CH 9 (CQ)

Tenant has rented office space from Landlord for ten years. Tenant recently made substantial improvements to the office space at its own expense with the knowledge and approval of Landlord. Under the terms of the lease, Tenant has an option to renew the lease for another ten years at a specific rent; however, Tenant's right to renew is conditioned on Tenant giving Landlord written notice of its intent to renew six months before the lease expires. Seven months before the lease expires, Landlord sends Tenant an email which states, "This is a reminder that you have to provide us with written notice six months before your lease expiries if you intend to renew for another ten years. If we don't hear from you by the deadline, then we will assume that you are not interested and we will find another tenant." Tenant receives the email but forgets to reply and does not give notice by the six-month deadline. Five months before the lease is set to expire, Landlord advertises the office space as being available for rent. The advertisement describes the office space as including many improvements, i.e., the ones that Tenant made at its own expense. Tenant sees the advertisement and immediately provides Landlord with notice of its intent to renew the lease. However, Landlord rejects Tenant's notice because he can lease the space for a higher rent. Tenant brings a lawsuit seeking specific performance of the option agreement. The parties stipulate that the six-month notice provision was a condition and that the condition did not occur. If a court rules in favor of Tenant and excuses the non-occurrence of the condition, then it is probably because of the doctrine of: (A) avoidance of disproportionate forfeiture. (B) express waiver of a condition. (C) estoppel on a promise to waive a condition. (D) wrongful hindrance by the party with the conditional duty to perform.

A Issue: This problem tests the different ways in which a condition may be excused if the condition did not occur. Rule: Restatement (Second) of Contracts § 229 provides, "To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange." Analysis: There are a number of ways in which courts excuse conditions, but only Choice A presents a doctrine that applies to these facts. Tenant might indeed suffer a disproportionate forfeiture if the condition is not excused, since Tenant recently made substantial improvements to the office space at its own expense, and likely made those improvements because it intended to renew the lease. Landlord was aware of the improvements. Landlord is not harmed by excusing the condition since Landlord has not yet leased the premises to another party. Choice A is the correct answer. Choice B is incorrect because the facts do not show that Landlord said anything or did anything that would have waived the condition. A waiver is a relinquishment of a legal right that a party has under an agreement. The contractual right stays in place, but the party chooses to not enforce it. However, an express waiver would require Landlord to tell Tenant that it was not going to enforce the notice provision. Here, Landlord clearly stated that it wanted to hold Tenant to the six-month notice provision. Choice C is incorrect for the same reasons. Landlord is not estopped because he never promised to waive the condition. Choice D is also incorrect because the facts do not show that the Landlord in any way hindered Tenant in performing the condition. The opposite is true. Landlord even sent a reminder about the six-month notice requirement.

Diego is a businessperson who was actively negotiating to purchase a car dealership. Although the negotiations had not finished, Diego wanted to make sure that he had salespeople ready to work at the dealership if the negotiations were successful. On March 1, Diego entered into a written and signed employment agreement with Sara that provided the following: "If Diego is successful in purchasing a car dealership by May 1, then the parties agree that Diego will employ Sara, and Sara will work for Diego, for two years as a salesperson at the salary described below." The contract included all of the other relevant terms for an enforceable employment agreement. Which of the following best characterizes the sentence in the contract that starts, "If Diego is successful in purchasing a car dealership by May 1"? (A) A condition subsequent that terminates Diego's obligation to hire Sara (B) A condition precedent to Diego's obligation to hire Sara (C) A condition concurrent that applies equally to both parties' obligations (D) A promise that can be enforced if Diego purchases the car dealership within a reasonable time after May 1

B Issue: This problem tests students on their ability to distinguish between different types of conditions. Rule: A duty or right that is conditioned upon the occurrence of some event or act shall not arise unless the condition either occurs or is excused. A condition precedent is an event that must occur before the duty or right arises. A condition subsequent is an event that terminates a duty or legal right. A condition concurrent is a situation where each parties' obligation is dependent on the other occurring at the same time. Analysis: Here, the duty to hire Sara is subject to a condition, i.e., an event, that Diego purchase a car dealership by May 1. If that event occurs, then Diego has an absolute duty to hire Sara. If the event does not occur, then Diego has no obligation to hire Sara. This is a condition precedent; therefore, Choice B is correct. Choice A is incorrect because the sentence would only be a condition subsequent if there were some event that occurs which cuts off an existing duty; here, there is no such existing duty. (An example of a condition subsequent in an employment contract might be if, in a contract for a fixed period, the employee is absent more than some set number of days, then the employer may terminate employment early. The set number of absent days is a condition subsequent that cuts off the employer's duty to employ the individual.) Conditions concurrent is a situation where each parties' obligation is dependent on the other occurring at the same time. This is not the situation here. The successful purchase of the dealership is independent of any act by Sara; therefore, Choice C is incorrect. Choice D is not the best answer. Here, the more likely interpretation is that the purchase of the dealership must happen by May 1 if the employment contract is going to be effective. The whole point of conditions is that the event must occur exactly to the terms.

