SUBSET 2E: QUESTIONS ON CONDITIONS · 2015-10-15 · Each lease must terminate no earlier than September 30, ... deficit, on July 10 the Governor had issued an order closing all non-essential

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SUBSET 2E: QUESTIONS ON CONDITIONS

QUESTION 76

Ms. Irving owned a shopping mall with 20 spaces in Morena. She was interested in selling the mall. Dr.

Jimenez was a successful physician who specialized in scanning technology such as positron emission tomography

(PET) and magnetic resonance imaging (MRI). He was interested in purchasing the mall and using two spaces for

his own offices.

On May 1, 2011 Irving and Jimenez signed a writing providing that Jimenez would occupy two of the 20

spaces, spaces 6 and 7. The writing stated that the parties intended to close the sale on September 1, 2011 for

$3,000,000 and contained the following additional provisions:

“2. Prior to August 1, 2011 Irving must obtain from the El Dorado Medical Agency a permit for

Jimenez to conduct PET and MRI testing in suites 6 and 7. Irving is financially responsible for any

modifications to the premises necessary to obtain the permit.

7. This agreement is contingent upon Jimenez obtaining mortgage financing for $2,600,000. The

duration of the mortgage shall be no shorter than 20 years, and the interest rate must be no higher than

3.5% per annum. Jimenez must be able to obtain a final commitment for such mortgage financing before

August 20, 2011.

9. It shall be a condition that at closing, Irving produce signed agreements for at least 16 of the

remaining spaces. Each lease must terminate no earlier than September 30, 2012.”

In early May, Irving contacted the El Dorado Medical Agency to determine what alterations she would

need to make to suites 6 and 7 to enable Jimenez to obtain the permit. After contacting the agency, she hired a

general contractor at a cost of $57,000 to make the alterations. The contractor completed work by July 10. Irving

then called the agency and asked them to inspect the alterations. However, she discovered that due to a large budget

deficit, on July 10 the Governor had issued an order closing all non-essential state offices, including the agency, for

two weeks. The inspection was delayed until August 4, but the inspector found the alterations were satisfactory. The

agency issued a permit on August 6. Irving notified Jimenez the permit was available. Jimenez responded,

“Understood,” but did not stop by to pick up the permit.

In early June, Jimenez began applying for mortgage funding. In early August, he reached a tentative

agreement with Karmel Bank. The loan officer, Ms. Lion, told Jimenez that to get “a final commitment, you must

send us your last three years‟ tax returns.” The next day, Jimenez developed a serious flu. Although he had a

business manager, Jimenez did not ask the manager to copy the tax returns and send them to Lion. Jimenez did not

recover from the flu and did not return to his office until August 21. On that date, he sent the copies of the tax return

to Lion. On August 25, she emailed him a “preliminary firm funding commitment.” He did not contact her again.

On August 26, Jimenez met with his financial consultant, Mr. Maloney. Maloney told Jimenez that he,

Maloney, hoped that Jimenez had not yet finalized the purchase of the mall because Maloney had found “a much

more profitable investment opportunity” for Jimenez.

In early August, Irving began compiling the signed leases of the other mall spaces. She had 15 signed

leases. A 16h prospective tenant, Mr. Natomas, had assured Irving that he would sign on August 20. However,

Natomas died unexpectedly on August 19. Natomas‟ wife contacted Irving on August 25 and emailed that as soon as

she was appointed executrix of the estate, she “absolutely guaranteed” she would sign the lease. Irving informed

Jimenez.

On August 30 Jimenez told Irving he “was no longer interested in the deal. Why? The mortgage funding

delay has proven troublesome.” IRVING SUES JIMENEZ FOR DAMAGES FOR BREACH OF CONTRACT.

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QUESTION 76

1 the duty to buy the property

2 conditional

11 CONDITION #1: THE PERMIT

12 is it a condition?

13 “must”

14 language of duty

15 however, a bargained-for exchange

16 therefore constructive condition of exchange

21 what happened to the condition?

22 specified date: before August 1

23 permit available on August 6

24 did the condition fail‟?

25 no “time of the essence” provision

26 time not impliedly of the essence in construction Ks

27 closing on September 1

28 plenty of time left

29 D didn‟t have to make further alterations

29.1 P had made those arrangements

31 if the condition failed, any excuses?

32 substantial performance

33 no express condition

34 therefore substantial performance applicable

41 subjective element

42 P acted in good faith

43 contacted agency in early May

44 evidently hired contractor shortly thereafter

45 objective element

46 basic purpose: allow D to do imaging on premises

47 basic purpose fulfilled

48 permit available to D

Avoidance of severe forfeiture

innocent

severe

15% rule of thumb

can be used against express conditions

relatively immaterial condition

minority view

51 impossibility

52 unanticipated event?

53 how extensive public knowledge of the budget deficit?

54 but foresee The Governor‟s order?

55 impossible?

56 illegal for agency to continuing operating

57 inspection delayed until August 6

58 immaterial condition?

59 timing critical?

59.1 supra

61 slip of the tongue

62 D told P he was refusing because of the mortgage funding

63 he did not mention the permit

64 split of authority

65 minority: slip fatal

66 majority: only if the facts give rise to estoppel waiver

67 not here

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68 D made the statement weeks after August 1

71 CONDITION #2; THE MORTGAGE FUNDING

72 a condition?

73 “contingent upon”

74 characteristic wording

75 thus an express condition

76 in any event constructive

77 supra

78 a condition can involve D‟s conduct

79 “any” act or event other than mere passage of time


82 “final” commitment by August 20

83 a commitment August 25th

84 late

85 moreover, “tentative” commitment

86 never a “final” commitment

87 condition technically failed

91 if condition failed, any excuse?

92 slip of the tongue?

93 D expressly mentioned “[t]he mortgage funding”

94 excuse inapplicable


102 inapplicable to express conditions

103 this condition express

111 impossibility

112 D‟s illness a contributing cause

113 unforeseeable?

114 render impossible?

115 D had a business manager


117 funding important

121 prevention by D

122 the form of the conduct

123 the evolution of the law

124 modernly passive non-cooperation substantially impeding

131 wrongful conduct

132 D responsible for obtaining the funding

133 “Jimenez obtaining mortgage financing”

134 implied duty of cooperation

135 never told business manager to send the returns

136 D neglected to contact Lion again

137 a combination of defaults

138 causation

139 facts establish

141 CONDITION #3: COLLECTING ALL THE CONTRACTS

142 a condition?

143 “It shall be a condition”

144 express condition

145 in any event constructive

146 supra

151 the nature of the condition?

152 “Signed” agreements

153 not mere agreements in principle

154 timing critical?

155 no “time of the essence” provision

156 time not impliedly of the essence in lease K

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157 but this date was the final closing date

158 closing date more likely to be important


162 as of closing only 15 signed agreements

163 Mr., Natomas agreed

164 but never signed lease

165 Mrs. Natomas

166 agreed

167 sent email

168 strong language: “guaranteed”

169 but never signed lease

169.1 condition technically failed

171 if condition failed, excuse?


173 as a practical matter the last lease

174 written email

175 “guaranteed”

176 arguably firm enough to trigger promissory estoppel

177 but express condition

178 cannot invoke substantial performance

181 estoppel waiver

182 Did P stop pursuing the last lease because of D‟s repudiation?

183 timing

184 not if time of the essence

185 D made statement on August 30th

186 P could not have obtained a signed lease by that day

187 yes if time not of the essence

188 P could have obtained the lease after that day

189 D‟s statement prompted P to forego doing so

Prospective non-performance

same facts



193 only under the minority view

201 if even one condition neither fulfilled nor excused, no duty of imm. perf.

202 D‟s strong argument: the number of signed leases

211 if all conditions either fulfilled or excused, duty of immediate performance

212 D did not fully perform

213 facts do not establish any discharge

214 ergo, D would be guilty of breach

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QUESTION 77

Mr. Masoli wanted to develop a 50-unit retirement home on a large parcel of land that he owned in Morena.

The parcel was zoned for commercial use rather than multi-unit residential. Ms. Nagoni was a licensed general

contractor.

On January 1, 2009, Masoli and Nagoni signed a writing. In the writing, Nagoni promised to build the

home in four phases: #1 to be completed by September 1, 2009, #2 by January 30, 2010, #3 by July 30, 2010, and #4

by December 30, 2010. Masoli promised to pay Nagoni $2,000,000 at the completion of each phase. The writing

stated that:

—”It shall be a condition that Masoli be able to have the property rezoned to multi-unit residential use. The

rezoning should be obtained by March 30, 2009.”

—“At the end of each phase and before Nagoni is to be paid, architect Lee Otto of Morena must issue a

certificate that Nagoni has strictly complied with the attached plans and specifications.”

—“Masoli will not be obliged to make the final payment for phase #4 unless, at that time, Masoli has

obtained precommitments from purchasers of at least 35 of the contemplated 50 units. Time shall be of the

essence of this written contract.”

The writing contained a merger clause. Before they signed the writing, Masoli said, “I just want it

understood that I don‟t have to make the final payment unless, at that time, I‟ve got 35 signed, sealed deals.” Nagoni

responded, “Understood.”

On January 1, 2009 Masoli applied for the rezoning. Due to budgetary problems, the city had begun

furloughing employees in the Planning Department. Consequently, the new zoning was not approved until April 1,

2009. On April 2, Nagoni asked Masoli whether he had obtained “the rezoning required by per deal.” Masoli said,

“Yes.” Nagoni responded, “OK. I‟ll begin now.” Masoli said, “Full speed ahead.”

Nagoni completed phases #1-3 and received the first three payments from Masoli. On the first two

occasions Masoli paid without demanding Otto‟s certificate, but Masoli demanded “the required certificate” for

phase three. On August 1, 2010, Nagoni began work on phase #4.

In the meantime, Masoli had learned of another business opportunity. It promised such enormous profits

that he seriously thought about diverting his resources to the other project. On September 2, 2010, Masoli spoke

with his Marketing Director, Mr. Pope, who was in charge of obtaining the precommitments. Pope told him that he,

Pope, already had 31 signed contracts and that six other families had “strongly indicated that they were eager to

come in and sign as soon as possible.” Masoli told Pope, “Let‟s slow down a bit. Don‟t get back to those folks yet.

There‟s no need for them to rush and sign their contracts yet.” Pope said, “If you say so. You‟re the boss. But,

frankly, I don‟t see any purpose to delaying.” Masoli responded, “Oh, there is one.”

On December 10, 2010, Nagoni phoned Masoli and told him that she would swing by to update him on “the

final few, very minor things I need to do on phase #4.” He told her, “You might hold off. We‟ve had problems

getting enough signed contracts; and remember the deal is contingent on that.” Nagoni was astonished. She said,

“You‟re giving me this bad news at this late date. That‟s ridiculous. If you don‟t pay, I‟ll see you in court.”

Immediately after the phone call, Masoli emailed Otto to inform him that the project might not go forward.

The next day, December 11, 2010, Nagoni asked Otto to provide a certificate that her work to date on phase #4 was

“satisfactory.” Otto responded, “This lawsuit stuff makes me uncomfortable, and besides you technically haven‟t

done all the work.”

On December 12, 2010, Masoli sent a letter “formally terminating our contract. We simply don‟t have the

required signed contracts from applicants.” NAGONI SUES MASOLI.

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QUESTION 77

1 D‟S DUTY

2 to make the last payment

11 CONDITION #1: REZONING

12 a condition?

13 “a condition”


21 content of the condition

22 certainly obtain the rezoning

23 by March 30?

24 in a separate sentence

25 distinction in the wording

26 “shall” in sentence #1

27 “should” in sentence #2

28 weaker

29 well ahead of completion of project

29.1 precise date relatively unimportant

29.2 but generally language, “time of essence”

29.3 if date not part of condition, fulfilled

31 if date part of condition, failed—April 2

32 if technically failed, excused?

33 (1) substantial performance?

34 only short, two-day delay

35 but SP not for express conditions

41 (2) impossibility

42 furloughs by city

43 unanticipated?

44 minor part of bargain

51 (2) slip of the tongue by D—not mentioned in December 12 letter

52 minority view

61 (3) estoppel waiver by D

62 P inquired whether zoning obtained

63 D said “Yes”

64 D added, “Full speed ahead”

65 P relied

71 CONDITION #2: ARCHITECT‟S CERTIFICATE

72 a condition?

73 -not use “a condition”

74 +but evident purpose

75 made payment dependent on certificate

76 technically failed—did not obtain certificate


82 (1) constructive fraud by Otto

83 “Lawsuit stuff ... uncomfortable”

84 fear of involvement not a proper basis for withholding

85 Masoli had contacted him

86 collusion—stronger case

87 but P had not completed the work


92 minority view

101 (3) estoppel waiver by D

102 two out of three times

103 —but D insisted last time

104 —and last time D referred to “required” certificate

105 —P evidently didn‟t form belief

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106 P sought certificate from architect

111 (4) prevention by D

112 D emailed Otto project might not go forward

113 but P had not completed the work

114 architect should have withheld even absent email

121 (5) domino theory


123 if depends on substantive condition, infra

131 CONDITION #3: THE SUBSTANTIVE WORK

132 a condition

133 no language “a condition”

134 constructive condition

141 fulfilled?

142 P admitted “few, very minor things” yet to be done


152 (1) substantial performance by P


154 “few, very minor”


156 P contacted D in order to discuss and complete

157 can use SP against constructive conditions

161 (2) prospective non-performance of D‟s conditioned duty

162 didn‟t complete because D said project not go forward

163 P had ability to complete


172 but minority view

181 CONDITION #4: THE “PRECOMMITMENTS”

182 the nature of the condition

183 interpretation: “precommitments”

184 step #1: identify all the meanings

185 text—ambiguous

186 context—used different word “contract” in next sentence

187 extrinsic, contemporaneous—”signed, sealed”

188 extrinsic, later—P didn‟t challenge D‟s statement about “signed contracts”

189 two possible meanings: informal commitments or contracts?

191 step #2: characterize each meaning as a type of usage

192 precommitment—ordinary, popular

193 contract—mutual

194 step #3: choose a meaning

195 order of preference

196 Williston—general

197 Corbin—mutual even if not reflected on face of K

201 fulfilled or failed?

202 fulfilled if mere precommitment

203 31 plus 6 = 37, exceeding 35

204 if signed contract, technical failure


212 prevention by D

213 Pope said others “eager to come in and sign”

214 Pope said no “purpose to delaying”

215 D told to “slow down”

216 “there is one” purpose

217 the purpose: set up argument that condition failed

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QUESTION 78

Mr. Hermanos was a general contractor. Ms. Ing was a subcontractor who specialized in building

foundations. Ms. Justin hired Hermanos to build a large cabin for her in a wooded area just outside Morena for

$600,000. As soon as Hermanos received the prime contract, he spoke with mg about the foundation for the cabin.

