Promises and conditions

     A.  Promises.   By definition, all contracts, whether express or implied in fact, consist of at least one promise.  See R.2d Contracts 1.  R.2d Contracts 2 defines promise as follows:   "A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee [the one to whom the promise is addressed] in understanding that a commitment has been made."   In a unilateral contract, one party makes at least one promise.  In a bilateral contact, both parties make at least one promise.  In many contracts, either or both of the parties make multiple promises.  Failure to perform the obligation created by an enforceable promise is a breach of contract, and breach entitles the promisee to a remedy from the promisor.  The remedy is typically compensatory money damages.  In addition, breach of promise will sometimes also discharge the promisee's own duties of performance, if any, under the contract.  See the discussion of constructive conditions of exchange below.  

     Parties frequently use a word or phrase other than "promise" to express commitment to future performance.  They may use "shall," "will," "must," "is obligated to," "covenants," or "agrees to."  But these do not exhaust the alternatives because the language that people use to communicate varies enormously.  Accordingly, one must occasionally identify promises by applying tools of interpretation, as illustrated by Howard v. Federal Crop Insurance Corp.   In addition, some promises are implied, as in Wood v. Lucy, Lady Duff-Gordon (best efforts to market designs)  and Charter Oak Fire Insurance Co. v. Color Converting Industries Co. (implied promises made by an insurance company to those whom it insures).  

     Consider the written agreement in these materials between the Cheetahs (a girls soccer team) and Paula Fernandez (a soccer trainer) (hereafter "the soccer agreement").  The contract formed by the soccer agreement is a bilateral contract in which both the Cheetahs and Paula Fernandez make multiple promises.  The following chart summarizes the promises.  Note that each party makes promises in exchange for all of the promises made by the other party.

Fernandez promises	Cheetahs promise
Train and coach for stated period	Pay stated amount
Supply necessary equipment	Not to control, direct or supervise assistants or employees of Fernandez
Indemnify and hold harmless	Not to assign duties under the contract absent prior written consent of Fernandez
Pay costs, including attorney's fees, if Cheetahs prevail in an action	Pay costs, including attorney's fees, if Fernandez prevails in an action
Not to assign duties under the contract absent prior written consent of Cheetahs
Supply necessary workers' compensation insurance

     Notice the multiple ways in which the parties to the soccer agreement express their promises:  "Contractor shall arrange for . . . equipment . . . ;"   "Contractor agrees to hold harmless and indemnify . . . ;" "Neither this agreement nor . . .  may be assigned . . .;" " . . . the prevailing party shall be entitled to all costs . . . "   The drafting of the soccer agreement would have been improved by eliminating the variation in the language used.  In drafting a written agreement, always use identical language and, if possible, identical sentence structure, to express a concept that is expressed more than once (whether the concept is a promise or some other term of the agreement).  This minimizes the risk of disputes about meaning.  Do not follow the advice of your undergraduate writing instructor to find synonyms to provide variety and interest to your writing.  I prefer to use the word "shall" to express commitment.  Applying that preference to the soccer agreement to eliminate variation in language, the promises would read:  "Contractor shall arrange for . . . . equipment;"  Contractor shall hold harmless and indemnify . . . ;"  Neither party shall assign . . . ;"   "In the event of an action, the losing party shall pay the prevailing party all costs . . .  "  For a contrary view on using the word "shall", and for a short linguistics lesson and a good chuckle, see Geoffrey Nunberg's article "The Last Word on Shall.")

     B.  Conditions.

     When talking about contracts, the parties to contracts, judges, and other legal writers use the word "conditions" to express several different concepts.  Pay careful attention to the context to determine the intended meaning.  There are at least four different intended meanings.  

• Sometimes people refer to the "conditions of the contract" simply as another way of saying the "terms (or the provisions) of the contract."  A seller of a business may say to a prospective buyer:  "I'll sell for $500,000 cash, plus a one year consulting contract at $50,000, with an office on the premises, and those are my conditions, take it or leave it."  The seller is really describing the promises that he will make and what he expects in return even though the seller is using the word "conditions." 