On January 5, an airport hired a construction company to build an airplane hangar for $1 million. The construction company had until July 1 to complete the hangar. The contract called for an initial payment of $200,000, a progress payment of $300,000 when the hangar was halfway finished, and the balance of $500,000 upon completion of the hangar. The progress payment was important to the construction company so that it could continue to cover costs during construction. The airport paid the initial $200,000, and the construction company started work on the hangar. On April 1, the construction company had reached the halfway mark in its construction of the hangar and sought the $300,000 progress payment from the airport. The airport refused to make the payment, stating that it would pay the construction company the remaining $800,000 upon completion of the hangar. The construction company stopped construction of the hangar. Although it was not actively working on the hangar, the construction company left its heavy equipment on site so that it could easily start work again when the progress payment was made. Throughout April and May, the construction company regularly contacted the airport, but the airport refused to make the payment at that time. By June 1, the construction company needed its heavy equipment elsewhere so it moved the equipment off the airport property. On July 1, the airport informed the construction company that it had hired another company to build the hangar. The construction company sues the airport for breach of contract. The airport countersued stating that it was prepared to substantially perform since it was willing to pay the entire $1 million but on a different schedule. The airport also argued that the construction company breached when it moved its equipment offsite on June 1. Which of the following is an accurate statement? (A) The airport substantially performed, and the construction company materially breached by suspending performance. (B) The construction company rightfully suspended performance on April 1 because the airport materially breached when it refused to make a progress payment. (C) The airport repudiated by not paying the April 1 progress payment. (D) The construction company repudiated by suspending performance.

B Issue: This problem tests the material breach doctrine. Rule: Any nonperformance of a contractual duty is a breach. However, if a party has substantially performed his duties, then he is entitled to compensation under the agreement less any amount for damages caused by his partial breach. Substantial performance occurs when there are only small deficiencies in the quantity or quality of performance where precision is not critical. If a party has materially breached a contract, then the nonbreaching party may terminate the contract unless the circumstances suggest that the breaching party will cure its breach. In those circumstances, the nonbreaching party may suspend performance until the breaching party cures the breach. If the material breach remains uncured, then it becomes a total breach and the nonbreaching party may terminate the contract. The following factors are considered in determining the materiality of a breach: 1) amount of benefit received; 2) adequacy of damages; 3) forfeiture suffered by breaching party; 4) likelihood of cure; 5) lack of good faith and fair dealing. Analysis: On April 1, the airport had a duty to pay a progress payment of $300,000 to the construction company because the hangar was halfway completed. Since the airport did not perform its duty, it breached the contract. The breach was material because the construction company needed the funds to cover its costs. Consequently, the construction company was justified in suspending its performance on April 1. The construction company appears to be operating in good faith by staying in contact with the airport. After two months and continued refusals by the airport to perform its duties, it was also reasonable for the construction company to move its heavy equipment to another site. Given that the airport was apparently not going to cure its breach, the construction company would have been justified in terminating the agreement on June 1. However, it was the airport that terminated the relationship on July 1. At that point, it is clear that airport has totally breached its agreement with the construction company. Choice B is the correct answer. Choice A is incorrect because the airport committed a material breach and did not substantially perform. Choices C and D are incorrect since repudiation is not at issue. The performance of the airport was due; consequently, the nonperformance was a breach. As noted above, the construction company was willing and able to perform, so its actions were not repudiations.