On April 1, 2009 Hermanos and Ing both signed a writing. In the writing, Hermanos promised to pay Ing

$45,000 for constructing the foundation for the cabin. The writing also contained the following provisions:

—Hermanos would pay Ing “at the time when Ms. Justin has paid Hermanos.”

—”It shall be a condition to Hermanos‟ duties under this contract that in timely fashion Ing obtain all the

necessary county permits for the construction work.” The writing specified that mg would have to “provide

Hermanos with the final county permit by June 2, 2009.”

—”Ing must comply with all the specifications in the prime contract, hereby attached as Exhibit A.”

Exhibit A stated that the base of the foundation “must be at least 28 inches” deep.

—”Before obtaining the final payment, Ing must provide Hermanos with a certificate from architect Daniel

Kessel to the effect that Ing has strictly complied with all the provisions of the specifications set out in

Exhibit A.” (Kessel was an old friend of Hermanos, and in the past two years most of Kessel‟s income had

come from projects with Hermanos.)

Ing wanted to begin work immediately. However, her own regular work crew was committed to a large

commercial project in Morena. Consequently, she hired Lorenzo Concrete to perform the work under her contract

with Hermanos. Mr. Lorenzo stopped by Ing‟s office to read the specifications. However, he was in a rush that day.

Hurriedly reading the specifications, he thought that the base of the foundation had to be only 23 inches deep.

The same day Ing instructed her administrative assistant, Ms. Mertel, to contact the County Planning

Department to begin processing the permit. Shortly after Ing issued that instruction to Mertel, though, Mertel went

on maternity leave. Although she had noted the permit on the office desk calendar, her temporary replacement, Mr.

Nerney, did not notice the notation.

On April 10 Lorenzo broke ground at the work site. He completed the foundation on May 25. With one

exception, his work complied with the specifications. The exception was that the foundation base was only 25 inches

deep.

When Lorenzo informed Ing that he had completed the foundation, Ing invited Kessel to visit the site and

inspect the foundation. Kessel visited the site on May 26th. He did not notice that the base was only 25 inches deep.

He told Ing, “There‟ll be no problem. The work looks fine to me. Call me whenever you want the certificate.”

On May 27th, Ing asked Nerney how soon he could obtain the county permit. Nerney said that he had not

noticed Mertel‟s notation and that since the minimum permit period is two weeks, Ing could not obtain the permit

until June 14th. Ing told Nerney to “rush it.”

On the morning of June 14, Ing obtained the final permit. The same morning Hermanos learned that Justin

had filed for bankruptcy and could not pay Hermanos. Hemanos notified Kessel. That afternoon Ing stopped by

Kessel‟s office to obtain the certificate. Kessel refused—and said that “under the circumstances—all the legal

bankruptcy mess—it wouldn‟t be advisable for me to do that.” Later that afternoon Hermanos sent Ing a latter. The

letter stated that “in light of Ms. Justin‟s financial situations it will be impossible for me to pay you.”

Ing sues Hermanos. At trial, Ing presented undisputed expert testimony that the shallower foundation base

was safe and would lower the fair market value of the property by only $7,000.

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QUESTION 78

1 D‟S PROMISE

2 pay for the work

11 CONDITIONS

12 (1) SUBSTANTIVE: DO THE WORK IN COMPLIANCE

13 failed

14 plans: 28 inches

15 performance: 25 inches

21 excuses?


23 limited to constructive conditions

24 no indication of an express condition

31 elements

32 (1) subjective: innocent

33 P didn‟t make the mistake

34 Lorenzo independent contractor

35 Lorenzo “in a rush”

36 “hurriedly”

37 (2) objective: trivial

38 foundation stable?

39 “safe”

39.1 $600,000 vs $7,000

41 avoidance of forfeiture

42 minority view

43 severe forfeiture

44 perhaps


46 didn‟t mention in letter

47 Did D know about it?

48 minority view

49 no estoppel waiver here

51 (2) PERMITS


53 “It shall be a condition”

54 content

55 permit

56 June 2 date?

57 in separate sentence

58 no condition language in sentence

59 no indication time of essence other than „timely”

59.1 ordinarily not in construction Ks

61 fulfilled?

62 if only condition get permit

63 yes

64 if date part of condition

65 no

71 if failed, excused?

72 waiver

73 did D accept the permit on June 14?

74 facts silent



77 should have known permit late

78 minority view

79 no estoppel waiver here

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82 not vs express condition


85 minority view

86 perhaps

91 (3) ARCHITECT‟S CERTIFICATE

92 fulfilled?

93 no

101 excused?

102 constructive fraud

103 would have issued

104 “no problem”

105 “looks fine”

106 “Call me”

111 withheld for wrong reason

112 “legal bankruptcy mess”

113 “[in]advisable”

114 old friend of Hermanos

115 most of his income in last two years

116 only supposed to evaluate quality of work



123 Did D even know?

124 but close relationship

125 minority view

126 no estoppel waiver

127 domino theory

128 relation to substantive condition

131 (4) PAYMENT BY LANDOWNER

132 condition?

133 no condition language

134 “at time”

135 “when”

136 temporal connotation

137 convenient time, not condition

141 if condition, fail

142 excuse?

151 duty of immediate performance

152 not if even one condition failed

153 if a duty of immediate performance?

154 D not perform

155 no evident discharge

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QUESTION 79

Ms. Harley owned a large, vacant manufacturing plant on the outskirts of Morena. Mr. Ing was interested in

buying the plant to begin manufacturing fireworks there.

On May 1, 2006 they both signed a writing including the following clauses:

“#2. Ing shall purchase the said facility, provided he can obtain a $900,000 loan at an interest rate no higher

than 5% for no fewer than 15 years. To that end, Ing shall exercise due diligence.

#3. Harley covenants that by June 15, 2006 she will obtain and deliver to Ing a written inspection report

certifying that the existing structure is in full compliance with local and state building codes.

#7. The purchase will be closed on condition that no later than July 15, 2006 Ing can obtain a permit from

the Morena Planning Department allowing him to expand the existing structure by at least 20,000 square

feet. Time shall be of the essence of this provision.

#9. A further requirement is that no later than July 30, 2006, Ing be able to obtain a permit from the State

Fireworks Commission authorizing him to manufacture fireworks on the premises. (At the time they signed

the writing, the state Fireworks Regulation Act both created the commission and required anyone proposing

to manufacture fireworks within the state to obtain a permit.).

#10. Closing shall occur on August 1, 2006, at which time Ing shall deliver to Harley a check for

$2,800,000 in exchange for Harley‟s deed.”

On May 15 Harley contacted a local building inspector and told him to “rush. Contact me if there‟s any

delay” preventing the delivery of an inspection certificate by June 15.

On June 1, the state legislature repealed the Fireworks Regulation Act. The new legislation transferred the

Commission‟s functions to the existing State Hazardous Activity Agency.

On June 2 Ing submitted a proposal to the Morena Planning Department to expand the existing plant. When

he submitted the application, he checked “normal processing” rather than “expedited” processing (requiring an

additional $275 fee). On July 11, the department notified Ing that since Harley was still the listed owner, she needed

to sign. Ing neglected to inform Harley of requirement until July 16. When Ing told her, Harley immediately drove

down to the department and signed the application. The department issued the permit on July 17.

The inspector Harley hired became seriously ill for several weeks. When she phoned him on June 11, he

said that he would “get to it as soon as I‟m well.” He completed the inspection and gave the report to Harley on June

20. She immediately FAXed the report to Ing. Ing acknowledged receipt of the report.

On July 1 Ing submitted his loan application to three of the 10 local banks. The lowest rate any of them

quoted him for the loan was a 5 1/4% interest rate.

On July 19, the State Hazardous Activity Agency issued Ing a permit.

On July 20 Ing learned that TNT Fireworks, a large national chain, had decided to open a huge new plant in

Morena. Fearing the competition, Ing had second thoughts about buying Harley‟s plant. On July 25, Ing informed

Harley that since “things weren‟t working out” as he had hoped, he did not intend to go through with the purchase.

When Harley asked why, Ing mentioned the “exorbitant” interest rate quoted him. At that point, Harley said, “I‟d be

willing to make up any difference for you.” Ing responded, “I‟m sorry. It‟s still no deal.”

HARLEY SUES ING FOR DAMAGES FOR BREACH OF CONTRACT. WILL SHE PROBABLY

RECOVER? DO NOT DISCUSS THE MEASURE OF DAMAGES.

12

QUESTION 79

1 CONDITION: THE AVAILABILITY OF THE SPECIFIED LOAN

2 a condition?

3 “provided”

4 ergo express

11 fulfilled?

12 did not obtain the financing

21 excused?


23 Harley offers to make up the difference

24 thus essentially the same position


26 substantial performance inapplicable

31 prevention

32 wrongful?

33 duty to exercise “due diligence”

34 contacted only 3 of 10

35 no information about other 7

36 evidently still plenty of time

37 prevention can take the form of inaction

41 CONDITION #2: HARLEY DELIVER INSPECTION REPORT

42 a condition?

43 “covenants”

44 language of duty

45 contrast: “provided”

46 contract: “on condition”

47 ergo, constructive condition

51 substantive condition: report

52 obtained report

53 FAXed to Ing

54 Ing received the report

61 in addition, timing requirement?

62 if a timing requirement

63 failed

64 June 15

65 delivered on June 20

66 but timing a condition?

67 specific date relatively unimportant

68 closing weeks away

69 contrast: “Time of the essence”

71 if timing a requirement, excuse?

72 impossibility

73 limited to immaterial conditions

74 delay seems unimportant

75 inspector ill

76 but she not an “essential” person

77 could have used another inspector

81 waiver

82 he “acknowledged” receipt

83 estoppel

84 but occurred after failure of condition

85 election

86 inconsistent rights?

87 “covenants”—duty

88 ergo breach

13

89 material?

89.1 intentional

89.2 split of authority

89 timing relatively unimportant provision


92 did not mention on July 25th


94 some: not unless estoppel facts

95 relevant events had already occurred

101 CONDITION #3: PLANNING DEPARTMENT PERMIT TO EXPAND

102 a condition?

103 “on condition”

104 express

105 content of condition

106 obtaining permit

107 timing

108 “Time shall be of the essence....”

111 fulfilled?

112 required timing: July 15

113 actual receipt July 17

121 excused?

122 prevention

123 not pay for expedited processing

124 wrongful?

125 plenty of time then

126 no evident need for “expedited” processing

127 not obtain Harley‟s signature initially

128 clear instructions?

129 perhaps negligent

129.1 delay notifying Harley

129.2 Ing notified July 11th

129.3 did not notify Harley until July 16th

129.4 at least negligent

131 waiver

132 Planning issued the permit

133 Did he accept it?

134 estoppel?

135 after the failure of condition

136 election?


138 intentional?





144 some: not unless estoppel facts

145 here?

151 CONDITION #4: FIREWORKS PERMIT

152 condition?

153 “[a] further requirement”


155 contrast: “on the condition”


157 content of the condition

158 permit

159 specific agency?

14

161 if the permit the real substantive condition


163 permission to engage in that business

171 if also a requirement that obtain permit from specific agency

172 technically failed: issued by different agency

173 excused?

174 impossibility

175 original agency no longer exists

176 relatively immaterial condition

181 waiver

182 agency issued permit

183 Did he accept?

184 estoppel?

185 events already occurred

186 election?


188 intentional?


189.1 relatively unimportant requirement




194 Some: only if estoppel facts

195 no such facts evident here

201 CONDITION #5: DEED

202 express?


204 contrast: “on the condition”

205 constructive

211 if condition, fulfilled?

212 no delivery

213 not even tender

221 excuse?

222 prospective non-performance of conditioned duty

223 he stated he did not intend to go through

15

QUESTION 80

Ms. Indrikson owned an undeveloped lot in Morena. In early 2005 she hired Ms. Julian, a general

contractor, to build a large house on the lot. In turn, Julian entered into agreements with five subcontractors,

including Mr. Kalish, a roofer. On May 1, 2005, Julian and Kalish signed a writing, including the following

provisions, inter alia:

1. Kalish shall complete the work in strict compliance with the attached plans and specifications. (The

plans stated that Kalish would do the work in four phases. The plans specified the type of tile and tar that

Kalish would use on each section of the roof.)

2. Before each progress payment and the final payment, Kalish must produce a certificate from architect

James Lucero that Kalish has strictly satisfied every requirement of that phase of the work.

3. Lucero shall inform Kalish of the deadline for each phase of the work to ensure that his progress does not

delay the work of either the general contractor or the other subcontractors.

4. Julian shall pay Kalish for each phase of the work within five days after Indrikson pays Julian for that

phase of the work.

5. The last progress payment shall be 15% of the contract price.

Kalish began work on May 10. He completed the first three phases of the work without any objection from

Julian or Lucero. When Kalish ended the third phase on June 25th, Lucero informed him that the deadline for the

fourth and final phase was September 1, 2005.

Kalish started the final phase on July 1, 2005. However, starting on July 2, 2005, his employees began an

illegal strike that lasted two weeks. After the strike, Kalish realized that he would have to rush to meet the

September 1st date.

On July 17, Kalish drove to his supplier‟s warehouse to buy the material needed for the final phase. He had

left the specifications at his office. Without the specifications, he purchased the wrong type of tile. His supplier‟s

policy was that all sales are final and that purchased materials cannot be exchanged later.

On July 20, just before Kalish‟s crew was to begin the work, he finally discovered that he had purchased

the wrong type of tiles. However, he believed that the tiles he had purchased were at least as sturdy and long-lasting

as those specified in the plans and that if he reordered, the delay would make it impossible to meet the deadline.

Despite his best efforts, including paying his crew overtime, he did not finish the work until September 2, 2005.

Early on September 3, Julian noticed that Kalish had used the wrong type of tile. Later that day Julian

learned that Indrikson had filed for bankruptcy and would not be making the final payment due to Julian. On

September 4, Julian sent Kalish a letter explaining that she would not pay Kalish. In pertinent part, the letter read:

“Your failure to use the specified type of material is inexcusable.”

After reading Julian‟s letter, Kalish did not bother to contact Lucero.

KALISH SUES JULIAN FOR BREACH OF CONTRACT. WILL HE PROBABLY RECOVER? Do not

discuss the measure of damages.

