Legal Outcomes in Contract Law Analysis

1. George Mason School of Law Contracts II Conditions F.H. Buckley fbuckley@gmu.edu 1

2. Next day • Warranties

3. Stees p. 73 • What are the possible legal outcomes here? Third and Minnesota, St Paul 3

4. Stees • What are the possible legal outcomes here? • Builder assumes risk and is liable in damages for non-completion 4

5. Stees • What are the possible legal outcomes here? • Builder assumes risk and is liable in damages for non-completion • Owner picked the land and assumes risk • and is liable for seller’s reliance damages or lost profits 5

6. Stees • What are the possible legal outcomes here? • Builder assumes risk and is liable in damages for non-completion • Owner picked the land and assumes risk • The quicksand put an end to the contract and no one is liable in damages 6

7. Stees What are the possible legal outcomes here? Can you tell which from the language of the contract? 7

8. Stees What are the possible legal outcomes here? Can you tell which from the language of the contract? Do you think the case was rightly decided? 8

9. Stees • Now let’s look at excuses • Mistake • Frustration • Condition 9

10. Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) 10

11. Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) • Is this a case of Restatement § 154(b) or (c)? 11

12. Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement § 152(1) • Is this a case of Restatement § 154(b)? Or (c)? • See Illustration 5 12

13. Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement • Impracticability or Frustration • Restatement § 261 • Futurity? See Restatement § 266(1) • Illustration 8 13

14. Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement • Impracticability or Frustration • Condition: Restatement § 224 • See Introductory Note 14

15. Stees • The quicksand put an end to the contract and no one is liable in damages • Mistake: Restatement • Impracticality or Frustration • Condition: Restatement § 224. • Futurity? See § 224 cmt e. 15

16. Conditions • What kind of a condition? • Condition Precedent • Condition Subsequent • What’s the difference? • Restatement § 224, cmt e; Restatement § 230. 16

17. Conditions • Conditions and Promises • Restatement § 224, Illustration 2 17

18. Stees • What did the court decide? • Why not split liability down the middle? 18

19. Stees • What did the court decide? • Why not split liability down the middle? • Assume that harm costs = 100 and that either party could have avoided the harm at a cost of 80 19

20. Stees • What did the court decide? • Why not split liability down the middle? 20

21. Stees • I agree to sell you my car, and tender delivery immediately. If no more is said, when do you have to pay? 21

22. Stees • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) 22

23. Stees • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Tender of delivery by seller and tender of payment by buyer are mutual conditions • UCC §§ 2-507(1), 2-511(1) • Both parties to stand “ready, willing and able” to perform 23

24. Stees • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) • When I agree to build you a house, when do you have to pay? 24

25. Stees • I agree to sell you my car, and tender delivery immediately. When do you have to pay? • Restatement § 234(1) • When I agree to build you a house, when do you have to pay? • Restatement § 234(2) • Illustration 9: The “work before pay” rule 25

26. Can this go to far?Paradine v. Jane I agree to rent your house, but am prevented from doing so by war Prince Rupert 26

27. Typical Force Majeur Clause Neither party shall be liable in damagesor have the right to terminate this Agreement for any delay or default in performing hereunderif such delay or default is caused by conditions beyond its control including, but not limited to Acts of God, Government restrictions (including the denial or cancellation of any export or other necessary license), wars, insurrections and/or any other cause beyond the reasonable control of the party whose performance is affected. 27

28. Typical Force Majeur Clause Why might the parties bargain for a force majeur clause, as opposed to assigning liability to one of the parties? 28

29. Typical Force Majeur Clause • Why might the parties bargain for a force majeur clause, as opposed to assigning liability to one of the parties? • Assume a probability of war of 0.001 percent. If that happens, each party loses the benefit of his bargain. 29

30. Ready, willing and able:Bell v. Elder 623 • What was the risk in question? 30

31. Bell v. Elder • What were the parties’ obligations? 31

32. Bell v. Elder • What were the parties’ obligations? • Buyer: to tender the price • Seller: furnish water and other hook-ups 32

33. Bell v. Elder • What were the parties’ obligations? • Which part of Restatement § 234 would you apply? • And why does it matter? 33

34. Bell v. Elder • What were the parties’ obligations? • Which part of Restatement § 234 would you apply? • What’s the point at dispute? 34

35. Bell v. Elder • What was the seller’s obligation in question? • To supply water • They didn’t do so but was “ready, willing and able” to do so on tender of the price • And that’s all that was needed 35

36. Bell v. Elder • Had the case been decided otherwise, what would have been the point of the deposit? • And what was the point of the deposit? 36

37. What is a condition? • Jacob & Youngs v. Kent p. 65 37

38. What is a condition? • What was the breach? • What remedy does the Π seek? 38

39. What is a condition? What are Dependent vs. Independent Promises? Benjamin Cardozo 39

40. What is a condition? • What are Dependent vs. Independent Promises? • Dependent promises as “conditions” • Tender of price and of delivery under Article 2 40

41. What is a condition? • What are Dependent vs. Independent Promises? • Dependent promises as “conditions” • Tender of price and of delivery under Article 2 • Independent promises as mere “promises” • Breach by one party does not excuse non-performance by the other, but can be remedied in damages 41

42. What is a condition? • What are Dependent vs. Independent Promises? • Dependent promises as “conditions” • Independent promises as mere “promises” • I know Cardozo called it a “promise” but I’m going to call it a “warranty”. 42

43. Promises and Conditions Promises Conditions Warranties

44. Promises and Conditions Promises Conditions Warranties Dependent Promises Independent Promises

45. Promises and Conditions Damages Forfeiture (rescission) Promises Conditions Warranties Election

46. Promises and Conditions Damages Damages only Forfeiture (rescission) Promises Conditions Warranties Election

47. What is a condition? • “I promise to buy your car if it passes inspection.” • If it doesn’t pass inspection, must I pay the price? 47

48. What is a condition? • “I promise to buy your car if it passes inspection.” • If it doesn’t pass inspection, must I pay the price? • No, since passing the inspection is a condition 48

49. What is a condition? • “I promise to buy your car if it passes inspection.” • If it doesn’t pass inspection, must I pay the price? • If it doesn’t pass inspection, are you in breach? • Yes, if you have promised it would; no, otherwise 49

50. What is a condition? • “I promise to buy your car if it passes inspection.” • So a condition might be a promise—or it might not. 50 50