On May 1, Seller enters into a contract with Buyer for the sale of a piece of property for $200,000. On that date, Buyer gives Seller a down payment of $20,000. The closing date is to be July 1. On June 1, Seller sells the same piece of property to another party for $250,000, closing on that date. However, Seller does not inform Buyer. Buyer learns of Seller's actions from another. Buyer would like to terminate the agreement and get his down payment back immediately. Which of the following is an accurate statement of Buyer's rights? (A) Buyer must wait until July 1 before terminating the contract to see if Seller will come to the closing. (B) Buyer may terminate the contract on June 1. (C) Buyer cannot terminate the contract on June 1 because Seller did not make a clear and unequivocal statement to Buyer that he was not performing. (D) Buyer must ask for adequate assurances of performance before terminating the contract.

B Issue: This problem tests the mechanics of the nonrepudiating party's rights after one party repudiates by conduct. Rule: A party has anticipatorily repudiated a contract when, before performance is due, the party: (1) makes an unequivocal and definite statement that he will not perform a contract when his performance is due, or (2) engages in any conduct that renders that party unable to perform its duties. After repudiation, the nonrepudiating party may: (1) suspend performance, (2) terminate the contract and sue for breach, or (3) continue to treat the contract as valid and wait for the time of performance before bringing suit. Analysis: A repudiation need not be expressed through words. If a party's conduct makes it impossible to perform the contract, then the conduct itself is a repudiation. Choice B is the correct answer. Seller has made a voluntary and affirmative act that makes it impossible to transfer the property to Buyer since a third party how owns it. Consequently, Seller repudiated on June 1 by conduct, and Buyer has a right to terminate on that date. (See Illustration #5 to Restatement (Second) of Contracts § 250, on which this problem is based.) Choice A is incorrect. The rules surrounding repudiation allow a party to terminate an agreement immediately upon the other party's repudiation. There is no need to wait until the time for performance. Choice C is incorrect since conduct alone can result in a repudiation. Choice D is incorrect since if a repudiation occurs (as it has here), a party can immediately terminate and does not have to seek adequate assurances of performance. The doctrine of adequate assurances of performance is implicated when a party's action or words fall short of a repudiation.

Seller manufactures sleds. Buyer operates a wholesale recreational goods business. On June 1, Seller and Buyer form a contract under which Seller is to sell Buyer 20,000 sleds for $100,000. Seller is to make delivery on September 1, and Buyer is to pay Seller within 30 days after delivery. On June 30, from a credible source within the recreational products industry, Seller hears that Buyer is in financial difficulty and has failed to meet some of her payment obligations to manufacturers. On July 1, by signed writing, Seller contacts Buyer. Seller asks that Buyer provide her with her most current financial statement and a list of purchases, if any, for which Buyer has failed to make timely payment. Buyer responds, 'We respectfully decline to provide you with such information.' It is now August 10. If Seller wants to terminate the contract, which of the following is the best basis for its decision to do so? (A) Buyer has committed an uncured material breach. (B) Buyer breached the duty of good faith and fair dealing. (C) Buyer repudiated the contract by declining to provide in a timely manner the assurances that Seller reasonably requested. (D) News of Buyer's financial difficulties was an implied condition subsequent that relieved Seller of its duty to perform.

C Issue: This problem tests students on the application of UCC § 2-609, Right to Adequate Assurance of Performance. Rule: UCC § 2-609(1) provides that "When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return." Additionally, UCC § 2-609(4) states, "After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract." Analysis: When, from a credible source, Seller heard about Buyer's difficulties, Seller had reasonable grounds to believe that Buyer might not be able to pay for the sleds. Seller made a proper demand for adequate assurance by requesting a financial statement and a list of any delinquent payments to manufacturers. Thirty days passed and Buyer failed to provide the requested information (or any other that would amount to adequate assurance). Therefore, under UCC § 2-609(4), Buyer has repudiated the contract. Choice C is the correct answer. Choice A is incorrect because, on August 10, the time for performance by Buyer has not yet passed. Buyer doesn't have to pay for the sleds until 30 days after delivery, and the delivery date is on September 1. Therefore, Buyer has not breached the contract. For the similar reasons, Choice B is also not the best answer. It is true that failure to provide adequate assurances under UCC § 2-609 would likely be considered a breach of the duty of good faith and fair dealing. However, Choice C provides a stronger basis for terminating the agreement. Choice D is a fanciful idea. Under UCC § 2-609, news of financial insecurity alone is not enough to release Seller of its obligation. Seller had to request assurances and give Buyer a reasonable time to respond. It is Buyer's failure to respond that allows Seller to declare that Buyer has repudiated the contract.