16

QUESTION 80

1 MUTUAL ASSENT

2 writing

3 detailed

4 signed

11 CONSIDERATION

12 P‟s promise to do the roofing

13 bargain

14 D bargained for it

15 P gave it in exchange

16 legal value

17 detriment to P

18 no prior duty to do work

19 benefit to D

19.1 no prior right to have work done

21 D‟S DUTY TO PAY

31 condition #1: strictly comply with plans and specifications

32 express condition?

33 “strict”

34 “strictly”

35 perhaps just forceful expression of duty

36 not manifest that duty to pay depend on it


38 exchange of performances

41 fulfilled?

42 wrong type of tile

51 excuses


53 not if express condition


55 wrong tiles

56 but as sturdy

57 but as long-lasting


59 initially a mistake

59.1 but then discovered

59.2 but as sturdy and long-lasting

61 avoidance of severe forfeiture

62 minority view

63 extreme forfeiture

64 15%

65 Restatement standard

66 inadvertent

67 initially

68 minor condition

69 just as sturdy

69.1 just as long-lasting

71 condition #2: deadline


73 perhaps not

74 constructive

75 part of bargain

76 affect general and other subs

81 fulfilled?

82 September 1st

17

83 September 2

91 excuses?

92 impossibility?

93 strike

94 illegal

95 but assumption of the risk?

96 his employees

97 but minor?

98 short delay

99 but could affect general and subs


102 supra

103 minor condition?

104 supra


112 did not mention delay


114 minority fatal

115 here

116 majority—not unless estoppel

117 date had already passed

121 condition #3: certificate from Lucero

122 condition?

123 at least constructive

124 fulfilled?

125 not for last payment

131 excuses


133 supra

134 minor term?

135 domino theory

136 merely evidentiary


138 supra


139.1 supra

141 condition #4: payment by landowner

142 condition

143 “within five days”

144 temporal connotation

145 no condition language

146 just fix convenient time for payment

151 if all conditions excused or fulfilled, duty of immediate performance

152 D not perform


154 ergo, breach

18

QUESTION 81

Mr. Hamid owned a large piece of undeveloped land in a suburb of Morena. Ms. Ingvold was interested in

buying the land to develop a tennis club. Ingvold was personally acquainted with a popular local tennis pro, Ms.

Jasiow. Ingvold believed that the club would be a huge success if she could advertise that Jasiow was the club‟s

teaching pro.

On May 1, 2005, Hamid and Ingvold signed a writing describing a sale to be closed on October 1 for

$400,000. The writing required Hamid to pay for specified excavation to ready the site for a tennis club. The writing

also included the following provisions, inter alia:

7. The Parties shall not be obliged to proceed with this agreement unless and until:

(a) The Party of the Second Part (Ingvold) obtains a mortgage loan of no less than $800,000 for no

fewer than 10 years at an interest rate no higher than 9%;

(b) The following condition occurs, namely, she obtain a permit from the Morena City Council to

operate a tennis club on said premises. The permit will be obtained by September 1, 2005; and

(c) The further condition occurs, that is, by September 1, she is able to sign Felice Jasiow to a

contract for at least three years to serve as the teaching professional at the tennis club to be

developed on the premises.

Shortly after signing the writing, after a night of excessive drinking, Ingvold became seriously ill. She did

not fully recover until June 30. On July 1, she filed the permit application with the Morena City Council and its

Planning Commission. The commission clerk informed Ingvold that it “normally” took a month to process an

application but that she could expedite processing for an additional $100 fee. Ingvold responded, “A month is plenty

of time.”

The commission began reviewing the application and was preparing to take final action, approving the

permit, when its staff started an illegal strike on July 20. The strike lasted until August 25. Although the strike was

highly publicized in the local media, it never occurred to Ingvold that the strike would delay the approval of her

application. When she checked with the commission on August 30, she discovered that the permit would not be

issued until September 5. She accepted the permit on that date.

Ingvold's illness also delayed the start of her search for mortgage financing. (During May, June, and July,

the prevailing interest rate for commercial loans such as this one had been 8 ¾ %.) During August, Ingvold

contacted only one bank, First Northern of Morena. First Northern was willing to offer her an $820,000 loan for 11

years. However, they quoted her an interest rate of 9 ¼ %. When Hamid learned of Ingvold‟s problem, he offered to

reduce the purchase price to fully compensate Ingvold for the additional interest expense.

In early August, Ingvold had contacted Jasiow to ask whether Jasiow would be willing to become the

teaching pro at the new club. Jasiow told Ingvold to “send the papers ASAP.” The next day Ingvold‟s investment

advisor counseled her against the tennis project; he recommended that she invest in a number of bio tech firms that

he had studied. She remarked that his recommendation was causing her to have “second thoughts” about the club.

Ingvold never sent Jasiow the papers. When Ingvold telephoned Jasiow on August 30 and said she needed “a

definite Yes or No right away,” Jasiow responded that she “had no choice but to say No.”

On September 20, Ingvold sent Hamid a letter stating she would not close the sale. Her letter referred to her

problems in obtaining the permit and financing. On October 2, HAMID SUES INGVOLD FOR DAMAGES FOR

BREACH OF CONTRACT. WILL HE PROBABLY RECOVER? Prior to September 20, Hamid spent $60,000 on

the excavation work.

19

QUESTION 81

1 CONDITIONS?

2 CONDITION THAT D ABLE TO OBTAIN SPECIFIED MORTGAGE FINANCING

3 —not use “condition”

4 —contrast (b) and (c)

5 but “unless”

6 express condition

11 if a condition, fulfilled?

12 technical failure

13 9%

14 9 1/4%

21 excuses?



24 -8 3/4%

25 +P‟s offer

26 +”fully compensate”


28 neither at fault

29 delay more D‟s fault

29.1 excessive drinking

29.2 but not against express conditions

31 prevention

32 in a broad sense

33 carelessness

34 excessive drinking


42 minority view

43 but against express conditions

44 immaterial condition

45 given P‟s offer

46 not willful

*47 not P‟s fault at all

48 severe forfeiture

49 more than substantial performance

49.1 Restatement 15%

49.2 lose $400,000

49.3 60,000 in excavating

49.5 15% here

51 CONDITION THAT D ABLE TO OBTAIN PERMIT

52 Basic condition: obtain a permit

53 “condition”

54 express

55 fulfilled

56 in fact obtained

61 Was September 1st date part of condition?

62 —separate sentence

63 —not critical

64 —neither suffer any economic loss

65 no “time of essence” language

66 reasonable, convenient time

71 if September 1st part of condition, excuse?


73 supra

81 impossibility—(l) D‟s illness

20

82 not P‟s fault

83 D‟s excessive drinking

84 length of illness more than accounts for lateness

85 but only immaterial condition

86 supra

*

91 impossibility—(2) strike

92 could not anticipate

93 illegal

94 not P‟s fault

95 length of strike more than accounts for lateness

96 but only immaterial conditions

97 supra

101 prevention

102 “highly publicized”

103 D should have known

104 didn‟t seek expedited processing

105 mere $100

106 could have hired agent

107 inaction now recognized form of prevention

111 CONDITION THAT D ABLE TO HIRE TENNIS PRO

112 “further condition”

113 express


115 not hire

121 excuses?


123 supra

*131 prevention

132 intentional misconduct?

133 at first mere negligence

134 -then conversation with advisor

*13 5-”second thoughts”

136 -motive to walk away

137 “papers ASAP”

138 delayed

139 not sent “papers”

139.1 telephone call

141 waiver

142 sent letter

143 mention other conditions

144 omit this one


146 minority view

147 weak intentional waiver rationale

151 CONDITION THAT P COMPLETE EXCAVATION

152 express?

153 evidently before “unless”

154 not use “condition”

155 constructive

156 part of exchange of performances

157 ready site for tennis club

161 fulfilled

162 evidently completed work

171 D‟S DUTY OF IMMEDIATE PERFORMANCE

172 not perform

21


174 ergo, breach

22

QUESTION 82

Mr. Ellering owned a landscape business in Morena. Ms. Fuentes wanted to purchase the business. On

April 1, 2004, they signed a writing including these provisions, inter alia:

“3. Closing will occur on June 1 provided that Fuentes then has a Morena Landscape License.

6. At closing, Fuentes must pay Ellering $400,000, subject to the proviso that Fuentes be able to

obtain loan financing for at least $350,000 of the purchase price. The loan term must be no shorter

than 10 years; and the annual interest rate must be no higher than six percent (6%). Time shall be

of the essence.

7. Prior to closing, Ellering must make satisfactory progress toward computerizing the company‟s

business operations. The equipment installed must be first rate competitive.”

After signing, on April 10 Fuentes submitted a loan application at a local lending institution. (She applied

to only one bank because her attorney correctly informed her that that was the only bank offering a 6% interest rate

on commercial loans.) However, when Fuentes submitted the application, she misread the form. The form called for

copies of her income tax returns for the past four years, but she submitted copies for only the last two years. In

addition, she neglected to tender a check for the $200 loan application fee.

On April 20 she submitted her application for a Morena Landscape License. When she did so, the form was

complete. However, on April 25, when the City Council met, it amended the ordinance governing such applications.

The amended required additional information, namely, a set of fingerprints to be checked through the F.B.L‟s

database. The amendment specifically provided that the amendment applied retroactively to pending applications.

On April 30, Ellering hired Giang Computer Solutions to upgrade his computer equipment. He explained to

Ms. Giang that he wanted “as good a computer system as any landscape business in the state.” He paid her

$35,000.00, and she began installing the equipment.

On May 1, the bank left a voicemail for Fuentes to alert her that she had not submitted the check and the

two missing tax returns. However, Fuentes‟ message machine malfunctioned and did not record the caller‟s

reference to the tax returns. On May 2, she mailed the bank the $200 check. The bank received the check on May 4.

On May 5, the city clerk‟s office phoned Fuentes to tell her that she needed to submit fingerprints and that

she could have the fingerprints taken at any local police station. On May 20, Fuentes went to the closest station, had

the prints taken, and delivered them to the clerk‟s office.

On May 21, Fuentes learned of another investment opportunity that promised a much larger return than the

landscape business. She lost enthusiasm for the landscape business. On May 25, she visited Ellering‟s business and

cursorily examined the new computer equipment. The equipment Giang had installed was superior to that of any

landscaping business in Morena, but it was inferior to the equipment used by Morena financial institutions.

On May 28, Fuentes learned that: (1) due to her failure to submit the tax returns, the bank would not

approve her loan until June 5 at the earliest; and (2) the F.B.L would not complete her background check until June

10. (If she had submitted the fingerprints any time in the first half of May, the check would have been finished by

May 25th and the license issued by May 29.)

On May 30, Fuentes wrote Ellering a letter stating that she did not intend to appear for closing. Her letter

cited “the inferior computer equipment installed by Giang” and “my inability to obtain timely, satisfactory loan

funding.”

ELLERING SUES FUENTES FOR DAMAGES FOR MATERIAL BREACH OF CONTRACT. WHO

WILL PROBABLY PREVAIL?

23

QUESTION 82

1 D‟s duty: to close and buy

2 Conditions to D‟s duty

11 FINANCING

12. a condition?

13 “subject to the proviso”

14 wording

15 express

21 fulfilled or fail?

22 specified date June 1

23 June 5 at earliest

24 but strictly on time

25 “time of essence”

26 express

27 therefore, at least a technical failure

31 excused?

32 prevention by D

33 wrongful?

34 misread form

35 submitted incomplete application

36 negligence

37 machine malfunctioned

38 negligence


42 minority view

43 but respectable authority

44 even against express condition

45 here already paid $35,000

46 really lose that amount?

47 recoup if sell to third party

48 severe enough?

49 triple the loss in Jacob

51 COMPUTERIZATION

52 a condition?

53 “must make”

54 express duty

55 but not an aleatory K

56 therefore constructive condition of exchange


62 one theory of fulfillment—made progress”

63 not required to fully computerize

71 second theory of fulfillment—computer equipment fulfilled condition

72 “satisfactory”

73 if subjective, perhaps actually satisfied with performance

74 ulterior motive—more profitable business opportunity

75 “cursorily”

76 case for objective standard

77 does not specify subjective standard

78 commercial subject-matter

79 person to be satisfied party to K

79.1 but in favor of objective standard

79.2 reasonable businessperson would be satisfied

79.3 superior to any landscaping business

81 third theory of fulfillment—”first rate competitive”

82 admittedly not as good as financial institutions

24

83 but as good as any landscaping business

84 “competitive” qualifies “first rate”

85 more sensible interpretation

91 fourth theory of fulfillment—time to cure any deficiency

92 no express “time of essence” provision

93 express unius est exclusio alterius

94 infer time not of essence under this clause

95 P still has a reasonable period of time to cure

101 If fail, excused?


103 elements, supra

104 applicable here as well

105 stronger case because constructive condition


112 applicability

112 not against express conditions

113 this condition constructive

114 elements

116 objective

117 facts here

118 subjective

119 facts here

121 LICENSE

122 a condition?

123 “provided”

124 express


132 no express time of essence provision

133 expressio unius

134 normal inference

141 excused?

142 prevention?

143 wrongful?

144 not at the outset

145 but notified of amendment

146 delay

147 long delay—May 5 to May 20

148 if any time in first half of May

149 a week and a half

151 impossibility-delay not wrongful?

152 amendment

153 legal impossibility

154 must be unforeseeable

155 not enough facts here

156 limited to immaterial conditions

157 license could be important

158 lawful to operate business without license?

161 waiver


163 minority view

164 weak inference of intent to waive

165 majority view-strong showing of subjective intent

166 not on these facts


172 elements, supra

173 applicable here as well

25

174 even against express conditions

181 TENDER DEED

182 a condition?



192 not deliver deed

193 concurrent condition

194 but not even tender

201 excuses?

202 prospective non-performance of D‟s conditioned duty

203 D said did not intend to appear at closing

211 if excuse all conditions, duty of immediate performance

212 no evident discharge doctrine applicable

213 ergo, D guilty of breach

214 material breach?

215 outright refusal to perform

216 therefore material

26

QUESTION 83

Ms. Chang was the most successful interior designer in El Dorado. She leased the premises, 1837 Style

Lane, where she operated her design house, Modern Style, from Mr. Danzig. The area had been zoned exclusively

for residential use, but she had obtained the Planning Commission‟s permission to conduct a business at that

location. In part, her business was so successful because of the quality of her staff. Her design associates, Ms. Ehret

and Mr. Fernandez, had stellar reputations in the industry. Ms. Chang was contemplating retirement.

