Learning Outcomes
After reading this article, you will be able to identify and distinguish between express and constructive (implied) conditions in contract law, explain the requirements for satisfaction of conditions, apply the doctrine of substantial performance, and determine when nonperformance is excused or a contract is discharged. You will be equipped to analyze MBE-style questions on conditions, breach, and discharge.
MBE Syllabus
For MBE, you are required to understand the rules governing the performance of contractual obligations, the role of conditions, and the consequences of breach or nonperformance. This article covers:
- The definition and operation of express and constructive (implied) conditions.
- The distinction between conditions precedent, concurrent, and subsequent.
- The doctrine of substantial performance and its application.
- The effect of failure or nonoccurrence of a condition.
- The ways in which conditions may be excused or waived.
- The consequences of breach of condition versus breach of promise.
- The discharge of contractual duties due to nonperformance, waiver, or other legal doctrines.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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Which of the following best describes a constructive condition?
- A condition expressly stated in the contract.
- A condition implied by law to ensure fairness.
- A condition that excuses all performance.
- A condition that cannot be waived.
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If a party fails to strictly satisfy an express condition precedent, what is the usual result?
- The other party's duty to perform is excused.
- The contract is automatically modified.
- The breaching party may recover full contract price.
- The condition is ignored if performance is substantial.
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Under the doctrine of substantial performance, which of the following is true?
- It applies to all contracts, including those for the sale of goods.
- It excuses performance of express conditions.
- It allows recovery if a constructive condition is nearly, but not perfectly, satisfied.
- It requires strict compliance with every term.
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Which of the following is NOT a way in which a condition may be excused?
- Waiver by the protected party.
- Hindrance or failure to cooperate.
- Substantial performance of an express condition.
- Actual breach by the other party.
Introduction
Contracts often make one party’s duty to perform dependent on the occurrence of an event, known as a condition. Understanding how conditions operate is essential for determining when a party’s performance is due, when nonperformance is excused, and when a contract is discharged. This article explains the difference between express and constructive conditions, the consequences of their failure, and the doctrine of substantial performance.
Key Term: Condition An event, not certain to occur, which must occur before a party’s contractual duty becomes due or is discharged.
Types of Conditions
Conditions can be express (stated in the contract) or constructive (implied by law). They are further classified by their timing and function.
Express Conditions
An express condition is one that the parties have specifically included in their agreement, often using language such as “on condition that,” “provided that,” or “if and only if.” Express conditions must be strictly satisfied unless excused.
Key Term: Express Condition A condition explicitly stated in the contract, requiring strict compliance for the duty to arise or continue.
Constructive (Implied) Conditions
A constructive condition is not stated in the contract but is imposed by law to ensure fairness and the orderly exchange of performances. The most important constructive condition is the constructive condition of exchange—the principle that one party’s performance is dependent on the other’s performance.
Key Term: Constructive Condition A condition implied by law to ensure justice, requiring substantial rather than strict performance.
Classification by Timing
- Condition Precedent: Must occur before a duty to perform arises.
- Condition Concurrent: Must occur simultaneously with the other party’s performance.
- Condition Subsequent: Terminates an existing duty if it occurs after performance has begun.
Key Term: Condition Precedent An event that must occur before a party’s contractual obligation becomes due.
Key Term: Condition Subsequent An event that, if it occurs after performance has begun, extinguishes a party’s duty to perform.
Effect of Conditions
If a condition precedent or concurrent is not satisfied, the corresponding duty does not arise. If a condition subsequent occurs, the duty is discharged. The failure of an express condition generally excuses the other party’s performance, unless the condition is excused or waived.
Worked Example 1.1
A contract states: “Seller will deliver goods to Buyer on condition that Buyer secures financing by June 1.” Buyer fails to obtain financing by June 1. Is Seller obligated to deliver the goods?
Answer: No. The financing requirement is an express condition precedent. Because Buyer did not satisfy the condition, Seller’s duty to deliver never arises.
Substantial Performance and Constructive Conditions
While express conditions require strict compliance, constructive conditions are satisfied by substantial performance. Under the doctrine of substantial performance, if a party has made a good faith effort and the failure is not material, the other party’s duty to perform becomes absolute, but damages may be awarded for any deficiency.
Key Term: Substantial Performance Performance that, although not perfect, is sufficient to trigger the other party’s duty under a constructive condition, subject to damages for minor defects.
Worked Example 1.2
A builder contracts to construct a house for Owner for $200,000. The contract does not specify that payment is conditional on perfect completion. The builder completes the house, but uses a slightly different brand of paint in one room. Owner refuses to pay. Is Owner excused from payment?
Answer: No. The builder has substantially performed under a constructive condition of exchange. Owner must pay, but may recover damages for the minor defect.
Breach of Condition vs. Breach of Promise
It is essential to distinguish between a condition and a promise. Failure of a condition excuses performance; breach of a promise gives rise to damages but does not necessarily excuse the other party’s performance unless the breach is material.
Key Term: Promise A contractual undertaking to do or refrain from doing something, the breach of which gives rise to damages.
Excuse and Waiver of Conditions
A condition may be excused in several ways:
- Waiver: The party protected by the condition voluntarily relinquishes it.
- Hindrance or Failure to Cooperate: If a party prevents or fails to assist the occurrence of a condition, the condition is excused.
- Estoppel: If a party indicates the condition will not be enforced and the other party relies, the condition is excused.
- Actual Breach: If the other party materially breaches, the condition is excused.
Worked Example 1.3
A contract states: “Painter will be paid if Owner is satisfied with the work.” Painter completes the work, but Owner refuses to inspect or give feedback. Is Painter entitled to payment?
Answer: Yes. Owner’s failure to cooperate excuses the satisfaction condition. Painter may recover the contract price, subject to damages if the work is objectively unsatisfactory.
Exam Warning
Exam Warning Do not confuse substantial performance (which applies to constructive conditions) with strict compliance (required for express conditions). Failure to strictly satisfy an express condition usually excuses the other party’s performance entirely.
Revision Tip
Revision Tip Look for language in the contract—words like “provided that,” “on condition that,” or “unless”—to identify express conditions. If absent, courts are more likely to treat the term as a promise or constructive condition.
Key Point Checklist
This article has covered the following key knowledge points:
- Conditions are events that must occur before or after a duty to perform arises or is discharged.
- Express conditions require strict compliance; constructive conditions require substantial performance.
- Conditions are classified as precedent, concurrent, or subsequent based on timing.
- Failure of a condition precedent or concurrent excuses performance; occurrence of a condition subsequent discharges a duty.
- Substantial performance of a constructive condition triggers the other party’s duty, subject to damages for defects.
- Breach of a condition excuses performance; breach of a promise gives rise to damages.
- Conditions may be excused by waiver, hindrance, estoppel, or actual breach.
- Distinguish between express conditions (strict compliance) and constructive conditions (substantial performance).
Key Terms and Concepts
- Condition
- Express Condition
- Constructive Condition
- Condition Precedent
- Condition Subsequent
- Substantial Performance
- Promise