A company in the business of office cleaning has a contract with a corporation that is concerned about being environmentally friendly. The term of the contract is structured in six-month increments for a total of five years. One provision requires the cleaning company to be certified every six months, by an independent environmental group, indicating that the cleaning company only uses environmentally safe ("green") cleaning products. If the cleaning company gives the corporation a copy of the certification every six months, then the contract automatically renews for another six months, up to a total of five years. If the cleaning company does not provide a certification at any given six-month mark, then the contract is terminated early. In the first year, the cleaning company provided the corporation with the certifications. In the second year, the corporation told the cleaning company it no longer needed to get the certifications, as the corporation knew the cleaning company was using "green" products. As a result, the cleaning company did not seek the certifications. In the third year, just after the certification was due, the corporation informed the cleaning company that the contract was terminated since the cleaning company failed to get the required certification. Cleaning company brings a breach of contract claim against the corporation. Which party will most likely win? (A) The corporation, because of the non-occurrence of a condition (B) The corporation, because the cleaning company did not substantially perform its duty to get the certification (C) The cleaning company, because it detrimentally relied on a promise to waive the condition (D) The cleaning company, because otherwise it will experience disproportionate forfeiture

C Issue: This problem tests students on the ways in which a condition may be excused. Rule: A duty or right that is conditioned upon the occurrence of some event or act shall not arise unless the condition either occurs or is excused. Some ways in which a condition may be excused include: 1) avoidance of disproportionate forfeiture, 2) express waiver of a condition, 3) estoppel on a promise to waive a condition, 4) wrongful hindrance by the party with the conditional duty to perform. Analysis: Here, the contract contains an express condition. If the cleaning company provide the corporation with its "green" certification every six months, then the contract automatically renews for another six months up to five years. In the third year, the condition did not occur. The company failed to get certified; therefore the contract does not renew unless the condition has been excused. The cleaning company does in fact have an excuse in estoppel on a promise to waive the condition. The corporation's statement to the cleaning company that it was not necessary to get the certification was a promise to waive the condition. As a result, the cleaning company did not seek the certification—relying on the corporation's promise through forbearance. The corporation should have reasonably expected the cleaning company to forbear since the corporation essentially told them not to seek the certification. Consequently, the corporation should be estopped from using the non-occurrence of the condition as a rationale for not renewing the contract. Choice C is the correct answer. Choice A is incorrect because it has the wrong conclusion. Although there was the non-occurrence of a condition, the condition was excused. Choice B is incorrect for the reasons above and because it uses the incorrect language (substantial performance) surrounding express condition. Choice D is not the best choice. Although the cleaning company will certainly experience a loss of revenue if the contract is not renewed, the forfeiture exception is crafted for a slightly different situation. Comment (d) to Restatement (Second) of Contracts § 229 states, "'forfeiture' is used to refer to the denial of compensation that results when the obligee loses his right to the agreed exchange after he has relied substantially, as by preparation or performance on the expectation of that exchange." Here, the facts don't show reliance in terms of preparation for performing the next six months of actual performance. The cleaning company is just denied the opportunity to perform. The better answer is Choice C.

A bricklayer enters into a written agreement with a homeowner to build a brick wall in return for a payment of $1,000. The writing is specific on the height, width, and length of the wall as well as the type of brick; however, the writing is silent on when the homeowner is to pay the bricklayer the $1,000. Which of the following is the most accurate description of the legal obligation of the homeowner? (A) The contract contains an implied-in-fact term that the homeowner makes a down payment representing the reasonable cost of materials necessary to build the wall. (B) It is an express condition that the bricklayer finishes the wall before homeowner has a duty to pay the $1,000. (C) It is a constructive condition that bricklayer complete the wall before homeowner has a duty to pay the $1,000. (D) No contract formed because of a lack of certainty of the terms.

C Issue: This tests students understanding of the doctrine of constructive conditions. Rule: When a contract does not specify which party should perform first, courts rely on the doctrine of constructive conditions. Restatement (Second) of Contracts § 234 provides "(1) Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate the contrary. (2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary." Analysis: Here, there can be no simultaneous exchange. The performance of the bricklayer requires a period of time to complete. Therefore, under Restatement (Second) of Contracts § 234, the bricklayer must perform first. The bricklayer's completed performance then triggers the homeowner's duty to pay the $1000. Therefore, Choice C is the correct answer. Choice A is incorrect. Nothing in the facts suggests that such a term should be implied into the contract. There is no prior course of dealings to establish that this is the way they deal with one another. Furthermore, the bricklayer is in the best position to determine if it is necessary for him to get a down payment before beginning work. If he needed such a down payment, then as a tradesman, he should have negotiated the term. Absent an express term, the common law relies on constructive conditions to determine which party should perform first. Choice B is incorrect because the condition is not stated in the contract; therefore, it is not "express." Choice D is incorrect because the contract has enough certainty to determine what is a breach and what is a remedy. Since the parties clearly intended to form a contract, the court can use the law of constructive conditions to determine the order of performance.