Mr. Giannelli was interested in buying Ms. Chang‟s business. He realized, though, that the business would

have the best chance of success if he could maintain the location where it had become so well known and if he

retained the services of Ehret and Fernandez. In early March 2003, Giannelli approached Chang about buying her

business.

They signed a writing on March 10, 2003. The writing had been prepared by Giannelli‟s attorney. The

writing included the following provisions:

B. It shall be a condition and undertaking of this agreement that no later than April 10, Chang must obtain a

permit from the Planning Commission, extending the right to operate a business at 1837 Style Lane until at

least January 1, 2008.

E. It is a further proviso of this agreement that Chang must obtain landlord‟s consent to the assignment of

the lease of the premises to Giannelli. Chang can obtain such consent by having the landlord personally

execute the attached form.

H. Chang shall deliver to Giannelli signed employment contracts for both Michelle Ehret and Ian

Fernandez, obligating them to work for Modem Style until at least January 1, 2008.

F. At closing on April 30, Giannelli shall pay Chang $650,000.

Chang set about to get the permit. She spent $15,000 in attorneys‟ and consulting fees. She would have

obtained the permit well before April 10, but there was an illegal strike by city employees. Due to the strike, she did

not obtain the permit until April 12. When she obtained the permit, she phoned Giannelli. Giannelli said that he was

“not happy with the delay” and that he expected her to “live up to both the spirit and strict letter of every other

contract provision.”

On April 13, Chang attempted to contact Danzig to obtain his consent to the lease assignment. She was

shocked to learn that he had just died. On April 15, she reached Ms. Hoing, the attorney who was the executrix of

Danzig‟s estate. She said she was willing to consent, but she pointed out that on March 15, a new state statute had

taken effect, prescribing a new statutory form for all commercial lease assignments. She gave that signed form to

Chang.

Meanwhile Giannelli had had second thoughts about his deal with Chang. Some other investment

opportunities had presented themselves, and Giannelli thought that he could put his $650,000 to better use. On April

17, he had an interview with Ehret and Fernandez. Before signing, they wanted to know what type of boss he would

be. They had heard accurate reports that he was normally a pleasant, laidback boss. They were taken aback when he

told them that “I‟m the toughest boss you‟ll .ever have. I don‟t stand for any nonsense at all. If you work for me, it‟s

my way or the highway. You need to dot absolutely every i and cross every t.” After that conversation, they phoned

Chang to say that they would not sign new employment contracts. They said Giannelli‟s remarks “scared them.”

Giannelli called to say “the deal is off.”

Chang suspected that Giannelli had sabotaged her efforts to persuade Ehret and Fernandez to sign CHANG

SUES GIANNELLI FOR DAMAGES FOR MATERIAL BREACH OF CONTRACT. DO NOT DISCUSS THE

MEASURE OF DAMAGES.

27

QUESTION 83

1 the duty to pay

2 CONDITION #1: OBTAIN THE PERMIT

3 a condition?

4 “a condition”

5 express

6 alternatively, “undertaking”

7 not an aleatory K

8 also a constructive condition

11 fulfilled?

12 “no later than”

13 sufficient to make time of essence?

14 if so, technical failure

21 excused?


23 objective

24 only two days late

25 subjective

26 not her fault

27 but not against express conditions

31 impossibility

32 illegal strike

33 foresee?

34 not at fault

35 an immaterial part of the bargain?

36 relevance of TOE

election waiver

41 duty as well as condition “undertaking”

42 breach

43 material?

44 If TOE

45 material breach puts victim to election

46 obviously elected to treat as minor and continue

47 intentional waiver


49 seemingly minor aspect of the bargain

49.1 avoidance of forfeiture

51 against express conditions

52 $15,000

53 relative to $650,000


61 CONDITIONS: CONSENT TO LEASE ASSIGNMENT

62 a condition?

63 “proviso”

64 express

65 alternatively, duty

66 “must”

67 not an aleatory K


71 fulfilled?

72 if specific form not part of condition

73 separate sentence

74 “can”

75 suggestive that alternatives permissible

76 contrast with “must”

28

77 if so, fulfilled

81

82 excused?



85 same legal effect


87 not at fault

88 Danzig‟s death

but not against express conditions

91

92 impossibility—the legislation

93 not foresee

94 requires use of prescribed form

specific form immaterial

101

102 impossibility—Danzig‟s death

103 “personally”

104 not foresee

105 not at fault

106 her signature has the same legal effect

executrix of estate


112 already spent the $15,000

113 how much additional time and expense

114 missing facts

115 but only a minority view

121

122 CONDITION #3: SIGNED EMPLOYMENT CONTRACTS

123 condition?

124 “must”

125 no language such as “condition” or proviso”

126 duty

127 but not an aleatory K

constructive condition of exchange

131

132 fulfilled?

clearly a technical failure

141 excused?


143 already spent the $15,000

144 additional time and expense?

145 missing facts

146 but only a minority view

151 prevention

152 form

153 active interference

154 substantially impede

155 “scared them”

161 wrongful?

162 ulterior motive

163 second thoughts about the contract

164 other investment opportunities

155 changed behavior

166 accurate reports

167 “normally”

29

168 “toughest boss”

169 “any nonsense at all”

169.1 “my way or the highway”

169.2 “dot every....”

171 if all three conditions fulfilled or excused, duty of immediate performance.

173 present breach

173 when did P file suit?

174 anticipatory breach

181 if duty, not performed


191 alternative theory: implied duty of cooperation

192 breach

201 breach material or minor?

202 P has not yet what she bargained for

203 intentional breach?

204 prevention, supra

205 automatically material in some jurisdictions

30

QUESTION 84

Mr. and Mrs. Fong lived on a large parcel of land in Morena. Mrs. Fong‟s elderly parents, the Grants, lived

in New York City. In early 2002, Mrs. Fong persuaded them to move Morena. At the time, the New York City realty

market was hot, and Mrs. Fong assumed that her parents would be able to sell their house quickly and be ready to

relocate to Morena no later than July 30. Although the Grants agreed to move to Morena, they did not want to move

in with the Fongs. Consequently, the Fongs decided to have a small guest house built on their property.

On April 1, 2002, the Fongs signed a written contract with Ms. Harris, a licensed general contractor in El

Dorado. The writing contained the following provisions, inter alia:

—A clause reading “WHEREAS Mrs. Fong‟s parents, the Grants, contemplate immediately relocating to

El Dorado;”

—#2. “Harris shall obtain a requisite permit from the Morena Building Office by April 30, 2002.”

—#3. “It is expressly agreed that Harris will strictly comply with the attached plans and specifications.

$300,000 is payable on completion.” (The plans contained numerous features to tailor the house for an

elderly couple, including a walk-in shower, wider door frames to facilitate the use of a wheelchair, and

lower placement of the fixtures in the shower.)

—#6 “Timely performance is generally essential in this contract.”

—#9 “Harris shall not be liable for unanticipated acts of government, nature, or providence.”

On April 10, Harris submitted the application for the building permit. The permit would normally have

been issued by April 25. However, on April 20 there was a fire at the building office. The fire shut down the office

until May 1. The office issued the permit to Harris on May 3. (Harris did not inform the Fongs that she was late

obtaining the permit.)

On May 10, Harris‟ subcontractor began working on the foundation for the guest house. He read the plans

hurriedly and consequently misread the dimensions. When his crew began pouring the foundation, they made it two

feet wider and one foot deeper than the plans called for. The added depth made the foundation more solid than it

otherwise would have been. Harris did not notice the subcontractor‟s mistakes.

On May 15, Harris‟ own employees began erecting the house. On May 25, they installed the plumbing

fixtures, including the fixtures in the shower. Harris‟ employees did not pay careful attention to the plans and

installed the shower fixtures at normal height rather than the lower height specified in the plans. Harris did not

discover their mistake until June 1. By then, the plumbing had been walled in and the tiles added to the walls. When

Harris discovered the problem, it would have cost approximately $5,700 to correct. He instructed his employees not

to mention the problem to the Fongs. (The height of the fixtures actually increased the fair market value of the guest

house by $2,000.)

Harris‟ employees continued working on the house until July 10th. At that time, their union staged an

illegal strike for increased wages. Harris threatened the employees and the union with a lawsuit, but they did not

return to work until July 25th. At that time there were still two weeks‟ worth of work remaining to complete the rest

of the house according to the plans.

In the meantime, the New York real estate market had cooled off. The Grants had yet to sell their New

York residence. On July 26, the Grants flew out to Morena to inspect the guest house. Mr. Grant, a retired architect,

pointed out to the Fongs the problems with the foundation and shower as well as the fact that Harris would be unable

to complete the project by July 30. The Fongs immediately took possession of the work site and fired Harris. Harris

sued for material breach of contract. WILL SHE RECOVER? Do not discuss the measure of damages.

31

QUESTION 84

1 D‟S DUTY

2 pay

11 P‟S CONDITION TO THE DUTY

12 THE PERMIT

13 fulfill?

14 Specified date April 30

15 late—May 3

16 time of the essence?

17 “generally”

18 a bit vague

19 slight delay practically unimportant

19.1 why not tell?

19.2 Did she think time of essence?

21 if fail, any excuse?

22 K clause

23 “not liable”

24 not justify affirmatively imposing liability

25 impossibility

26 fire

27 no fault

28 inconsequential delay

29 time of the essence, supra


32 not an express condition


34 good fifth effort

35 beyond her control


satisfied essential purpose, project proceeding

37 waiver by D

38 P never told D


39.1 minority view

39.2 relatively immaterial

39.3 extent of forfeiture

39.4 all the money at the end

39.5 perhaps if the only provision preventing recovery

39.6

41 THE FOUNDATION

42 Type of condition

43 “expressly”

44 but “agreed”

45 language of duty


47 fulfill?

48 Two feet wider

49 One foot deeper

51 if fail, any excuses?

52 Substantial performance

53 if constructive condition


55 subcontractor, not P

56 “hurriedly”

57 unintentional

32


59 more, not less

59.1 better

59 2 more solid

59.3 serve the same purposes

61 waiver

62 election?

63 Later took possession of site

but on their property

64 voluntariness


66 supra

67 weaker case: more material provision

68

71 SPECIAL DESIGN FEATURES FOR THE ELDERLY

72 Type of condition

73 supra

74 fulfill?

75 Placement of fixtures

81 if fail, any excuse?

82 Substantial performance

83 if constructive condition


85 his employees‟ mistake

86 not “pay careful attention”

87 mere negligence

91


93 more

94 increase fair market value

economic waste

95 $5,700

96 generally serviceable

97 but special purpose

98 for the elderly

101 waiver

102 election

103 supra


105 supra

106 again more material

111 ON TIME COMPLETION?

112 Fulfill?

113 Two weeks late


115 Generally not in construction Ks

116 +WHEREAS clause—”immediately”

117 +”essential”

118 but “generally” weakens the language

119 if so, what happens later irrelevant

119.1 immaterial that Grants didn‟t sell immediately

119.2 August 1st in the contract?

121 if fail, any excuses?

122 Impossibility

123 strike

124 “illegal”

33

125 threatened suit

126 but his employees

127 not industry-wide

128 no threats of violence

129 inconsequential provision?

129.1 Time of essence, supra

substantial performance

131 not if time of essence


133 supra

134 how material?

135

141 if excuse all conditions, duty of immediate performance

142 not performed


144 ergo, breach.

145 material?

146 Withhold all the money

34

QUESTION 85

The Dongs owned an undeveloped lot on Lake Elston. They eventually wanted to retire to the lake. They

had a large family and hoped that during their retirement, their children and grandchildren would visit frequently,

especially during the summer. However, local environmentalists believed that the lake area was too densely

developed and had mounted a well publicized campaign to lobby the county board of supervisors to declare a

moratorium on new construction. When the Dongs heard about the environmentalists‟ campaign, they decided that

they needed to move quickly to build on their lot. They chose Ms. Falco as their contractor

The parties entered into a signed contract in early March 2000. In the writing, the Dongs promised to pay

Ms. Falco $250,000: $200,000 for a main house and $50,000 for a boat shed. Both sums were payable on May 31.

The writing read: “The Dongs undertake their duties on the understanding that Ms. Falco will strictly fulfill her side

of this bargain.” In addition, the writing: required Falco to obtain any necessary building permits; specified a high-

grade, expensive type of insulation, since the winters at Lake Elston could be quite cold; gave the Dongs the right to

choose the lighting and plumbing fixtures; established the following “strict deadlines” for the phases of the work-

March 31 for the foundation, April 30 for the boat shed, and May 31 for the entire project; and set out the

dimensions for the boat shed, permitting the Dongs during the winter “to store a 22‟ boat, the type capable of seating

eight persons.”

Falco began work in late March. She hired a subcontractor to install the insulation. When the subcontractor

went to the warehouse to order the insulation, another, very similar brand was on sale for a lower price. That type of

insulation was just as good as the kind of insulation specified in the contract during the winter but not as efficient

during the summer. Because the former type of insulation was so much cheaper, the subcontractor purchased and

installed the former. He never told Falco that he had substituted another type of insulation.

On April 1, the county board adopted an emergency ordinance that took effect immediately. While the

ordinance did not halt all new construction, it imposed new restrictions, including limitations on the size of

lakeshore boat sheds. Under the new restrictions, the maximum length of a boat shed could be only 16—as a

practical matter, the shed would only be big enough for a boat that could accommodate four passengers. When Falco

applied for her permit on April 3, she learned of the new restrictions. She reluctantly complied with the terms of the

permit and built a 16‟ boat shed before April 30. (The undisputed expert testimony is that the small size of the shed

reduces the fair market value of the Dongs‟ property by $30,000.)

In late April, it was time for Falco to order fixtures. She asked the Dongs to make their selections.

However, when Falco called, Mr. Dong had just come down with a very serious case of influenza. Mr. Dong was

hospitalized for two weeks. Mrs. Dong spent a good deal of her time at the hospital and did not bother to return

Falco‟s calls. On May 15, Falco finally reached Mrs. Dong and explained that she need to finalize the choices

“yesterday” to keep the construction project on schedule. Mrs. Dong made the choices by May 22.

On May 28, the Dongs visited the lot and became angry when they discovered that the boat shed was much

smaller than the contract specifications. On May 29, they ordered Falco‟s crew off their property. On May 29, they

also sent Falco a letter, explaining that “your failure to live up to the requirements for the boathouse is intolerable.”

Falco sues the Dongs on the contract for damages for breach. CAN FALCO RECOVER ON ALL OR PART OF

THE CONTRACT? DO NOT DISCUSS THE MEASURE OF RECOVERY. There is undisputed expert testimony

that Falco could have completed the main house by June 5th.