• Sometimes people refer to a "condition to the contract," by which they mean that a contract will not be formed absent the occurrence of an event that is beyond the control of the parties to the contract.  For example, if the Cheetahs and Paula Fernandez orally agreed that the soccer agreement would be subject to approval by the Board of Directors of the Los Robles Soccer Club (based on a conclusion that Paula Fernandez was a qualified soccer trainer), the formation of the contract would be subject to that condition of approval.  It may be difficult, even somewhat artificial, to distinguish a condition to formation from a condition to performance (discussed below).  The distinction is important however because the parol evidence rule may bar introduction of evidence offered to establish a condition to performance but will not bar introduction of evidence offered to establish a condition to formation (such as the condition that the Los Robles Soccer Club approve the soccer trainer).  
  
  
• Sometimes people use the word "condition" to refer to the manner of accepting an offer to form a unilateral contract.  For example, in describing the formation of a contract of insurance one might hear that the insurance company offers to insure on condition that the purchaser of the insurance policy pays premiums.  This is simply another way of saying that the offer to insure made by the insurance company can be accepted (thus forming a contract) by the action of the purchaser in paying premiums.  Less frequently one might hear the word condition used to describe the acceptance of an offer to form a bilateral contract:  "I promise to sell you this grain when harvested on condition that you promise to pay me $5.00/bushel."   This is another way of saying that the offer to sell the grain can be accepted (thus forming a contract) by the expression of commitment to buy at the stated price and time.
  
  
• You will also hear the word "condition" used to refer to an event the occurrence of which either triggers or discharges the duty of a party to a contract to perform the obligations created by her promises.  Here, we are speaking of a condition to performance of an obligation under a contract that has already been formed, not a condition to formation.  The ensuing discussion, most of the relevant literature, and our study of conditions focuses on this use of the word. 

     1.  Express and implied conditions.   Like promises and like other terms of a contract, events that condition performance of an obligation may be described by oral or written language of the parties ("express conditions") or may be implied from the circumstances ("implied conditions" or "implied-in-fact conditions").  They may also be supplied by default ("constructive conditions"), as we see when discussing impracticability and frustration of purpose.  See Commentary.Discharge by impracticability or frustration of purpose.    

     There are no express conditions in the soccer agreement, but one can imagine several conditions to performance that the parties might have included.  For example, the Description of Services might have provided:  "Train U-16 girls select team (Los Robles Cheetahs) - soccer- Tuesday & Thursday, approx. 4-6 p.m., weather permitting."  So drafted, the trainer's obligation to train on a scheduled day would be discharged in the event of lightning storms at the times scheduled for training.  Once discharged, the trainer's failure to perform the discharged obligation cannot be a breach of contract.  Typical language for the expression of condition are phrases such as:  "if . . . . then . . . ;" "provided that . . . ;" "on condition that . . . ;" "in the event that . . . "  But, as suggested by the example above ("weather permitting"), there are a variety of other ways to express conditions.  Of course, even though the soccer agreement did not contain an express condition referring to the weather, the condition would probably be implied from usage of the trade, because soccer trainers invariably cancel training in the event of lightning for the safety of the players.  Another implied condition to the trainer's obligation to train the team through the national championships (or is it an express condition?) is that the Cheetahs first qualify to play in national championships. 

     An event that conditions performance is often labeled either a "condition precedent" or a "condition subsequent."  A condition precedent is an event that must occur before performance of an obligation becomes due.  Its occurrence triggers the obligation.  A condition subsequent is an event the occurrence of which discharges the obligation.  Note that R.2d Contracts uses different terminology that has not generally infiltrated the case law.  R.2d Contracts reserves the word "condition" to identify what is more commonly identified as a "condition precedent."  R.2d Contracts 224 provides: "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 (emphasis added)."   See also R.2d Contracts 225, 226.  R.2d Contracts 230 uses different language, avoiding the word "condition" entirely, to identify what is more commonly identified as a "condition subsequent."   R.2d 230 provides: "[I]f under the terms of the contract the occurrence of an event is to terminate an obligor's duty of immediate performance or one to pay damages for breach, that duty is discharged if the event occurs."  Can you classify the condition "weather permitting" in the soccer agreement?