B Sarah Perkins is a certified public accountant. She enters into a contract with PetLand, a pet store and pet services company, to audit their financial statements for the past three years. PetLand needs the audit to be completed by March 31 and completed in accordance with Generally Accepted Auditing Standards. It needs such an audit by this date to fulfill its obligations under a loan agreement with its bank, First Street Bank. The contract signed by Perkins and PetLand contains the following term: "Perkins covenants and promises to complete the audit in accordance with Generally Accepted Auditing Standards on or before March 31 and Perkins agrees that it is a condition of PetLand's obligation to pay Perkins the audit fee of $100,000 that Perkins fully and completely perform this obligation in full." Perkins ends up taking on more work than she can handle and does not complete the audit until April 5. The audit report states: "Due to the limitations of time, this audit was not conducted in accordance with all Generally Accepted Auditing Standards" and then goes on to list the standards with which the audit did not comply. Ignoring whether or not any excuses exist, what is PetLand entitled to do in response? (A) PetLand can sue for damages for breach of contract by Perkins but must pay the agreed audit fee since Perkins substantially performed her obligations. (B) PetLand can withhold payment of the audit fee since a condition to that obligation has not been fulfilled but cannot seek damages for any harm caused by Perkin's failure to meet the condition. (C) PetLand can withhold paying the audit fee since the conditions to its obligation to pay are not fulfilled and it can seek damages caused by the breach of Perkins of the contract. (D) PetLand has no legal recourse since a condition and promise cannot be combined in this way and are therefore ineffective.

C The quoted provision is a "promissory condition." It is a contractual promise of Perkins to complete the audit in a specified manner by a specified date, the performance of which promise is an express condition to the obligation of PetLand to pay the audit fee. Failure to fulfil a condition relieves the party whose obligation is subject to such condition from the duty to perform the conditional promise. Breach of the promise in the promissory condition gives rise, like any claim for breach of contract, to a right to damages. Only answer C contains both of these consequences. Answers A and B contain only half of this conclusion and are therefore not the best answers. The reference to "substantial performance" in answer A is inappropriate because this doctrine only applies to constructive conditions and the condition in this agreement is express. Answer D is incorrect since promises can serve as express conditions as well as promises. Recommended Reading: Pages 803-805, 813-815, 829

One year before the 100th anniversary of the founding of a city, a publishing company hired a writer to author a book about the history of the city in return for a set fee. The publishing company planned to sell the book during the festivities that were scheduled for the anniversary. In order to have time to print the book, the publisher needed to have the final manuscript from the author no later than six weeks before the anniversary. The written contract between the publishing company and the writer provided that "time was of the essence" and the writer would not be paid if he missed the deadline. The writer, however, did not finish the manuscript until five weeks before the anniversary. At that point, it was too late to print the book in time for the anniversary. The publishing company estimated that there would be few sales after the anniversary had passed; consequently, the publishing company did not print the book at all. The publishing company also did not pay the writer his fee. If the writer brings a breach of contract suit to recover his fee, which of the following is the most likely holding of the court? (A) The writer substantially performed and should be paid his fee less damages. (B) The publishing company must pay the writer restitutionary damages; otherwise, the publishing company would be unjustly enriched. (C) The publishing company has no duty to pay the writer. (D) The court would excuse the condition of the six-week deadline on a theory of waiver.