35

QUESTION 85

1 CONDITION #1: INSULATION

2 type of condition


4 express?

5 “The Dongs undertake”

6 refers to both sides‟ commitments

7 probably sufficient

11 fulfill?

12 no

21 excuses

22 SUBSTANTIAL PERFORMANCE


24 +winter

25 -summer


27 +subcontractor

28 +not tell general

29 -intentional

29.1 -bad faith: cut costs

29.2 not against express conditions

31 INTENTIONAL WAIVER


33 knowledge?

34 latent defect

35 no indication they knew

41 FAILURE TO MENTION

42 minority view

43 not mention in letter

51 AVOIDANCE OF FORFEITURE

52 +express condition

53 +extreme forfeiture

54 no $ until May 31

55 -only inconsequential conditions

55 insulation important

57 -only inadvertent

58 intentional

59 minority view

61 CONDITION #2: BOATHOUSE

62 type of condition


64 express?

65 supra

71 fulfill?

72 no

81 excuses?

82 SUBSTANTIAL PERFORMANCE


84 22‟ vs. 16‟

85 8 vs. 4 people

86 large family

87 $30,000 FMV

88 more than 10% of K price


89.1 negligence

36

89.2 but unintentional

91 IMPOSSIBILITY


93 unforeseen event?

94 well publicized campaign

95 but so soon

96 emergency ordinance

97 fault?

98 if had applied immediately

99 delayed

99.1 but so soon

99.2 “emergency”

99.3 only immaterial conditions

99.4 important part of bargain

99.5 $50,000 absolute terms

99.6 1/5 of K price


102 +forfeiture

103 all $ at the end

104 +against express conditions

105 -minority view

106 -only immaterial parts of bargain

107 no

108 inadvertent

109 not intention

109.1 at most negligent

111 CONDITION #3: FINAL DEADLINE

112 type of condition


114 express?

115 supra

121 fulfill?

122 -no “time of essence”

123 +but “deadline”

124 +”strict

125 +Dongs in rush

126 +”well publicized”

127 +Falco should have known

128 thus, failure

131 excuses

132 INTENTIONAL

133 voluntary?

134 they owned the land

135 minority view

141 FAILURE TO MENTION


143 minority view


152 +vs express conditions

153 +extreme forfeiture

154 all $ at the end

155 +inadvertent

155 the Dongs‟ fault

157 -immaterial

158 at least debatable

161 PREVENTION

37

162 (1) ORDER OFF PREMISES

163 three days early

164 but need five days

171 (2) DELAY IN SELECTING FIXTURES

172 -understandable

173 serious illness

174 +but long delay

175 a week after “yesterday”

175 +not even return calls

177 more than enough time

178 need only five days

181 IF FULFILL OR EXCUSE ALL CONDITIONS



184 ergo, breach

191 RECOVER ON PART OF THE CONTRACT?

192 divisibility

193 parts?

194 yes

195 Pairs?

196 yes

197 mini-Ks?

198 proportionate benefit

199 two prices stated

38

QUESTION 86

Ms. Chen was the owner of the Morena Marauders, a professional co-educational tennis team in Morena,

which played at the municipal stadium. The club had two of the league‟s three star players, Jane Escarra and John

Fishburne. (The third was Sergio Gamba, who played for Kansas City. For the past two years Gamba had been the

league‟s Most Valuable Player.) Mr. Diaz, who operated a local realty development firm, was interested in buying

the team. On March 1, 1999, Chen and Diaz entered into a written contract. The contract provided that the parties

would close the transaction on July 1, 1999 and that at that time, Diaz would pay Chen $ 10,000,000 for the club.

The writing contained the following provisions:

1. It is understood and recited that Mr. Diaz will need to obtain a loan of at least $8,000,000. To be

satisfactory to Mr. Diaz, the terms must provide for repayment in no fewer than 20 years and at an interest

rate no higher than 6%.

2. It is stipulated that total attendance for the Marauders‟ home matches between March 1, 1999 and June

25, 1999 must be no less than 15,000.

3. It shall be another proviso that at the time of closing Ms. Chen must produce signed employment

contracts binding Jane Escarra and John Fishburne to continue playing for the Marauders until at least

January 1, 2002.

Just before Diaz signed, he commented that he “would love to have Gamba as a player, but that‟s just too

much to hope for.”

On June 1, his accountant informed Diaz that Diaz had suffered financial reverses. Diaz decided to try to

get out of the contract. In mid-June, at Chen‟s urging Morena Bank, the largest local bank, tried to contact Diaz to

arrange his loan to purchase the Marauders. Diaz didn‟t return the call for a week. When the bank called again, they

reached Diaz and told him that “as soon as possible you need to send us your tax returns for 1995-98.” Diaz relayed

the request to his accountant but said: “It‟s nothing urgent. You don‟t need to drop everything just to make the

bankers happy.” Two weeks later the accountant gave Diaz a packet to be sent to the bank. The packet included

Diaz‟ tax returns for 1994-97. Diaz sent the packet without noticing that his 1998 return was missing.

In early June Ms. Chen began contract renegotiations with Escarra and Fishburne. She initially signed

Escarra to a contract extension lasting until January 1, 2002. Fishburne orally agreed to a similar extension; but just

before he could sign, he died unexpectedly. To replace him, Ms. Chen immediately signed Gamba to a contract

lasting until January 1, 2003. Ms. Chen sent Diaz a copy of the two contracts and Fishburne‟s death certificate.

By June 20, the attendance at Marauders home games had reached 14,000. The minimum attendance at any

game this season had been 2,200 fans. However, when the former El Dorado Governor died, the incumbent

Governor declared June 24 a state day of mourning and ordered that all government facilities be closed. A

Marauders home game had been scheduled for that date. The game was rescheduled for June 26, and 4,300 fans

attended.

On June 30, Chen phoned Diaz and updated him on all relevant developments since March 1. On July 1,

Diaz wrote Chen a letter. Diaz‟ letter read: “Sorry the financing didn‟t work out. However, I guess that you couldn‟t

hold up your end of the deal either. I‟ve been following the attendance figures I see you didn‟t make the 15,000. The

deal just wasn‟t meant to happen. It‟s best if we just forget about the whole thing.” Diaz refused to close the deal.

CHEN SUES DIAZ FOR BREACH OF CONTRACT. IF THERE IS A BREACH, IS IT MATERIAL?

39

QUESTION 86

1 DUTY TO BUY

11 CONDITION #1: FINANCING AVAILABLE

12 a condition at all

perhaps recital of fact

14 “understood”

15 “recited”

16 “will”

17 but “another proviso”

18 context

19 moreover, what other purpose

19.1 thus, an express condition


22 not technically fulfilled?

excuse?

31 prevention

32 wrongful conduct

33 need not be active

34 passive misconduct suffices

35 intentional

36 “nothing urgent”

37 “don‟t need to drop”

38 “as soon as possible”

39 negligent

39.1 1995-98

39.2 1994-97

39.3 accountant‟s error

39.4 impute?

39.5 D did not notice

41 CONDITION #2: ATTENDANCE

42 a condition at all?

43 “it is stipulated”

44 but evident purpose

45 and “another proviso”

46 context

52 but is date part of the condition

52 no “tune of the essence”

53 but “must”

54 if date not part of the condition, fulfilled

55 if date part of the condition, technically failed

61 excuses


63 unexpected death

64 unexpected day of mourning

65 municipal stadium

66 but cannot excuse material part of bargain

67 short delay

68 no economic injury to D

69 but if time impliedly of essence, automatically material



73 good faith by P

74 no fault on P‟s part


76 met attendance requirement after short delay

40

77 no economic injury to D

78 but limited to constructive conditions

79 if express condition, excuse inapplicable


82 applicable against express conditions

83 only immaterial part of bargain

84 date important?

85 supra


87 even if court adopt, must show extreme forfeiture

88 what forfeiture other than benefit of bargain?

91 CONDITION #3: EMPLOYEE‟S CONTRACTS

92 condition at all?

93 “proviso”

94 generally means a condition

95 thus, an express condition


102 one employee signed

103 the other employee did not

104 technically failed

105 excuses?

111 impossibility

112 death

113 renders fulfillment impossible

114 “unexpectedly”

115 but only immaterial part of the bargain

116 personal services contract

117 a star

118 probably material



123 good faith

124 no fault


126 replacement player

127 another star in league

128 MVP

129 twice

129.1 D “love to have”

129.2 “too much to hope for”

131 but only constructive conditions.

132 express condition here

133 ergo, excuse inapplicable

141 avoidance of extreme forfeiture

142 true can be used against express conditions


144 supra

145 have to show extreme forfeiture

146 what loss other than mere benefit of bargain?

147 minority view

151 waiver

152 estoppel?

153 not induce change of position

154 election?

155 no choice between inconsistent rights

156 intentional?

41

157 not under realistic, DAHL view

158 weak inference of intent to waive

159 but did not mention in the letter

159.1 p had updated D

159.2 even then a weak inference.

159.3 distinct minority view

161 if fulfilled or excused all conditions, duty of immediate performance

162 not perform

163 no discharge

164 thus, a breach

171 IF A BREACH, MATERIAL?

172 in limine

173 at the outset

174 some say automatically material

175 intentional

176 financial reverses

177 wanted to get out of contract

178 some say automatically material

179 the essence of D‟s part of the bargain

179.1 probably material

42

QUESTION 87

Mr. Falco owned a burglar alarm company in Morena. His clients included several government agencies He

decided to diversify his company by providing security services for businesses and civilian government agencies In

order to do so, he created a new department, Patrol Services. He began searching for a new employee to head the

department

On July 1, 1998, he spoke with Ms. Guyton. For five years, she had been the head of operations for the

government secret service of a small Middle Eastern country. She had an excellent reputation in the security

business. When Falco and Guyton spoke, she indicated that she was “very interested in the job” but “only if” Falco

was willing to “invest the level of resources needed to do the job right, first class. You know, a decent training

facility, etc.” Falco assured her that he would place “adequate” resources at her disposal.

On July 10, 1993 Falco and Guyton entered into a written personal services contract running until July 1,

2003. Under the terms of the contract, Guyton “promise[d]” to report to Falco‟s headquarters “no later than August

1, 1998 to assume” her duties. Since many of the contemplated clients were government agencies, the contract

provided that Guyton “further committed” to apply for a Top Secret government security clearance and to “obtain

said clearance by September 1, 1998 at the latest.” The contract stated that “time” was “of the essence” of Guyton‟s

promise to obtain the clearance. Another clause stated that the writing “voids and renders nugatory all prior and

contemporaneous agreements between the parties.”

After signing the contract, Guyton returned home to pack for the move. When she arrived home, she

tendered her resignation as secret service director; her contract with the foreign government gave her the right to do

so. However, the prime minister decided that “national interests” required that she remain to train a replacement.

The prime minister ordered the immigration authorities to refuse to allow her to leave until they received orders

from him. She reluctantly complied and consequently did not arrive in Morena until August 15, 1998. When she

arrived, Falco gave her her initial paycheck but “caution[ed]” her about “timely performance.”

As soon as Guyton arrived in Morena, she applied for the Top Secret security clearance. However, when

her application arrived, it was mislaid by the U.S. government official. Guyton repeatedly called, but the

government delayed. Guyton asked Falco to help; “with all your government contacts, you could put in a good word

and expedite the process.” At the time, though, Falco was preoccupied with another business deal; he told Guyton

that it was her problem, “not mine.” Guyton did not obtain the clearance until September 15, 1998.

On October 1 Falco gave Guyton another paycheck but deducted $3,000. A notation on the check read:

“Deduction for delay in obtaining contractually required clearance.”

On October 2 Guyton stormed into Falco‟s office. She objected to “this nonsense about my check. You

never lifted a damn finger to help with the clearance. Moreover, you‟ve given me only a $50,000 training budget.

That‟s a joke. You‟re asking me to do this job on a shoe string. I want assurances in black and white right now that

you‟ll give me $200,000 for training, or at the end of this month I‟m headed out the door.” Falco said, “Show me

where it says in your contract that I have to fork over that much money to build you a fancy playground for your

rent-a-cops.” Guyton responded, “That does it. I‟ll serve out the month, but then I‟m history.” Falco responded,

“There‟s the door. It hasn‟t been nice knowing ya.” Guyton then left.

On October 3 Falco files suit. At trial, there is undisputed expert testimony that it would cost “at least

$2000,000 to initially fund adequate training for a security force of the size contemplated by” the contract between

Falco and Guyton.

43

QUESTION 87

1 P‟s conditions to D‟s duty to work

11 condition: payments

12 to date

13 one made

14 another made

15 but deficient

16 but assume prior breach

17 self-help remedy?

18 under UCC

19 this not under UCC

19.1 policy argument in favor

19.2 if not, condition failed

21 future payments

22 prospective non-performance?

23 why did D refuse

24 claimed prior breach by P

25 protested failure to pay

26 payment duty as well as condition

27 if no self-help remedy, breach

28 perhaps no prospective non-performance.

31 condition: cooperation

32 implied?

33 prior contacts

34 relevant to this business

35 D requested aid

36 P did not lift a finger

37 if condition failed, no duty of immediate performance

41 condition: investment of resources

42 parol evidence problem

43 “only if”

44 specifically refer to training facility

45 but not in writing

51 step #1: integration?

52 test finality

53 obviously yes

61 step #2: complete integration?

62 UCC not govern here

63 personal services contract

64 Wigmore: subject-matter

65 debatable

66 Williston: normally and naturally

67 merger clause

68 more complete

69 presume complete

69.1 Corbin

69.2 no

69.3 UCC

69.4 power to apply by analogy

69.5 “certainly” would have included

71 if a condition, fulfilled?

72 undisputed expert testimony $200,000

73 only $50,000

81 D‟s duties

82 -----get there “on time”

44

83 August 1

84 August 15

91 discharge?

92 prime minister


94 but foreign law

95 modernly

96 but specific order, not general law change

97 modernly

98 if so, no breach

101 if breach, material?

102 contract says “of the essence” of clearance

103 but not of arrival

104 expressio unius

105 +in limine

106 in some jurisdictions automatic

107 -no identifiable economic harm

108 -not her fault

109 -in any event, P elects to treat as minor

109.1 continued K

111 -----get the security clearance

112 September 1

113 “at the latest”

114 September 15

121 discharge: impossibility

122 government‟s delay

123 could she have applied before arriving in the US?

124 her fault?

125 if so, breach

131 if breach, material?

