§ 13.01 Timing of Performance of Duties

Unless the contract specifies otherwise, some of the rules that dictate the order of performance of contractual duties are:

1)  Promises capable of simultaneous performance are each due simultaneously, with each being constructively conditioned on tender of the other.

2)  Where the duty of only one party requires a period of time for performance, such duty is due first.

3)  Where the contract provides for a series of performances and payments, performance of one part is a condition precedent to payment, which in turn becomes the condition precedent to the next performance installment.

§ 13.02 Conditions

A condition is the occurrence or non-occurrence of an event that gives rise to or extinguishes a contractual duty. A conditional duty becomes due upon either the fulfillment or excuse of such condition. Fulfillment of conditions becomes due as follows:

• conditions precedent – a promise which by its terms is to be performed prior to the return promise
• concurrent conditions – promises that are capable of being performed simultaneously, and neither party has a duty to perform until the other has performed
• conditions subsequent – an event, occurring after a duty has arisen, that discharges such duty

[1] Strict vs. Substantial Fulfillment

Express conditions, as well as implied conditions which may be found based on course of performance, course of dealing, trade usage or other conduct, must be strictly fulfilled in order to give rise to a conditional duty. E.g., the condition of tender of payment is likely one to require strict fulfillment.

Constructive conditions – which are judicially imposed in the interest of justice – may be fulfilled by substantial performance. Courts may interpret an express or implied condition as a constructive condition where substantial performance has been rendered in order to avoid a forfeiture.

[2] Excuse of conditions

If a condition fails to occur, the other party may still be obligated to perform his contractual duties if the condition is excused. A condition may be excused by:

1)  rejection of a proper tender of performance, where acceptance of the performance is a condition precedent to the rejecting party's duty to perform

2)  wrongful prevention or hinderance of the other party's performance, if such performance was a condition of the aggrieving party's duty, and upon demonstration by the other party that he was otherwise ready, willing and able to perform

3)  waiver of a non-material condition (e.g., time or manner of delivery) that has not yet failed. A waiver can be withdrawn and the condition reinstated if the other party has not relied on such waiver to his detriment. Waiver is only available for conditions that solely benefit the party waiving it.

4)  election to continue performance after a condition has failed. Under the majority view, an election cannot be withdrawn, even if the other party has not relied to his detriment on it. If the failed condition constitutes a breach, election does not foreclose an action for damages.

5)  equitable estoppel where a party wrongfully prevented the occurrence of a condition

6)  avoidance of disproportionate forfeiture unless the occurrence of such condition was a material part of the bargain

7)  impossibility of performance of a non-material condition does not relieve the other party of his duty to perform if there would be forfeiture (need not be an extreme forfeiture in cases of impossibility)

8)  unreasonable withholding of approval by a third party in some circumstances

[3] Approval as a Condition

[a] Approval by a Third Party

Generally, if there is no forfeiture involved, a condition that a third party approve the performance will be enforced and will not even be excused by the third party's death or incapacity or unreasonable withholding of approval. If the failure of the condition of approval will result in forfeiture by the other party, whether the condition will be enforced or excused depends on the matter subject to approval. If the approval pertains to aesthetics, taste and fancy, the honest judgment of the third party is likely to be upheld and the condition enforced. However, if the approval concerns a matter of utilitarian function or a matter on which the third party possesses no special expertise, such condition of approval will generally be excused if deemed to have been unreasonably withheld.

[b] Approval by a Party

Where a party's duty is conditioned on his own approval of the other party's performance, courts generally enforce such condition – even if the other party will suffer forfeiture – where:

• approval concerns a matter of aesthetics or taste, and the disapproval is based on honest dissatisfaction; or
• approval concerns a matter of utilitarian function and it was not unreasonably withheld.