C Issue: This problem tests students on the impact of a "time is of the essence" clause. Rule: If "time is of the essence" is an enforceable term in a contract, then a party's failure to perform in a timely manner is a material breach that allows the other party to terminate the agreement. Analysis: If a contract has an enforceable "time is of the essence" clause, then the substantial performance doctrine will not apply. Such clauses can have an effect that is similar to a condition. If the party with the duty does not perform by the deadline, then the nonbreaching party might have no duty to perform. However, some parties include "time is of the essence" clauses as boilerplate. To be enforceable, the intent of the parties must be that performance is necessary by a certain date. Here, the "time is of the essence" clause would be enforceable. The publishing company has a legitimate reason for needing the book by the deadline stated in the contract. Therefore, the deadline was a material term of the contract. Since the writer missed the deadline, he materially breached the agreement. There is no way to cure the breach since the time has passed. Consequently, the publishing company may terminate the contract and has no duty to pay the writer. Choice C is correct. Choice A is incorrect since the failure to comply with the "time is of the essence" clause negates the substantial performance doctrine. Choice B is incorrect since (1) the publishing company has not been unjustly enriched, and (2) there is an express term in the contract that the writer will not be paid if he misses the deadline. Choice D treats the "time is of the essence" clause as a condition. However, nothing in the facts suggests that the publishing company waived the deadline requirement; consequently, Choice D is also incorrect.

Bart and Brenda have a contract of insurance with Statewide Insurance on their home. The home was severely damaged by a hurricane. Statewide admits that the hurricane damage was an insurable loss but claims Bart and Brenda failed to fulfil a condition of Statewide's obligation to pay that required the homeowners to notify Statewide of the loss within 30 days of the event. The relevant provisions of the contract state: "3. Conditions and Obligations. It is an absolute and express condition of the obligations of Statewide to pay any claim that Homeowner has paid when due all premiums due on the policy before the insured loss occurred. Homeowners promise to notify Statewide of any loss or damage within 30 days of any event giving rise to such loss or damage." Bart and Brenda have never missed a premium payment. Is a court likely to rule that Statewide does not have to pay the claim (you can assume no special laws regulating insurance contracts apply)? (A) Yes, Bart and Brenda failed to fulfil an express condition to give notice within 30 days and so Statewide's performance is not due. (B) Yes, Bart and Brenda failed to substantially perform their obligation to give notice. (C) No, Bart and Brenda complied with half of the obligations in this section and therefore the condition is substantially performed. (D) No, a court likely will interpret the promise to notify Statewide as a mere promise that is not a condition to paying the claim.

D This problem tests the interpretation of contracts to distinguish a promise from a condition. A court would likely interpret section 3 of the contract to contain one condition (paying premiums) and one promise (to notify Statewide). The two are contained in separate sentences, and only the first states that it is an express condition of Statewide's obligations. The language in no way states that the promise to notify is a condition. Although courts will strictly enforce express conditions, they will typically resolve ambiguity in drafting in favor of a provision being a promise and not a condition. The problem is similar to the facts in the case of Larry K. Howard v. Federal Crop Insurance Corp., 540 F. 2d 695 (4th Cir. 1976), in which the court interpreted an insurance contract provision that included promises in the same section as express conditions as promises only since the language did not clearly state the performance of the promise was a condition. Answer A incorrectly concludes the promise to give notice is an express condition and is, therefore, not the best answer. Substantial performance relates to a constructive condition that a party performs all promises before the other party must perform. The question revolves around whether or not the promise to notify is an express condition and, therefore substantial performance is inapplicable. Answers B and C are, therefore incorrect. Only answer D states what a court is likely to do on these facts—interpret the promise as not being a promissory condition—and is, therefore the best answer.

Sanjay contracted to sell his home to Charlotte for $500,000. The contract contains a clause that states, "Buyer's obligation to purchase this home is expressly conditioned on the City of Rivendell granting on or before March 31, a petition to rezone the Property for a two-family home." Charlotte included this condition because she wants to convert the large home into two units, live in one, and rent the other. She submitted an application for rezoning but a few weeks later discovered a nicer property on the other side of town that she believes she can buy for a better price. It is also already zoned multifamily. She wants to get out of her contract with Sanjay, but the quoted condition is the only one still unfulfilled. She has an old school friend who is chair of the zoning board. She invites him to lunch and explains she is no longer interested in the zoning change and would be very grateful if her friend could get the zoning board to deny her request. Her friend says the board was going to approve the request at the next meeting but if she would rather it be denied it can be arranged. After the board denies the zoning request on March 31, Charlotte sends Sanjay a letter terminating the contract due to the failure of the condition. Is Charlotte's obligation to purchase Sanjay's house excused due to a failure of condition? (A) Yes, the change of zoning was an express condition and courts require express conditions be strictly fulfilled. (B) Yes, Since Charlotte cannot control the zoning board's decision, she is able to use the failure of the condition to her advantage. (C) No, the condition is void as being too ambiguous. (D) No, the fulfillment of the condition is excused because Charlotte interfered with and frustrated its fulfillment by asking her friend to refuse the zoning change.