      One common example of a condition precedent is a condition of satisfaction, such as in the following case:  A portrait artist promises to paint a portrait of Bill Gates to be hung in the lobby of the Microsoft office tower in which Bill works.  In exchange, Bill promises to pay $5,000 for the portrait if satisfied with the rendering.  Bill's promise to pay is subject to a condition precedent of satisfaction.  We explore conditions of satisfaction in Kennedy Associates, Inc. v. Fischer, in which a prospective financier balked on lending money to a prospective borrower after inspecting the real property that was to serve as collateral for repayment of the loan.    

     Conditions subsequent are less common.  R.2d Contracts offers this illustration following R.2d Contracts 230:  "A, an insurance company, insures the property of B under a policy providing that no recovery can be had if suit is not brought on the policy within two years after a loss.  A loss occurs and B lets two years pass before bringing suit.  A's duty to pay B for the loss is discharged and B cannot maintain the action on the policy."  Notice in this example that the "event" is the failure of B to timely file suit and "event" is simply a convenient shorthand for the non-occurrence of an event. 

     The distinction between conditions precedent and conditions subsequent is important in some jurisdictions, vestigial in others.  In some jurisdictions, rules of procedure governing pleading and persuasion require that the party alleging injury from breach of contract by another must plead the occurrence of any condition precedent to the breaching party's obligation to perform and carry the burden of persuasion (preponderance of the evidence) on that issue.  In contrast, the party defending against an alleged breach of contract must plead the occurrence of any condition subsequent claimed to discharge the duty of performance and carry the burden of persuasion on that issue.  Some jurisdictions do not allocate the burdens of pleading and persuasion in this way; in such jurisdictions the distinction between conditions precedent and subsequent has little if any consequence. 

     Recall that the consequence for the failure of a party to perform an obligation created by an enforceable promise is the right of the aggrieved party to compensatory money damages and, sometimes, a discharge of the aggrieved party's duty to perform its own promises.  In contrast, if an event that conditions performance of an obligation does not occur, no party has a right to a remedy; the only consequence is discharge of the obligation that is conditioned on the event.  In our earlier example, if Bill Gates is not satisfied with the rendering of his portrait, his obligation to pay is discharged, but he cannot hold the artist responsible for breach of contract because the artist did not promise that Bill would be satisfied.  However, sometimes a party will make a promise (express or implied-in-fact) that a conditioning event will occur.  In our soccer agreement, for example, the parties may have agreed that the Cheetahs would pay for soccer training only if the soccer trainer completed a licensing course and received a Class C coaching license and the soccer trainer may have promised to complete that course and receive that license.  If they had so agreed, the soccer trainer would have promised that an event would occur.  In the words of Professor Corbin, the trainer would have agreed to a "promissory condition."  Failure of that event would give the Cheetahs a right to compensatory money damages for breach of the promise and would also discharge the Cheetahs from their obligation to pay under the contract.

     2.  Avoiding the impact of express or implied conditions.  The consequence for non-occurrence of an event that conditions an obligation in a contract is dramatic:  the conditioned obligation of a party is entirely discharged, even when the event seems minor or the degree of deviation from event seems minor.  Dove v. Rose Acre Farms, Inc., involving a law student who didn't get paid a substantial bonus for summer work on an egg farm because of a two-day absence from work for strep throat, is a particularly stark example.   Lawyers for obligees therefore will advocate and courts may seize upon one of several doctrinal devices to avoid that consequence. 