132 another early breach

133 in some jurisdictions automatically material

134 moreover, “time” “of the essence”

135 automatically material

136 -but inadvertent

137 -but no identifiable economic harm

138 probably material

139 but P elects to treat as minor

139.1 continues K

139.2 merely tries to deduct $3,000

141 departure

142 anticipatory breach?

143 threat before actually left

144 time #1: time of alleged breach

145 D‟s threat

146 relatively categorical

147 conditional

148 legality of condition, supra

149 P‟s position

149.1 remaining conditions

149.2 remaining duties

151 time #2: interim between breach and trial

152 P elects

153 before D retracts

45

QUESTION 88

Mr. Cardonez is a general contractor in El Dora do Ms Dalton owned a warehouse business in El Dorado

Her business, founded m 1995, had grown rapidly She was in a rush to construct a new warehouse to accommodate

the expansion of her business She contacted only one contractor, Cardonez, because she had dealt with him once in

the past,

On March l, 1997, Cardonez and Dalton entered into a written contract to erect a new warehouse on land

Dalton owned. The writing set out “deadlines” for the work pouring the foundation by May 1, the erection of the

entrances and wails by June 1, the addition of the roof by July 1, and completion by August 1. The writing stated

that 10 days after the completion of each phase, Dalton would pay Cardonez $200,000. The writing included the

following clauses:

1. Cardonez “promised that the finished building would be completely satisfactory. The building shall be in

compliance with both the attached plans and specifications.”

2. Before receiving each progress payment, Cardonez had to obtain a certificate of completion and

compliance from Mr. Ehito, a local architect. Ehito was Dalton‟s college classmate.

3. The attached plans and specifications stated that “In order to recover under this contract, the Contractor

shall strictly comply with the following specifications.” Under a subheading entitled “Functional

Requirements,” the specifications provided that “the building shall be exactly 60,000 square feet in size.”

Under a subheading entitled “Aesthetic Guidelines,” the specifications stated that the tile at the entrance

must be “turquoise colored, Eagle brand tile AA14.”

4. Cardonez “should stay on schedule, since timely completion is important” to Dalton.

After signing the writing, Dalton learned that if she had competitively hid the project, she probably could

have gotten the job done for under $500,000. She regretted entering into the contract with Cardonez and told Ehito

that “frankly, I‟m looking for a way out.”

Cardonez began performance in April 1997. By the end of April, he had poured the foundation. However,

the foundation was larger than the plans called for; when completed, the square footage would be 60,500. (The

larger size would make the building even more useful to Dalton as a warehouse, but it would slightly increase the

annual property tax on the building.) When Cardonez sought the first certificate from Ehito, Ehito discovered the

error. Ehito issued the certificate but gave Cardonez “a stem warning to stick to the letter of the specs in the future.”

In early May, Cardonez laid the entrance tile. Cardonez had hired a subcontractor to do the tiling. The

subcontractor read the specifications cursorily. He ordered a tile manufactured by Classic rather than Eagle. With

one exception, the tile was identical to “turquoise colored, Eagle brand tile AA14”: Eagle gave a 2 year warranty

while Classic offered a 3 year warranty.

In late May, Cardonez‟ foreperson had a heated argument with Dalton. The foreperson was so incensed that

Cardonez‟ employees went on a three day strike. Due in part to the strike, Cardonez did not finish erecting the walls

until June 7.

On June 10, Cardonez approached Ehito for the second certificate. Ehito noticed that the tile was Classic

rather than Eagle. Ehito told Dalton “not to worry-it‟s essentially the same tile with a better warranty.” However,

Dalton blew up and told Ehito that “that idiot Cardonez has done it again, in addition, he‟s late. If you know what‟s

good for you, you won‟t even think of issuing that clown a certificate. This deal is off” Ehito decided not to issue the

certificate.

On June 11, Dalton wrote to Cardonez. The letter barred Cardonez from the work site. The letter stated that

“I‟m dissatisfied, since you [Cardonez] violated the agreement again by installing the wrong type of tile.” On June

46

12, Dalton took possession of the work site. Since her existing warehouse was full, she began using the new

warehouse. On June 20, Cardonez sues.

47

QUESTION 88

1 conditions to D's duty to pay

11 CONDITION: SIZE

12 a condition

13 “In order to recover”

14 “specifications”

15 included in the specifications

16 “Functional Requirements”

17 express

21 failed

22 “exactly”

23 larger

31 excused?



34 more property tax

35 but only “slightly increase”


37 probably mere negligence



42 alternative to substantial performance

43 apply to express conditions


51 waivers

52 intentional

53 voluntary relinquishment of known right

54 Ehito knew

55 impute to D

56 election

57 D elects to continue contract

58 but was it a major breach?

59 did D really have an election?

61 waiver when D takes possession of new building

62 voluntary

63 but on her land

71 CONDITION: TILE

72 a condition?

73 true subheading under “specifications”

74 but subheading (mere) “Guidelines”

75 contrast “Functional Requirements”

81 if a condition, failed

82 wrong type of tile




94 “essentially the same”

95 longer warranty


97 sub's mistake

98 hurried

99 perhaps this was not an express condition

101 alternatively, avoidance of severe forfeiture

102 waiver in later letter

103 mentioned that failure

48

104 waiver when took possession

105 supra

111 CONDITION: TIMING OF COMPLETION OF SECOND PHASE

112 a condition?

113 “deadline”

114 constructive condition of exchange

121 if a condition, failed?

122 no “time of the essence” clause

123 no identifiable economic harm

124 but “timely completion” important

125 true for overall project

126 also true for this phrase?


132 impossibility

133 strike

134 render truly impossible?

135 not the cause of entire delay

136 three day strike

137 seven days later

138 assumption of the risk

139 his employees

139.1 not excuse material part of the bargain

139.2 “timely completion” important

141 prevention

142 D contributed to strike

143 Was D at fault?

144 perhaps P's foreperson at fault

145 missing facts

146 again, not account for entire delay

147 three day strike

148 seven day delay

151 waiver


153 “again ambiguous”

154 minority view

155 no facts giving rise to an estoppel

161 waiver by taking possession

162 Supra

171 CONDITION: CERTIFICATE

172 a condition?

173 no other evident purpose for provision

181 if condition, failed

182 Ehito did not issue



193 the domino theory: if fulfill substantive condition


195 D's college friend

196 probably being paid by D

197 D threatens, “If you know. . . .”

198 prevention

199 D threatened architect

199.1 waiver by not mention in letter

199.2 minority view

199.3 waiver by take possession

119.4 supra

49

201 CONDITION: “SATISFACTORY”

202 interpretation

203 subject-matter commercial

204 favors objective standard

205 person the opposing litigant

206 favors subjective standard

207 wording

208 not specify the standard

211 if objective, satisfied

212 some small defects

213 but reasonable person

214 if subjective, fulfilled?

215 says “dissatisfied”

216 but was told served essential purpose

217 “looking for a way out”


222 waiver by taking possession

223 supra


225 minority view

231 CONDITION: COMPLETION OF THE WORK

232 did not fulfill

233 excused?

234 prospective non-performance of the conditioned duty

235 prevention

236 barred form work site

241 if all conditions fulfilled or excused, duty of immediate performance

242 no discharge

243 therefore breach

244 material?

245 intentional

246 essence of the bargain

247 the work for the pay

50

QUESTION 89

Ms. Dunston owned a shopping mall in Morena. A tenant had just vacated a space in the mall. Mr. Elow

had recently moved to Morena and wanted to open a restaurant. He was looking for space when a realtor informed

him of the vacancy at Dunston's mall.

On March 1, 1994, Dunston and Elow discussed the possibility of Elow renting the empty space. On March

10, they signed a valid, enforceable written contract. The writing stated that the lease would run from July 1, 1994 to

June 30, 1997 with a $4,000 monthly rental. The writing included the following provisions:

#2. Landlord understands that Tenant may require Landlord's assistance in obtaining a loan to finance the

opening of a restaurant in the demised premises. Landlord promises to exert reasonable efforts to aid Tenant in

obtaining a loan. #5. This lease is subject to Tenant's ability to obtain a timely liquor license for the premises.

Landlord promises to cooperate in Tenant's efforts to obtain a license and promptly furnish any documents needed

for a license.

#11. Landlord promises to renovate the premises according to the attached specifications. (Elow had

furnished Dunston with plans prepared by his architect, and the plans were physically attached to the writing.) It is

agreed that Tenant's duty to occupy the demised premises is contingent upon Landlord's strict compliance with this

provision. The renovations shall be completed by June 30, 1994.

On March 20, Dunston took Elow to her bank, First Interstate, to introduce Elow to the loan officer. Elow

unsuccessfully applied for a loan from First Interstate.

On March 25, Dunston carried a loan application from Elow to Granite City Federal. The same day Elow

went alone to Halston Bank, which was affiliated with the bank Elow had previously done business with. Halston

Bank granted Elow's loan application.

On March 30, the Liquor Control Board gave Elow an application form requiring a certification from

Dunston. They told him that it takes two months to process a completed application. Elow immediately gave

Dunston the certification form.

On April l, Elow learned that he could have rented a similar space for $2,500 per month. He told Dunston

he expected her to “adjust” his rent. She said that she expected him to “stand behind” their contract. On May 10,

after thinking the matter over, Elow informed Dunston that he would “live up to” his word. She then handed him the

signed certification, and he submitted it to the Liquor Control Board. On June 15th, the Board informed Elow that it

would not issue him a permit until July 10. The contractor Dunston hired to do the renovation completed work on

June 29. Dunston paid the contractor $30,000.

On July 1, Elow refused to move into the mall. DUNSTON SUES ELOW. DOES DUNSTON HAVE A

CAUSE OF ACTION FOR BREACH? IF SO, IS THE BREACH MAJOR OR MINOR? At trial, there was

undisputed expert testimony that; There was one deficiency in the contractor's work—some of the tile in the kitchen

was the wrong color; the tile installed was as functional as the tile the specifications called for; the customers sitting

in the dining area could not see the tile in the kitchen; and it will cost $2,000 to correct the deficiency.

51

QUESTION 89

1 duties

2 move in

3 pay

11 condition #1: loan

12 “promises”

13 on its face a duty

14 condition

15 not express

16 but constructive

21 nature of condition

22 not to actually get a loan

23 interpretation

24 “may”

25 “assistance”

26 “efforts”

27 “reasonable”

31 nature-bona fide effort

32 once

33 twice

34 unsuccessful

35 but still satisfy the standard

41 if condition fail, excuse?

42 prevention

51 condition #2: permit

52 “subject to”

53 express

54 “promises”

55 also duty

61 fulfill?

62 “timely”

63 “promptly”


71 if fail

72 excused?

73 prospective non-performance of the conditioned duty

74 “adjust”

75 threat not to perform

76 suspend

77 not remove until May 10

81 delay

82 two months

83 July 10

84 his fault

91 condition #3: specifications

92 “promises”

93 duty

94 condition

95 express?

96 “contingent”


101 if fail, excused?


103 objective component

104 10% rule of thumb

52

105 $30,000

106 $2,000

107 structural problem

108 not here

109 broad purpose test

109.1 as functional

109.2 not see

111 subjective component

112 who made the error?

113 why?

114 insufficient facts

115 but express condition?

116 if so, not apply substantial performance

121 avoidance of a severe forfeiture

122 a minority view

123 against express conditions as well

124 extreme enough?

125 $30,000


132 not perform

133 discharge?

134 financial impracticability?

135 if no discharge, breach

141 major or minor breach?

142 how much has P already received

143 none

144 probability P receive the rest

145 outright refusal

146 character of the breach

147 if


149.1 extent of D's forfeiture

149.2 minimal

149.3 therefore material

53

QUESTION 90

Mr. Denton was a general contractor in Morena, El Dorado. Ms. Edberg was the president of a charitable

corporation, Friends of the Homeless (FOTH), headquartered in Morena. FOTH recently completed a successful

fundraising campaign. On January 1, 1992, the board of directors authorized Edberg to hire a contractor to build a

new homeless shelter. Edberg contacted Denton.

Before signing a written agreement, Edberg told Denton's wife that if “we bring this baby in on time, we

can expect some real goodies from Uncle Sam.” (If FOTH was able to occupy the shelter by September 20, 1992,

FOTH would receive a $200,000 federal grant to furnish the shelter.) The same day Denton's wife told him that

Edberg had said “something about some government money.”

On January 20, 1992, Denton and FOTH entered into a valid, enforceable written contract. In addition to

prescribing the specifications for the shelter, the writing stated the following:

3. Denton “promised” to provide FOTH with a performance bond from a commercial surety “at the very

latest by 2/1/1992.”

6. All work done by Denton “must be satisfactory.” The next sentence of the clause mentioned a local

architect, Ms. Grant. Although she had her own architecture business, Grant was also a member of FOTH's

board of directors.

7. Denton would be paid $320,000-four $80,000 payments on March 15, May 15, July 15, and September

15. Denton had to present a certificate from Grant to obtain each payment. The clause described September

15 as the “firm” completion date for the project.

Denton did not obtain a performance bond, but FOTH permitted Denton to begin and continue work.

Denton completed the first three phases of the work, and FOTH made the March, May, and July progress payments

without demanding a certificate from Grant.

Denton began the last phase of the work on July 16th. However, he lost ten workdays when there was an

unexpected strike by the employees of the subcontractor Denton had hired to paint the shelter.

Edberg drove to the work site on September 14th. It was obvious that the shelter would not be completed

by the 15th or even the 20th. Denton approached when he saw her. Edberg angrily said that there was “no way”

FOTH would pay him the final installment. Edberg immediately phoned Grant and said that “as FOTH members, we

can't tolerate this delay. As president, I'm telling you that you can't give a certificate to that jerk.” Later that day

Denton called Grant to tell her that he would finish by September 22nd (that statement was accurate). He added that

he would then ask for her final certificate. Grant replied that she did not want to “get embroiled in a potential

lawsuit” and that “given the circumstances,” she could not issue a certificate. Denton then pulled his crew off the

work site. At that time, it would have cost $15,000 to hire another contractor to complete the remaining painting and

cosmetic finish work.

(1) DENTON SUES FOTH FOR BREACH OF CONTRACT. CAN HE RECOVER?

At trial, it is undisputed that with the exception of the delay and the $15,000 of unfinished work, Denton

complied with the contract. Do not discuss the measure of damages.

(2) ASSUME ARGUENDO THAT FOTH COUNTERCLAIMED AND THAT THE

JURY FOUND THAT DENTON WAS GUILTY OF A MATERIAL BREACH. DISCUSS

ONLY WHAT WOULD BE FOTH'S MEASURE OF RECOVERY.

