Learning Outcomes
After reading this article, you will be able to identify when a party’s duty to perform under a contract is excused due to the non-occurrence or waiver of a condition. You will understand the distinction between express and implied conditions, the doctrine of substantial performance, and how prevention, waiver, and estoppel can excuse conditions. You will be able to apply these principles to MBE-style questions.
MBE Syllabus
For the MBE, you are required to understand when a party’s contractual obligations may be excused due to the failure, waiver, or prevention of a condition. This includes:
- Recognizing the difference between express and implied (constructive) conditions.
- Determining when substantial performance satisfies an implied condition.
- Identifying when a condition is excused by waiver, estoppel, or prevention by the other party.
- Applying the doctrine of divisibility and the effect of breach on the duty to perform.
- Understanding the consequences of the failure or excuse of a condition on contractual duties and remedies.
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 an express condition in a contract?
- A term implied by law to ensure fairness.
- A term stated explicitly in the contract that must occur before a duty arises.
- A promise to perform in good faith.
- A minor term that can be disregarded.
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If a party prevents the occurrence of a condition that benefits them, what is the likely result?
- The condition is excused, and the other party’s duty is discharged.
- The contract is void for uncertainty.
- The condition is enforced strictly.
- The contract is automatically terminated.
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Under the doctrine of substantial performance, which type of condition may be satisfied by less than complete performance?
- Express condition precedent.
- Express condition subsequent.
- Constructive (implied) condition of exchange.
- Condition of satisfaction (aesthetic).
Introduction
A party’s duty to perform under a contract is often subject to the occurrence of a condition. When a condition fails, the duty may be excused, but there are important exceptions and doctrines that may still require performance or provide remedies. Understanding when and how conditions are excused is essential for MBE contract questions.
Key Term: Condition A fact or event, not certain to occur, which must occur before a contractual duty becomes due or is discharged.
Types of Conditions
Conditions can be express (explicitly stated in the contract) or implied/constructive (imposed by law to ensure fairness or effectuate the parties’ intent).
Key Term: Express Condition A condition stated in clear, unambiguous language in the contract, requiring strict compliance for a duty to arise.
Key Term: Implied (Constructive) Condition A condition not expressly stated but inferred by law or the nature of the agreement, often satisfied by substantial performance.
Strict vs. Substantial Performance
Express conditions must be strictly satisfied. If an express condition is not met, the duty subject to that condition does not arise. In contrast, implied (constructive) conditions—such as the constructive condition of exchange in bilateral contracts—may be satisfied by substantial performance, especially in service or construction contracts.
Key Term: Substantial Performance Performance that, while not complete, is close enough to satisfy an implied condition, entitling the performing party to the contract price minus damages for any defects.
Excuse of Conditions
A condition may be excused in several ways:
- Waiver: The party protected by the condition voluntarily relinquishes the right to insist on its occurrence.
- Estoppel: If a party indicates they will not insist on a condition and the other party relies, the condition may be excused.
- Prevention: If a party wrongfully hinders or prevents the occurrence of a condition, the condition is excused.
- Forfeiture: Courts may excuse a condition to avoid disproportionate forfeiture if the breaching party has acted in good faith.
Key Term: Waiver The intentional and voluntary relinquishment of a known right, such as the right to insist on a condition.
Key Term: Prevention When a party wrongfully interferes with the occurrence of a condition, excusing the condition and making the duty absolute.
Worked Example 1.1
A contract states: “Painter will be paid $10,000 if, and only if, the homeowner is completely satisfied with the work.” Painter completes the job, but the homeowner honestly dislikes the color, even though most people would find it acceptable. Must the homeowner pay?
Answer: No. This is an express condition of personal satisfaction. If the contract involves aesthetic taste, the subjective standard applies. If the homeowner is honestly dissatisfied, the condition is not met, and the duty to pay does not arise.
Worked Example 1.2
Builder contracts to construct a house for Owner for $500,000. Builder completes the house, but uses a slightly different brand of windows than specified, with no impact on value or appearance. Owner refuses to pay, citing noncompliance with the contract.
Answer: Owner must pay, minus any damages for the minor defect. The constructive condition of exchange is satisfied by substantial performance. Minor deviations do not excuse payment, but Owner may recover damages for the difference.
Worked Example 1.3
Seller agrees to sell land to Buyer, “provided Buyer secures financing at 5% or less.” Buyer only obtains a loan at 6% but still wants to proceed. Seller agrees to close the deal. Later, Seller refuses to sell, arguing the condition was not met.
Answer: Seller’s agreement to proceed is a waiver of the express condition. Seller cannot later insist on the condition after waiving it.
Exam Warning
Exam Warning: Do not confuse express conditions (which require strict compliance) with promises or constructive conditions (which may be satisfied by substantial performance). Failure to distinguish these may lead to incorrect answers on the MBE.
Revision Tip
Revision Tip: Always identify whether a term is an express condition, an implied condition, or a promise. This determines the standard of performance and the consequences of non-occurrence.
Key Point Checklist
This article has covered the following key knowledge points:
- A condition is an event that must occur before a contractual duty arises or is discharged.
- Express conditions require strict compliance; implied (constructive) conditions may be satisfied by substantial performance.
- Substantial performance is sufficient for constructive conditions but not for express conditions.
- Conditions may be excused by waiver, estoppel, or prevention by the other party.
- If a party wrongfully prevents a condition, the condition is excused and the duty becomes absolute.
- Waiver is the intentional relinquishment of a known right to insist on a condition.
- Courts may excuse conditions to avoid disproportionate forfeiture in some cases.
Key Terms and Concepts
- Condition
- Express Condition
- Implied (Constructive) Condition
- Substantial Performance
- Waiver
- Prevention