     A court may conclude that language suggestive of a condition is ambiguous and justifies an interpretation that restricts the reach of the condition or the discretion vested by the condition in one of the parties.  Cases involving conditions of satisfaction are a common example.  See, e.g., Kennedy Associates, Inc. v. Fischer and R.2d Contracts 228.  Courts may also conclude that ambiguity justifies an interpretation that language creates a promise rather than a condition (breach of which gives a right to damages but does not necessarily discharge the other party's duties of performance).  See, e.g., Howard v. Federal Crop Insurance (insurer refuses to pay benefits to insured tobacco farmer because farmer plowed damaged tobacco stalks before inspection of damaged crop by insurer); New York Bronze Powder Co., Inc. v. Benjamin Acquisition Corp. (buyer of assets of a business declines to pay $350,000 still owing absent the seller's surrender of a promissory note evidencing that debt) and R.2d Contracts 227.   In some cases, a court may conclude that ambiguous language suggestive of condition reflects the parties' expectation that performance of a duty will normally follow an anticipated event but is not conditioned on the occurrence of the event.  Cases involving payments by a general contractor to a subcontractor "upon payment by the owner" (or similar language) are a common example.  If the owner does not pay the general contractor (because of insolvency, for example), the court will generally construe the language as measuring the time at which the general contractor is expected to pay the subcontractor rather than as a condition to the duty to pay because it is generally most reasonable to assume that the general contractor, not the subcontractor, assumes the risk of the owner's non-payment.     

     A court may find the condition eliminated by mutual agreement of the parties (modification) or, if the condition does not reflect a material part of the agreed exchange, a court may find the condition waived by the voluntary words or conduct of one of the parties. 
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     A court may excuse a condition if the party whose obligation is conditioned has breached or repudiated its own duty (such as an implied duty of cooperation or an implied duty of best efforts) and that breach or repudiation materially contributes to the non-occurrence of the condition.  R.2d Contracts 245, 255.    Charter Oak Fire Insurance Co. v. Color Converting Industries Co. considers this device but declines to apply it under the circumstances of the case.
    
     Finally, a court may outright excuse the occurrence of the event, in effect rewriting the contract, if enforcing the condition would cause forfeiture to the obligee that is disproportionate to the prejudice suffered by the obligor resulting from failure of the condition.  See R.2d Contracts 229, including Comment b to R.2d Contracts 229, and J. N. A. Realty Corp. v Cross Bay Chelsea, in which the court rescues a restaurant owner from its failure to timely exercise an option to renew a lease of the restaurant premises. 

     3.  Constructive conditions of exchange.  The parties to a bilateral contract, by definition, have exchanged promises of future performance.  Those promises create an expectation of the actual exchange of performances.  The parties may contemplate exchange of performances concurrently (typical in a sale of goods or sale of real property in which goods or the title to real property are to be tendered for delivery concurrently with tender of the price), or the parties may contemplate that performance by one party is to precede performance by another (typical in a service contract in which service or at least some portion of a service, such as painting a house or working for wages, is to precede payment).  However, often the parties do not express any temporal relationship between the obligations that each have undertaken by their promises.   The soccer agreement does not do so.  It states the obligation of Paula Fernandez to train and the obligation of the Cheetahs to pay, but does not state that the obligation to pay is conditioned upon the training or that the obligation to train and coach is conditioned upon the obligation to pay. 

     At early common law, absent an expression of the relationship between the promises of each party, courts construed promises of one party as independent of promises of the other party rather than as conditioned upon one another.  If one party breached a promise, the other was entitled to damages but remained obligated to perform its own promise because its promise was independent of the promise that had been breached.  In Nichols v. Raynbred, Hob. 88, 80 Eng. Rep. 238 (King's Bench 1615), Nichols promised to sell a cow to Raynbred for 50 shillings.  In suing Raynbred for the 50 shillings, the court held that Nichols need not allege or prove that he delivered or was even prepared to deliver the cow.  Of course Raynbred could sue Nichols for failure to deliver the cow but that would be a separate action (now a cross-complaint) because Raynbred's obligation to pay was independent of (i.e. not dependent upon) the obligation of Nichols to deliver the cow.  Even today, a court will construe some promises as independent of others if that intention is clearly expressed or otherwise is consistent with the overall purpose of the contract.

      In most contracts, however, courts have long since departed from the early view that promises in a bilateral contract are independent of one another to conclude that performance of one or more of the promises of one party is dependent upon the performance of one or more of the promises of the other party.   In other words, performance by one party of one or more promises is a condition to performance of a promise or promises by the other party.  When this relationship is not expressed by the parties the court constructs the condition.  We call the condition a constructive condition of exchange.   However, unlike express conditions or implied conditions, and unlike constructive conditions of impracticability or frustration of purpose, the non-occurrence of which will discharge the duties conditioned, the breach of a promise (i.e. the non-occurrence of a constructive condition of exchange) will only discharge a duty conditioned on performance of the promise if the breach of the promise is material.  We explore the concept of material breach further in other portions of the these materials. 