54

QUESTION 90

1 DUTY

2 PAY THE LAST INSTALLMENT

11 Condition #1—performance bond

12 on its face duty

13 “promised”

14 but constructive condition of exchange

non-aleatory contract

21 condition technical failed

22 but excuse

23 if duty breached

24 arguably material breach

25 important protection

26 if so, put to election

27 treat as material and immediately terminate

28 or treat as minor and continue

29 allowed to begin and continue

29.1 election waiver

31 Condition #2—satisfaction

32 on face duty

33 “must”

34 again constructive condition of exchange

35 non-aleatory

41 meaning—subjective or reasonable


43 objective standards

44 but third party

45 less reason to mistrust

46 differing tendencies among the courts

47 but here third party tied to D

48 member of board

49 cut in favor of objective

51 if objective fulfilled

52 with exceptions. contractor complied

53 hypothetical architect would be satisfied

61 if subjective, failed

62 excuses

63 domino theory

64 if substantive condition satisfied or substantially performed

65 infra

66 prevention

67 Edberg

68 “as president”

69 “we can‟t”

69.1 constructive fraud

69.2 exceeds proper scope of judgment

69.3 “not get embroiled”

69.4 “potential lawsuit”

71 Condition #3—certificate


73 excuses

74 estoppel waiver

75 on all 3 prior occasions

76 create reasonable belief

77 but revocable

55

78 prevention

79 could have completed

79.1 timing?

79.2 time of essence, infra

79.3 domino theory: if substantive condition fulfilled, this excused

81 Condition #4—substantive

82 “prescribed”

83 duty

84 but constructive condition of exchange

85 non aleatory contract


92 excuses

93 prevention

94 their statements

95 timing, infra

96 prospective non-performance

97 their statements

98 if wrongful

99 timing, infra


102 objective

103 $15.000

104 $320.000

105 10% rule

106 “cosmetic”

107 nonstructural

108 subjective

109 not intentional

109.1 strike

109.2 not even his employees

111 Condition #5—Time of Essence

112 construction contracts

113 generally no

114 exceptional tacts?

115 text

116 “firm”

117 but context

118 another provision “at the very latest”

119 their statement

119.1 somewhat vague

119.2 “goodies”

119.3 statement to wife

119.4 but no evidence she business agent

119.5 her statement to him

119.6 vague

121 if time of essence, failed

122 excuse

123 impossibility

124 strike

125 unexpected

126 impossibility as discharge

127 material

128 but here impossibility as excuse

129 not apply to material provision

131 DAMAGES

132 General damages

56

133 diminished value

134 explanation

135 no expert testimony as diminution in fair market value

136 cost of completion

137 $15,000

138 but expression means the excess

139 as in employment contracts

139.1 they save $80,000

139.2 windfall

141 Delay damages

142 rental value

143 no testimony

144 profits

145 in the form of the grant?

146 foreseeability

147 special damages

148 statement to wife

149 but she not business agent

149.1 her statement to him

149.2 vague

57

QUESTION 91

Dr. Darien, a licensed dentist in Morena” was contemplating retiring and selling her business. A Mend of

hers had acquired an option on realty which a major developer was interested in. The friend told Darien that he

needed $300,000 in cash to exercise the option and then resell at a “huge” profit to the developer. The Mend said

that if Darien could “come up with $150,000 in cash by October 12, 1992,” she could have a half interest in the

option and the profits from the resale.

In late 1991, Dr. Effram graduated from the University of El Dorado Dental College. He passed the El

Dorado licensing examination in early 1992. On March 1, 1992, Effram sent Darien a resume and sought

employment Darien invited him to stop by the office. On March 5, they met there. Darien explained that she was not

only interested in hiring him; if he “worked out,” she would sell her practice to him.

On March 20, Darien and Effram signed a written agreement including the following provisions:

1. Effram “promise[d]” to serve a six-month “apprenticeship” between April 1 and October 1, 1992.

During that period, Effram would render “all” services in an “absolutely competent, professional” manner.

2. “Before or on” October 10, Effram would deliver to Darien $150,000 in cash and a promissory

note for another $150,000 in specified monthly installments. The note would be guaranteed by “a

satisfactory commercial surety.”

After Effram signed but just before she signed, Darien told Effram that she needed the $150,000 “pronto

by” October 10th to take advantage of a “once in a lifetime business opportunity. I have all my money sunk in this

dental practice, and I need to free it up to capitalize on” this opportunity.

Effram began work on April. Effram and the chief dental technician, Fernandez, developed a personality

conflict After Effram screamed at him several times, Fernandez quit Darien was upset told Effram that Fernandez

was “the best employee I've ever had” and a “terrible loss,” but added that she would give Effram “one last chance”

to complete the apprenticeship. He did so without further incident

On September 1, Effram began making the financing arrangements with Granatelli Surety. (Ten years ago

Granatelli had almost gone bankrupt However, it was now the largest and financially soundest surety in Morena.)

Effram did not finalize the arrangements until October 13, when he tendered the cash, note, and surety guarantee to

Darien. She rejected the tender.

On October 11, Darien's Mend had phoned to ask whether she had the $150,000 cash. She said No. (On

October 1, Darien began to suspect that Effram would not meet the October 10 deadline, but her efforts to obtain a

loan by October 11 were unsuccessful.) The Mend contacted another acquaintance, the two of them exercised the

option, and each realized a $150,000 profit on resale to the developer in late October.

Effram sues Darien, and Darien counterclaims. At trial, Darien testifies that Granatelli was “unsatisfactory

as a surety,” as a former president of the Morena Chamber of Commerce, she knew about Granatelli's financial

problems a decade before.

(1) MAY EFFRAM RECOVER FOR BREACH OF CONTRACT? DO NOT DISCUSS MEASURE

OF DAMAGES.

(2) ASSUME THAT THE JUDGE HOLDS EFFRAM MATERIALLY BREACHED HIS

CONTRACT WITH DARIEN. ON HER COUNTERCLAIM, MAY SHE RECOVER THE $150,000 PROFIT SHE

WOULD HAVE REALIZED BY PURCHASING THE HALF INTEREST IN THE REAL ESTATE OPTION?

58

QUESTION 91

(1)

1 D's duty to turn over the business

11 condition #1: complete apprenticeship

12 “promise”

13 express duty


14 not aleatory K

15 condition fulfilled

16

21 condition #2: perform apprenticeship in particular manner

22 “all”

23 “absolutely”

24 “competent”

25 “professional”

26 again “promised”

27 express duty


31 condition not fulfilled

32 “all”

33 “absolutely”

34 screamed

35 several times

36 at best employee

37 however, promissory condition

38 duty as well

39 duty breached

39 arguably materially breached

39.2 best employee

39.3 “terrible loss”

39.4 material breach puts to choice

39.5 chose to allow to continue

39 6 treated as minor breach

39.7 election waiver

41 another excuse?

42 perhaps substantial performance

43 evidently most work satisfactory

44 majority: excuse limited to constructive conditions of exchange

45 this condition express?

46 seems to be merely constructive

47 others: limit to constructive conditions in construction contracts

48 if so, inapplicable here

49 still others: not recognize at all

49.1 if so, no excuse here

51 condition #3: “satisfactory” commercial surety

52 interpretation: subjective or objective standard?

53 one factor: who to be satisfied

54 D herself

55 greater risk of false claim of dissatisfaction

56 cuts in favor of objective standard

57 second factor: subject matter

58 commercial

59 also cuts in favor of objective standard

61 if objective standard

62 some reason for doubt, near bankruptcy

59

63 +but 10 years ago

64 - +now largest

65 +now financially sounded

66 if subjective standard.

67 former C of C president

68 know

69 perhaps enough

71 condition #4: provide cash, note, etc.

72 perhaps express duty

73 “promise” absent from this clause

74 but clearly condition

75 purpose


77 fulfilled?

78 actually attempted to deliver

79 condition concurrent

79.1 simultaneous exchange

79.2 tender

79.3 sufficient for this type of condition

81 condition #5: provide cash, note, by specific date

82 time of essence issue

83 not ordinarily in non-personality Ks

84 however issue of interpretation

85 text

86 ambiguous

87 “by or on”

88 extrinsic

89 can consider?

89.1 even under objective approach if ambiguous

89.2 certainly under subjective

91 conversation

92 WHEN

93 too late?

94 P had signed already

95 if K formed, D cannot unilaterally change

terms

96 but D had not yet signed

97 “P” Could have objected

98 WHAT was said

99 “once in a lifetime”

99.1 “all” her money

99.2 “need”

99.3 date crucial

99.4 “pronto”

101 if time of essence, condition failed

102 failure final

103 cannot cure

111 if any condition fails and is not excused, no duty of immediate perf

112 D win

(2)

121 general damages

122 benefit of bargain

123 resale?

124 still able to sell at that price?

131 THE $150,000 PROFIT

60

132 foreseeability at the time of contracting

133 special damage

134 ergo must show foreseeability

135 the showing here

136 WHEN

137 did not mention anything until P already signed

138 but D had not yet signed

139 no K at that point

139.1 the time of K formation

141 WHAT was said

142 vague

143 not identify opportunity

144 but “once in a lifetime” opportunity

145 sounds as if major opportunity

146 sense of urgency

147 anticipate that lose profit from opportunity

151 mitigation

152 P argues that D should have tried harder to obtain loan

153 D obviously had collateral

154 D should have started earlier

155 but some effort

156 did not wait until the last minute

157 effort unsuccessful

158 P did not plead D's failure to mitigate

159 P has burden of proof on the issue

159.1 P probably failed to meet burden

161 certainty

162 not merely speculative

163 friend other person capitalized on business opportunity

know the profit they made on resale

61

QUESTION 92

Ms. Ellington owned an old house in Morena. Under the local zoning code, the house was a Type 3

residential building. Ellington decided to convert the building into three commercial rental units. The conversion

required a Type 2 permit; the neighborhood was zoned for both Type 2 and Type 3 buildings, but Type 2 buildings

had higher plumbing and electrical standards.

Mr. Falsetti was a licensed Morena contractor, specializing in remodels. On March 1, 1986, Ellington asked

him to help her convert the building. On March 10, 1986, Ellington and Falsetti signed a written contract.

Paragraphs 5-6 of the contract set out specifications, including reroofing requirements such as the type of tar and

shingles. The contract stated that the deadlines for the various phases of construction were May l, July 1, and finally

September I. Ellington was to make $40,000 progress payments after May 1 and July 1 and a final $20,000 payment.

The contract provided:

7. Contractor expressly covenants that he shall strictly comply with the above specifications.

8. Owner shall make the final payment to Contractor on the understanding that the City of Morena issue

Owner a Type 2 permit for the building no later than September 30, 1986.

9. Contractor must obtain a certificate of compliance from Architect Joyce Grant as a condition to each

payment under the contract.

Falsetti completed the first two stages of the work by June 30. Ellington made the May 1 and July 1

payments without requesting Grant's certificate.

On July 1, Falsetti began the reroofing. When Falsetti stopped by his supplier, Mr. Hummel, Kummel

informed him that the price of the tar he had ordered had declined but that the price of the shingles he had ordered

had skyrocketed. Hummel told him that if Falsetti substituted a better grade of tar and a cheaper shingle, “the roof

will be just as sturdy and cost you a little less.” Without consulting Ellington, Falsetti decided to follow Hummel's

advice.

After finishing the roofing on August 30, Falsetti told Ellington that he was “going down to the City to get

our permit. I need a copy of your deed.” Ellington said she would mail his a copy the next day. However, Ellington

forgot to do so and went on a two-week vacation the next day. When she returned, she sent Falsetti the deed. In the

interim, the City had put into effect a new building code. Consequently, it issued a Category 2 permit rather than a

Type 2 permit; under the new code, an owner could use a Category 2 building for the same commercial purposes as

a Type 2 building. Category 2 had higher wiring standards than the old Type 2, but the rewiring Falsetti had done

satisfied the new standards.

When Falsetti delivered the permit to Ellington on September 21, Ellington said that “everything seems

O.K.” but refused to pay without an architect's certificate. At Falsetti's request, Grant inspected the premises. She

discovered the use of the different tar and shingles.

Grant informed Ellington of the substituted materials but added that she might issue the certificate, since

“the substituted materials are pretty good.” Ellington told Grant that she, Ellington, wanted Grant to “enforce the

letter of the contract. Remember how much business I send you.” Grant commented that she did “not want to get

involved in any legal hassle between” Ellington and Falsetti. Grant said she would not issue a certificate.

Ellington refused to pay Falsetti. On October 1, 1986, Ellington took possession of the premises and

advertised its availability for rental.

Falsetti sues Ellington. At trial, Falsetti offers expert testimony that the substituted roofing materials

reduced the property's fair market value by, at most, $1,000.

62

QUESTION 92

1 DUTY TO PAY THE $20,000

11 CONDITION #1: COMPLIANCE WITH PLANS AND SPECIFICATIONS

12 express or constructive?

13 “strictly”

14 but “covenant” connoting promise

15 “on the understanding”

16 “as a condition”

17 context

21 if express

22 excused?


24 minor part of the bargain

25 generally yes

26 Hummel, infra

27 Grant, infra

28 substantial forfeiture

29 Restatement test: 15%

29.1 20% here

31 if constructive

32 excused?

33 waiver

34 took possession

35 knowing

36 yes

37 but voluntary?

38 she owned the property


42 objectively trivial

43 Hummel

44 expert

45 “justas”

46 Grant

47 expert

48 impartial

49 “pretty good”

49.1 Reduce FMV by only $1,000

51 subjectively innocent

52 intentional

53 to save money

54 not consult Ellington

55 not consult Grant

56 de minimis exception?

61 CONDITION #2: ARCHITECT'S CERTIFICATE

71 excused?

72 domino theory

73 if satisfy substantive condition, this automatically excused as well

74 mere evidentiary function


81 first certificate

82 estoppel waiver

83 time to obtain?

84 did not demand

91 second certificate

92 estoppel waiver

63

93 time to demand

94 did not demand

101 third certificate

102 estoppel waiver

103 revocable

104 enough time to reinstate condition?

105 September 21

106 September 30

111 prevention

112 Ellington threatens

113 Wrongful?

114 “letter of contract”

115 proper demand

116 “how much business”

117 Causation

118 Timing


122 Proper basis for denial: deviation from plans

123 Deviations

124 Improper basis: cowardice

125 “Legal hassle”

131 election waiver

132 supra


142 supra

151 CONDITION #3: PERMIT FROM CITY

152 express or constructive?

