## Facts

- Richard's 5 & 10, Inc. (Richard's) owned several discount variety stores operating as REO Discount Stores.
- Herbert Jackson managed two REO stores and reached an oral agreement to buy the two stores’ inventory, fixtures, and goodwill for about $60,000.
- The parties signed a written agreement on January 30, 1975, setting a February 18, 1975 closing and requiring a down payment; one of Jackson’s down-payment checks was returned for insufficient funds, and Jackson did not appear for the scheduled closing.
- On February 28, 1975, the parties signed a second written agreement extending the closing to March 31, 1975.
- Under the second agreement, Jackson was required to (1) pay $2,000 in cash and (2) execute a deed to his home as security, to be recorded by Richard's if Jackson defaulted.
- The second agreement also included express conditions requiring Jackson to provide proof that he paid specified debts and proof that he applied for a Small Business Administration (SBA) loan.
- Jackson did not provide the required proofs.
- Richard's seized the stores, sold merchandise, and recorded the deed to Jackson’s home.
- Jackson sued in equity seeking an injunction to prevent transfer or encumbrance of his home, arguing his breach was not material and that forfeiture of his home was unjust because he had substantially performed.
- The trial court denied injunctive relief and entered a money judgment for Richard's for $10,000. Jackson appealed.

## Issues

1. Does the doctrine of substantial performance excuse a party’s failure to satisfy express conditions in a contract so as to prevent the other party from enforcing the contract’s agreed remedy (including recording a deed given as security)?
2. Did the trial court properly deny equitable relief and award Richard's monetary damages based on Jackson’s default under the second agreement?

## Decision

- The Superior Court of Pennsylvania affirmed.
- The court held that substantial performance does not excuse noncompliance with express conditions in a contract.
- Because Jackson failed to satisfy the contract’s express conditions requiring proof of payment of specified debts and proof of an SBA loan application, Jackson was in default under the second agreement.
- Given that default, Richard's was permitted to enforce the security arrangement the parties negotiated, including recording the deed to Jackson’s home.
- The court upheld the trial court’s denial of an injunction and left in place the $10,000 damages award to Richard's.

## Legal Principles

- Substantial performance may permit recovery despite minor defects in performance of contractual promises, but it does not substitute for strict satisfaction of an express condition.
- An express condition—an event that the contract plainly states must occur before a party’s duty to perform (or before a party loses protection against a stated remedy)—must be satisfied as written unless excused on a recognized basis.
- Courts generally enforce clear contractual risk-allocation and security terms, even when enforcement is harsh, where the terms were part of the parties’ bargain and the triggering default occurred.
- A party seeking equitable relief against a bargained-for remedy must show a basis for equity to intervene; where default is established under express conditions, equity will not rewrite the agreement to provide relief from the agreed consequences.

## Conclusion

The Superior Court held that Jackson could not rely on substantial performance to avoid the results of failing to meet the contract’s express conditions requiring proof of debt payments and an SBA loan application. Because those conditions were not satisfied, Jackson was in default under the second agreement, and Richard's could enforce the agreed security remedy by recording the deed to Jackson’s home; the court therefore affirmed the denial of injunctive relief and the $10,000 damages award.


Jackson v. Richard's 5 & 10 Inc., 433 A.2d 888 (1981)