D Failure of a condition to be met will result in the conditional performance not becoming due. Courts will usually strictly enforce an express condition requiring its perfect fulfillment. Yet, courts will excuse conditions and require performance in several circumstances. Therefore, answer A is not correct because it fails to note that although strictly enforced, conditions can be excused. When the party whose performance is conditioned frustrates the satisfaction of that condition, the condition will be excused. Here Charlotte used her influence with her friend to persuade the zoning board to deny the rezoning and thus not satisfy the condition. As a result, Charlotte cannot now claim no duty to perform due to the failure of that condition. Answer D is correct. Although to be a condition on one's promise, the event or circumstance constituting the condition must not be in the total control of the promisor, the fact that the promisor cannot definitively frustrate the condition without assistance is not relevant to the excuse of frustrating the condition. Answer B is incorrect. There is nothing to suggest that the condition is ambiguous, and if it were, a court could resolve the ambiguity by a principle of interpretation. Answer C is incorrect.

On September 1, a company and an architect enter into a contract where the architect is to design plans for a new office building. Under the contract, the architect is to complete the plans by December 31, and the company is to pay the architect $50,000 upon the completion. On October 1, the architect informs the company that he has accepted another more profitable assignment and will not be creating the architectural plan. On October 15, the company hired someone else to design office building for $60,000. The company did not inform the architect that it had done so. On November 1, by signed writing, the architect contacted the company, stating, 'Things have changed. I will, after all, create the architectural plan for which we contracted. I'll have it finished by December 31, as agreed.' At that point, the company informed the architect that it considered their contract to have been terminated and that the company had hired someone else. If the architect sues the company for breach of contract, what is the most likely holding? (A) The company breached because the architect effectively retracted his repudiation. (B) The company breached because it did not inform the architect that it hired someone else. (C) The architect repudiated the agreement and the contract was effectively terminated on October 1. (D) The architect repudiated the agreement and the contract was effectively terminated on October 15.

D Issue: This problem tests the rules surrounding a retraction of a repudiation. Rule: A party has anticipatorily repudiated a contract when, before performance is due, the party: (1) makes an unequivocal and definite statement that he will not perform a contract when his performance is due, or (2) engages in any conduct that renders that party unable to perform its duties. The repudiating party has the right to retract its repudiation. However, the ability to retract a repudiation terminates when the non-repudiating party: (1) Gives notice that it chooses to treat the contract as rescinded or terminated, (2) Treats the anticipatory repudiation as a breach by bringing suit, or (3) With or without notice materially changes its position in reliance on the repudiation. Analysis: Here, the architect on October 1 repudiated the contract because he made an unequivocal and definite statement that he would not perform when he said he was taking another job that paid more. Choice D is the correct answer. Although the architect attempted to retract his repudiation on November 1, he was too late. The architect's ability to retract was terminated on October 15 when the company relied on the repudiation and changed its position in a material manner by entering into a contract with another architect. Such a change in reliance is effective whether or not the repudiating party receives notice of that reliance. Choice A is incorrect since the right to retract was eliminated on October 15. Choice B is incorrect since a material change in position in reliance on the repudiation effectively terminates the right to retract. Choice C is incorrect since the architect had the right to retract until October 15 when the company changed its position.

A homeowner entered into a contract with a landscaper to plant a large number of trees on the homeowner's property in return for a certain price. The contract called for the landscaper to follow certain specifications as to the type and placement of the trees. One hundred trees were to be planted, and each tree was of a different type. No two were alike. The landscaper followed every specification except that for one of the trees, he accidentally purchased and planted the wrong variety. When the homeowner saw that the landscaper had planted the wrong oak tree, the homeowner refused to pay the landscaper. If the landscaper sues the homeowner for his fee, what would be the likely result? (A) The homeowner must pay the landscaper the full price under the contract because the landscaper substantially performed. (B) The homeowner can suspend any payment indefinitely until the landscaper cures his material breach. (C) The homeowner can terminate the contract because of landscaper's breach; however, the landscaper can partially recover in restitution. (D) The landscaper will recover the full price under the contract minus the damages that arise from his partial breach.