153 material

154 “on the understanding”

161 if express

162 excuses

163 prevention

164 He requested in time

165 She promised

166 She delayed

167 In the interim


172 unforeseeable?

173 enough facts?

174 material part of the bargain

175 minor difference between the two schemes

181 if constructive

182 excuses


184 same purposes

185 stricter standards

186 but complied here

191 DAMAGES

192 Contract price minus

193 if rely on substantial performance

194 cost of correcting deficiencies

201 traditional view

202 cost of completion the strong preference

203 always if intentional deviation

204 automatic in some jurisdictions

205 not deviate unless substantial economic waste

64

206 here

207 missing facts

208 obvious here?

211 competing modern view

212 discretionary balancing test

213 missing facts

214 obvious that there would be economic waste?

215 but $1,000 somewhat substantial

65

QUESTION 93

Mr. Aubright owned some realty on which he wanted to build a shopping center. On January 1, 1985, he

entered into a valid and enforceable contract with Mr. Bermudez a general contractor, to build the center. Later the

same day Bermudez signed separate, valid and enforceable contracts with three different businesses to do the

subcontract work. Cahane (excavation and foundation), Deering (the erection of the buildings, plumbing and

electricity), and Eleazor (the roofing).

The contracts set the following deadlines for work: Cahane January 31, Deering February 28, and Eleazor

March 31. Each subcontract referred to the other two subcontracts and provided that Mr. Bermudez would

“coordinate the work of all three subcontractors on this project.” Eleazor's contract stated that “It is hereby provided

that all work must be completed exactly; the work must be finished precisely on schedule.” The contract called for

Fulton shingles for the roof. The contract stated a total contract price of $200,000 for the roofing; $30,000 was to be

paid when the contract was signed, and Eleazor was to receive the balance on “satisfactory completion” of the work.

When Bermudez and Eleazor signed the contract on January 1, Bermudez paid Eleazor the $30,000.

Cahane began work on January 2, 1985. However, a week later, Cahane was required to pay a fine assessed

by the state environmental protection agency on another project. After paying the fine, Cahane was short on cash.

He was unable to pay for the concrete he had ordered delivered to work site on January 20, 1985. When Cahane

could not pay the concrete company refused to deliver. Cahane obtained a loan from the bank and used the loan

proceeds to order more concrete, but he was unable to complete the foundation until February 10, 1985.

On February 11, Eleazor happened to be driving by the work site. He expected to see Deering's employees

busy at work. Instead, he saw Cahane's employees doing their cleanup. Eleazor stopped and asked them why they

were still on the site. They explained Cahane's problems. Eleazor grabbed his car phone and contacted Deering.

Eleazor asked when he, Deering, intended to begin work. Deering stated that there would be a further delay. When

Deering learned that Cahane was behind schedule, he “looked around for other work for my crew. Deering found a

hotel owner who wanted some rehabilitation work done. Deering's crew began that work on February 1, 1985, and

hoped to complete it by February 16th. Eleazor asked, “Well, when in the hell do you think your guys will get to this

job and then clear out to let my men do the roofing?” Deering responded, “Probably not well into March. Sorry.

There's nothing I can do.”

The next day, February 12, Eleazor drove to Bermudez' office. Eleazor asked Bermudez whether he,

Bermudez, was aware of the delays. Bermudez said that he was unaware; he had been on vacation in Europe and had

not returned to Morena until that very morning. Eleazor complained, “You're supposed to be coordinating this job.

The whole thing is messed up now. I expect you to light a fire under Deering.” Bermudez assured Eleazor that he

would do “everything in my power.”

Later that day Bermudez contacted Deering and urged him to finish up “as fast as you can.” Deering asked

whether Bermudez was threatening to refuse to pay unless Deering met the February 28 deadline. Bermudez said,

“No. I'm not saying that at all Jerry.”

Deering's crew finished work on March 16th. On March 17th, Eleazor's roofers began work. That day they

stopped by their supplier's warehouse to pick up the shingles. They discovered that the day before, their supplier had

sold the last Fulton shingles in stock. The supplier phoned Eleazor, and Eleazor directed the supplier to give the

crew Wiley shingles. Eleazor commented, “They're almost as good, and they're roughly the same price. I can't afford

any more delays now.”

Eleazor completed work on April 15th. On that date, he phoned Bermudez and demanded payment. Eleazor

began the conversation by saying, “No thanks to you, the project is wrapped up. I've never worked with a more

incompetent general in my life.” Bermudez took offense and stated, “You're hardly in any situation to complain.

You were supposed to finish by March 31. Looked at the calendar lately? I wasn't satisfied with your progress.”

Eleazor said, “The whole delay is your damn fault. You wouldn't dare withhold payment now.” Bermudez

concluded, “Oh, wouldn't I? You'll have to sue me if you want to see any of that money. The most incompetent

general you ever dealt with? We'll see who the court thinks is competent.”

66

Eleazor files suit against Bermudez for breach of contract. MAY ELEAZOR RECOVER MONEY

DAMAGES? EVEN IF YOU DECIDE THAT ELEAZOR SHOULD NOT RECOVER, DISCUSS HIS

DAMAGES. It would cost $100.000 to replace the shingles. The use of Wiley shingles reduced the fair market value

of the center by $7,000.

67

QUESTION 93

1 THE DUTY TO PAY

2 CONDITION #1: COMPLETE

3 “Fulcon” shingles

4 “exactly”


11 whiley shingles


21 excuses


23 trivial

24 “almost as good”

25 $7,000 effect

26 innocent

27 deliberate

28 cost little less

29 the test: bad faith

29.1 the delay the reason

29.2 but express condition

29.3 majority not apply substantial performance


32 good faith

33 supra

34 large forfeiture

35 170,000

36 even express conditions

37 but only minority view

41 estoppel waiver

42 earlier conduct

43 did not know of substitution

44 no evidence of notice

51 intentional waiver

52 knowing

53 no evidence of notice

54 failure to mention

55 mentioned only lack of progress

56 distinct minority view

61 CONDITION #2: TIME OF COMPLETION

62 if merely reasonable time

63 arguably fulfilled

64 delay”

65 as soon as possible

71 if time of essence

72 “on schedule”

73 “precisely”

74 normally not

75 language_explicit_enough.

76 condition technically failed

81 excuses

82 impossibility

83 not his fault

84 impossible—roofing

85 but material part of the bargain

91 prevention

92 wrongful

68

93 “coordinate”

94 subsequent assurance

95 subsequent attempt

96 earlier neglect

97 later half-hearted effort

98 factual causation

101 estoppel waiver

102 knew of delay

103 permitted to continue

111 election waiver

112 if time of essence, material breach

113 choice

114 allowed to continue

115 elect to treat as minor breach

121 CONDITION #3: SATISFACTION

122 “satisfactory completion”


124 objective test

125 said not satisfied

126 but with progress

127 merely subjective dissatisfaction

128 ulterior motive

129 took offense

129.1 repeated remark about incompetent contractor

131 THE DUTY TO COORDINATE

132 “coordinate”

133 subsequent assurance

134 subsequent attempt

135 breach

136 not withhold payment

137 earlier neglect

138 vacation

139 evidently asked no one to supervise in absence

141 DAMAGES

142 expectation

143 contract price

144 deduct for deficiency


151 cost of completion versus diminution in value

152 early view: strong preference for cost of completion

153 bad faith

154 not here

155 physical destruction

156 here

157 special purpose

158 not here

161 modern view: discretionary balancing test

162 7,000

163 100,000

171 restitution

172 “breach of K”

173 only if not in default

174 fair market value

175 no facts

181 reliance

182 “breach of contract” action

69

183 out-of-pocket expenditures


70

QUESTION 94

On January 1, 1576, Mr. Zola visited the offices of Ms. Herner, local agent for Bailey Insurance Co., Zola

filled out a disability insurance application and gave Werner $200, the premium for one year. Werner forwarded the

application and money to the insurer's home office. On January 5, Mr. Bailey approved the application, thereby

forming a valid and enforceable contract. Bailey authorized Werner to issue a disability policy to Zola.

On January 10, Zola visited Werner's offices. Werner gave Zola the policy. The policy's COVERAGE

section included the following language:

“3. The Insured must notify the Company in writing within 30 days after the onset of any disability.

4. Within 70 days after the onset of disability, the Insured must furnish the Company with

satisfactory proof of such disability.”

When Werner handed Zola the policy, he inquired about the policy deadlines for notice and proof of loss.

Werner said, “Well, you get about a month for notice and about three months for proof. It's all in your policy's

COVERAGE section.”

On February 1, Zola suffered disability in an accident, Zola spent almost four weeks in the hospital. On

February 28, Zola phoned Werner and told her about the accident. She said, “Sorry about the accident. Let's start

processing your claim. Get the proof of loss in as soon as you can.”

On March 1, Werner informed Bailey that Zola had phoned. Bailey decided to deny liability. On March 2,

he wrote Zola, “We are not liable for your disability. You did not give us the required written notice of loss.”

On March 6, Zola received the letter. Be phoned Ms. Werner and told her that he considered Bailey liable

and would submit proof of loss. Werner told Zola that it would be a waste of time to submit proof. Before closing,

Zola asked for a list of names of doctors who could help prepare the proof. Werner refused to help. She said, “Even

if we were liable, it would be your job to prepare the proof.”

On April 20, Zola delivered satisfactory proof of loss to Werner. As Zola handed her the proof, Werner

said, “I just hope you realize you're wasting your time.”

Werner forwarded the proof to Bailey. On April 25, Bailey sent Zola another letter. The letter stated, “I

must reiterate our position that we are not liable for your disability. You did not give us written notice of your

disability. “

Zola sues Bailey Insurance Company to recover disability benefits.

WILL ZOLA RECOVER DISABILITY BENEFITS FROM BAILEY INSURANCE COMPANY? DO

NOT DISCUSS THE MEASURE OF DAMAGES.

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QUESTION 94 SAMPLE ANSWER

Zola is suing to enforce the insurer's duty to pay the disability benefits.

I. THE EXISTENCE OF ANY CONDITIONS TO THE DUTY

The first issue is whether there are any conditions to the duty. The courts generally do not apply the

constructive condition doctrine to insurance contracts; the courts treat insurance agreements as aleatory contracts.

Hence, we must determine whether there are any express conditions to the duty. The insurer will argue that the third

and fourth clauses, quoted in the problem, constitute express conditions. On the one hand, the clauses are in the

COVERAGE section rather than a CONDITIONS section. However, the clauses will serve a useful purpose only if

we construe them as conditions, Moreover, since the language is attributable to the promisor and refers to acts to be

performed by the insured, the court will probably conclude that the clauses are two express conditions precedent to

the insurer's duty to pay the benefits.

II. EXCUSES FOR THE FAILURE OF THE FIRST CONDITION PRECEDENT The third clause

required written notice, and the insured gave only oral notice. The condition failed, and we must now determine

whether the failure was excused.

A. Impossibility. Zola might argue that it was impossible for him to file the proper notice because he

was ill during most of the notice period. The court will almost assuredly reject the argument, Zola had 30 days in

which to file the notice. When Zola left the hospital, he still had two days in which to file notice. It would have been

a simple matter to file written notice of loss.

B. Prevention of Forfeiture. Zola might argue that the court should excuse the failure because the

court's refusal to do so would impose a severe forfeiture upon him. First, it is doubtful whether he would suffer the

type of extreme forfeiture necessary to trigger the doctrine, Moreover, prevention of forfeiture as an excuse doctrine

is a distinct minority view. The court would probably refuse to follow the minority view.

C. Intentional Waiver. The courts are especially eager to find intentional waivers in insurance cases.

In the instant case, however, Werner really did not intend to waive the written notice provision; she evidently

thought that oral notice was sufficient. Yet, in spite of her ignorance of the provision, some courts would

undoubtedly “imply” a fictitious intent to waive from her act of accepting notice. While most courts would not

excuse the failure on this theory, some would.

D. Estoppel Waiver. Zola has a strong argument that there is an estoppel waiver, Werner's conduct

reasonably led Zola to believe that his notice was deficient. If Werner had said that point that Zola had to file written

notice, he could easily have filed the writing within the remaining two days.

E. Conclusion. While a few courts would excuse the failure on an intentional waiver rationale, most

would excuse the failure of an estoppel waiver theory.

III. EXCUSES FOR FAILURE OF THE SECOND CONDITION PRECEDENT

The fourth clause required that Zola file proof within 70 days. The condition failed, and we must now

determine whether the failure was excused.

A. Intentional Waiver. Zola can present three arguments.

1. He can argue that Werner's statement on January 10 was a waiver. While Werner mentioned three

months, her last sentence made it clear that she was merely describing the policy provisions. I doubt whether any

court would find an intentional waiver in her statement.

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2. He might argue that Werner's statement on February 1, “as soon as you can,” was a waiver. A

court probably would not read the statement that broadly. Werner was encouraging Zola to submit proof promptly

rather than waiving any condition.

3. Zola's weakest argument would be that Werner waived the condition by physically accepting the

proof. However, as she accepted the proof, she made it clear that the insurer did not consider itself liable. Again, the

court probably would not find a waiver.

B. Estoppel Waiver. Zola will argue that he relied upon Werner's statement on January 10. However,

to invoke an estoppel theory, the promise must show that his or her reliance was reasonable. Since, in the same

breath, Werner referred Zola to the policy provisions, I do not think that Zola's reliance was reasonable.

C. Prevention. Zola might argue that Werner prevented the condition's fulfillment by refusing to give

Zola a list of names of doctors. The argument fails for two reasons. First, it is difficult to believe that Werner's act

substantially hindered Zola. It is a relatively easy matter to contact a physician to obtain proof of loss. Second,

Weimer's refusal probably was not wrongful. Werner voiced parties' common understanding when she said, “Even if

we were liable, it would be your job to prepare the proof.”

D. Forfeiture, supra.

E. Failure to Mention the Condition. A minority of courts would excuse the failure because Bailey

did not mention the failure of the second condition on the April 25th letter. However, most courts would not excuse

the failure in the absence of facts amounting to an estoppel.

F. Prospective Failure of the Conditioned Duty. The insurer repudiated the contract in the March 2nd

letter. The letter reasonably led Zola to believe that whatever he did, Bailey would not perform the duty. Bailey did

not retract the statement prior to the proof period's expiration. I think that almost all courts would excuse the failure

on this theory.

IV. CONCLUSION

Zola can recover. The court will excuse the first condition's failure on an estoppel waiver theory and the

second condition's failure on the ground of prospective failure of the conditioned duty.

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