Conditions and Performance

Question 1

Conditions and Performance

Answer 1

The failure of a condition relieves a party of the obligation to perform. The failure of a party to perform a promise constitutes breach.

Question 2

Condition

Answer 2

A condition is a future event that must take place before a party’s contractual rights or obligations are created, destroyed, or enlarged.

Question 3

Promise

Answer 3

A promise constitutes a party’s obligation to act or refrain from acting.

Question 4

Express Conditions

Answer 4

Express conditions are established (expressed) in the contract. Words in the contract such as “on the condition that” or “provided that” are typical examples of express conditions.

Question 5

Implied Conditions

Answer 5

Implied conditions are conditions that are deemed to be part of the contract.

Question 6

Implied-in-fact Conditions

Answer 6

Implied-in-fact conditions are deemed conditions because the nature of the agreement suggests that the parties truly intended the conditions but failed to expressly include them.

Question 7

Implied-in-law Conditions

Answer 7

Implied-in-law conditions are known as “constructive conditions.”

Question 8

Substantial Performance

Answer 8

Substantial performance is the completion of all but the nonmaterial terms of a contract. A party who substantially performs in good faith can recover on the contract even though that party has not rendered full performance.

Question 9

Material Breach Test

Answer 9

Many jurisdictions use the following five-pronged test to determine whether a breach is material:

i) The degree to which the breach deprives the other party of the benefit she reasonably expected;

ii) The extent to which that party can be compensated for that deprivation;

iii) The extent to which the breaching party will suffer forfeiture;

iv) The likelihood that the breaching party will cure the breach; and

v) The extent to which the breaching party has acted in good faith

Question 10

Installment Contract (common law)

Answer 10

A divisible or installment contract is one in which the obligations imposed on the contracting parties can be separated into corresponding pairs of part performances such that each pair constitutes agreed equivalents.

Question 11

Good Faith

Answer 11

Good faith means “honesty in fact and the observance of reasonable commercial standards of fair dealing.”