D Issue: This problem tests the substantial performance doctrine. Rule: Any nonperformance of a contractual duty is a breach. However, if a party has substantially performed his duties, then he is entitled to compensation under the agreement less any amount for damages caused by his partial breach. Substantial performance occurs when there are only small deficiencies in the quantity or quality of performance where precision is not critical. If a party has materially breached a contract, the nonbreaching party may terminate the contract unless the circumstances suggest that the breaching party will cure its breach. In those circumstances, the nonbreaching party may suspend performance until the breaching party cures the breach. If the material breach remains uncured, then it becomes a total breach and the nonbreaching party may terminate the contract. The following factors are considered in determining the materiality of a breach: 1) amount of benefit received; 2) adequacy of damages; 3) forfeiture suffered by breaching party; 4) likelihood of cure; 5) lack of good faith and fair dealing. Analysis: Under these facts, the landscaper has substantially performed his duties under the contract. Out of the 100 different types of trees the landscaper had to plant, he planted the wrong type for only one of the trees. Although the landscaper breached the agreement, he provided most of the benefit of the bargain to the homeowner. Furthermore, the landscaper appears to be operating in good faith since he planted the wrong tree by accident. Choice D is the correct answer. The landscaper is entitled to receive his payment under the contract; however, the homeowner can recover for damages caused by the partial breach, reducing the payment to the landscaper by the amount needed to replace the tree with the correct variety. Choice A misapplies the substantial performance rule. Substantial performance only allows the breaching party to recover for its performance but does not eliminate any claim for damages the other party may have incurred as a result of the breach. The homeowner does not have to pay the landscaper the full price under the contract as he is entitled to recover for damages caused by the partial breach. Choice B also misapplies the law. The homeowner may not suspend payment because there was only a partial breach. Likewise, Choice C is incorrect since a party can only terminate a contract if the breach is an uncured material breach. Here, there was a partial breach.

First Street Bank made a loan of $10 million for ten years to Boats N'More, a business that manufactures and sells small recreational boats. The loan agreement contains the following condition subsequent. "It shall be a condition subsequent to the Bank's obligation to make the loan that on or before March 15 of each year, Borrower shall deliver to Bank written proof of insurance covering the inventory and work in progress of Borrower. In the event this condition subsequent is not satisfied, the Bank's obligation to continue the loan shall terminate and the Borrower shall repay the loan within 10 days of notice by the Bank." For the first five years of the ten-year loan period, Boats N'More never delivered the proof of insurance to the Bank. The Bank never requested the proof. Each year the Bank met with Boats N'More on April 1 to review the loan and never stated that the condition was not fulfilled. In the sixth year, the Bank sends a notice to Boats N'More demanding repayment claiming the condition subsequent quoted above has not been met. Which of the following statements is most likely to be true with respect to whether the Bank's obligation to loan the $10 million for ten years is discharged? (A) The condition subsequent of delivering proof of insurance has not been satisfied and the Bank's duty is discharged. (B) Since the insurance proof was never provided, the Bank's duty to lend the money never arose. (C) Because the Bank interfered with the satisfaction of the condition by not informing the Boats N'More that the information had not been received, the Bank cannot use the failure of the condition to discharge its duty. (D) The Bank is estopped from invoking the condition to discharge its duty since its repeated failure to object to the failure of Boats N'More to satisfy the condition implies an intention not to enforce the condition.

D The question tests the understanding of conditions subsequent and the excuse of a condition by estoppel. The condition quoted is a condition subsequent = a condition is a fact or event that must occur after performance begins but which discharges the already begun performance. A condition precedent, in contrast, must be met before performance begins. Thus, answer B is incorrect because it treats the condition as a condition precedent. Although interfering with a condition will excuse its satisfaction, there is no evidence the Bank interfered with the condition. It merely did not remind Boats N'More of its duty. This is not interference or frustration. If the Bank had changed its address or refused to receive mail from Boats N'More that might constitute frustration of the condition, but no such facts are stated and therefore Answer C is incorrect. Here the Bank's failure to object to the non-satisfaction of the condition for five years and its meeting with the borrower to discuss the loan every year shortly after the condition was due to be satisfied most likely suggests the Bank is estopped from exercising its right to demand the past due proofs of insurance. It was reasonable for Boats N'More to believe on these facts that the Bank did not intend to enforce this condition. Therefore, answer D is the best choice. Because answer A does not take account of the likely waiver/estoppel possibility it is not the best choice.