs did not use due diligence in seeking a mortgage within the terms specified in the K.”
![Page 13: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/13.jpg)
Effect of nonoccurrence of condition
If the plaintiff failed to obtain financing after using reasonable efforts, “all sums paid under the K would be refunded and the K terminated”
-- P. 692
![Page 14: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/14.jpg)
Internatio-Rotterdam, Inc. v. River Rice Mills, Inc.
![Page 15: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/15.jpg)
![Page 16: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/16.jpg)
![Page 17: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/17.jpg)
![Page 18: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/18.jpg)
Internatio-Rotterdam, Inc. v. River Rice Mills, Inc.
• Facts
• History
![Page 19: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/19.jpg)
What did the K say?
![Page 20: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/20.jpg)
What did the K say?
• “FAS Lake Charles and/or Houston, Texas”
• Shipment: “December, 1952, with two weeks call from buyer”
• LOC, payable vs dock receipts
![Page 21: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/21.jpg)
![Page 22: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/22.jpg)
![Page 23: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/23.jpg)
![Page 24: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/24.jpg)
Merges, Toward a Computerized System for Negotiating Ocean Bills of Lading, 6 J. L. & Commerce 23 (1985) (with Glenn Reynolds).
![Page 25: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/25.jpg)
What was the “condition” question in the case?
![Page 26: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/26.jpg)
What was the “condition” question in the case?
• Was seller’s duty to perform conditioned on notice on or before Dec 17?
![Page 27: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/27.jpg)
What is at stake?
Whether the giving of shipment instructions on or before December 17 was required in order for the defendant/seller to have to perform, i.e., deliver rice to the buyer
![Page 28: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/28.jpg)
In the language of conditions . . .
Whether the buyer’s giving of shipment orders was A CONDITION of the seller’s duty to perform (i.e., deliver the rice)
![Page 29: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/29.jpg)
But the K says that the buyer must give instructions . . .
DUTY vs. CONDITION
“notice of shipping instructions before Dec. 17 was not merely a duty of the [buyer] . . .”
![Page 30: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/30.jpg)
Duty vs. Condition
Mere duty: a contractual obligation which, if not performed, may result in damages
Condition: an event, the nonoccurrence of which EXCUSES the other party from performance
![Page 31: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/31.jpg)
Mere duty (cont’d)
If a mere duty is breached, damages may follow but the other party – the one owed the duty – MUST CONTINUE TO PERFORM
![Page 32: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/32.jpg)
Example
• P. 700: Section (B)
• “a duty to sail with the next wind”
• Not sailing will NOT excuse the sender from paying for shipment– BUT the shipping co. may owe some damages
for sailing late . . .
![Page 33: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/33.jpg)
Peacock Construction Co. v. Modern AC Inc.
![Page 34: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/34.jpg)
![Page 35: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/35.jpg)
Peacock Construction Co. v. Modern AC Inc.
• Facts
• History
![Page 36: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/36.jpg)
Peacock: The K
Peacock [GC] will make final payment to subcontractors [Modern] “within 30 days after the completion of the work included in this subcontract, written acceptance by the Architect and full payment therefor by the Owner”
P. 701
![Page 37: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/37.jpg)
Owner – contractor – sub K
• What was the “condition” argument in the case?
![Page 38: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/38.jpg)
• Owner went bankrupt, never made final payment to Peacock
• Peacock will make final payment “within 30 days of . . . Full payment by the Owner . . .”
![Page 39: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/39.jpg)
Holding
• Owner pmt to GC NOT a condition of GC’s duty to pay subs
![Page 40: Conditions Being What They Are .](https://reader035.vdocuments.net/reader035/viewer/2022062501/56815b7b550346895dc9774f/html5/thumbnails/40.jpg)
Conflicting interpretations
• Condition: no payment from Owner, GC has no obligation to pay subcontacors
Discharge: they are “off the hook”
• OR: merely a “convenient time at which to make payment”; not a requirement for GC to have to pay