     The constructive condition of exchange may be a condition concurrent or a condition precedent.  R.2d Contracts 233, 234 reflect the common law rules that guide a court's determination of whether the constructive condition is concurrent or precedent.  U.C.C. 2-507(1) and 2-511(1) state the rules for transactions in goods.  Under the Restatement rules, in the soccer agreement, which says nothing about the temporal relationship of the obligations, the obligation of the Cheetahs to pay would be conditioned upon the performance by Paula Fernandez of her obligation to train (although an immaterial breach of her obligation to train, e.g. cutting a session short by five minutes, would not excuse the obligation to pay).  Because the agreement calls for her to be paid $100/training session, the Cheetahs would probably have to pay her $100 promptly after she completes each session.  Her continuing obligation to train would in turn be conditioned upon that payment (although an immaterial breach of the obligation to pay, e.g. $95 with a promise to pay $105 the next time, would not excuse her obligation to continue with the next training session). 

     Supplementary reading: Farnsworth 8.1-8.7.

     C.  Warranties. 

     Warranties are, for the most part, promises concerning the future performance of goods to be sold or leased, of real property to be sold or leased, of intellectual property to be sold or licensed, or of services to be rendered.  If the performance falls short of the promise there is a breach of warranty.  U.C.C. 2-313 describes the express warranties that may arise in a transaction in goods and U.C.C. 2-312 (warranty of title), 2-314 (warranty of merchantability), and 2-315 (warranty of fitness for particular purpose) describe the implied warranties that may arise in a transaction in goods.  In your Property course, you may study the implied warranty of habitability of leased real property or the implied warranty of marketable title in a contract of sale of real property, and in Hicks v. Superior Court these materials consider the implied warranty of quality made by a builder-developer of improvements on real property.   The law does not generally imply warranties with respect to services, and express warranties relating to services are uncommon.  The soccer trainer did not warrant the quality of her services in the soccer agreement, and doctors, lawyers, engineers, architects, and other service providers do not typically warrant their services.  Remedy for injury attributable to poorly performed services is generally left either to the law of negligence or to warranties imposed by statute. 

     Some warranties are statements of fact rather than promises of future performance and some warranties may be characterized as either.  U.C.C. 2-313 tells us that a seller creates an express warranty by "any affirmation of fact or promise . . . which relates to the goods and becomes part of the basis of the bargain . . . (emphasis added)" and that a seller creates an express warranty by "[a]ny description of the goods which is made a part of the basis of the bargain . . . (emphasis added)."  The implied warranty of marketable title in a contract of sale of real property is a statement that the real property conveyed is free of undisclosed claims just as much as it is a promise that the buyer will not suffer undisclosed adverse claims to the real property in the future.  If the fact warranted is untrue, there is a breach of warranty (even though it would be odd to say "breach of fact"). 

     Whether the warranty is based on promise or statement of fact, breach of warranty has the same consequences as the breach of any other promise.  The party aggrieved by the breach of warranty may recover damages and, if the warranty is a constructive condition of exchange, as it almost always will be, the aggrieved party may be discharged of its own duty or duties of performance.  We explore the particular damage and discharge rules of Article 2 of the Commercial Code in the material on remedies. 

    D.  Representations. 

     Representations are statements of fact.  These statements may be expressed in written agreements, in oral agreements, or in negotiations leading to agreements.  The soccer agreement does not include any representations, but one can easily imagine a representation that might have been included in such an agreement or made in negotiations leading to the consummation of the agreement ("I have received a Class C coaching license," or "Teams that I have coached have won two national championships.").  As indicated above, some statements of fact will be considered warranties and the inaccuracy of the statement will have the same consequence as a breach of promise.  Other statements of fact, if untrue, may entitle the person misled to avoid the contract on the grounds of misrepresentation or to seek damages for the tort of deceit, but are not the basis for damages based on breach of promise.  We discuss avoidance for misrepresentation and the tort action of deceit in Commentary.Mistake, misrepresentation, and duress.