CHAPTERCHAPTER McGraw-Hill/Irwin©2008 The McGraw-Hill Companies, All Rights Reserved Conditions FOURFOUR

4-2 Objectives Chapter Objectives: Use vocabulary regarding conditions properly Differentiate between a covenant and a condition Discuss the practical implications of conditions precedent, subsequent, and concurrent Evaluate whether the condition was created expressly, impliedly in fact, or impliedly in law Determine the effect of the condition on the performance required under the contract

4-3 Objectives This chapter will explore HOW and WHEN the performance will be carried out IF at all. Conditions place requirements on the circumstances surrounding the parties’ performance obligations These requirements may have to occur before, during, or after the parties act upon their promises to each other. These conditions may be created by words, actions, unspoken intentions, or operation of law

4-4 Objectives These requirements may have to occur before, during, or after the parties act upon their promises to each other. These conditions may be created by words, actions, unspoken intentions, or operation of law

4-5 Condition –An event that may or may not happen, but upon which the rest of the performance of the contract rests –The most common condition in a contract relates to when contractual obligations become due—when do the parties actually have to do what they promised to do? Types of Conditions

4-6 Covenant –The promise upon which the contract rests –A covenant is the contractual promise to perform with no strings attached –If the person does not fulfill his covenant, his is in breach Types of Conditions

4-7 There are three types of “timing” conditions 1.Condition precedent –An event that happens beforehand and gives rise to the parties’ performance obligations. If the condition is not satisfied, the parties do not have a duty to perform Types of Conditions

4-8 There are three types of “timing” conditions 2.Condition subsequent −An event that, if it happens after the parties’ performance obligations, negates the duty to perform −If the condition is satisfied, the parties can “undo” their actions Types of Conditions

4-9 There are three types of “timing” conditions 3.Concurrent condition −An event that happens at the same time as the parties’ performance obligations Types of Conditions

4-10 There are three means of creating conditions. Conditions may be 1.Express 2.Implied in fact, or 3.Implied in law Method of Creation

4-11 Express conditions –Requirements stated in words, either orally or written, in the contract Method of Creation

4-12 Express conditions –While the court usually interprets these express conditions strictly, conditions that are not related to the subject matter of the agreement may not be enforced so as to avoid the contract entirely. Contract law likes to preserve contracts where possible Method of Creation

4-13 The evidence of the existence of these implied in fact conditions is determined by the surrounding circumstances If you enter into a sales and delivery contract with a merchant, the express condition is that you will pay for the goods The implied in fact condition is that you will allow the delivery person access to your home to actually deliver the goods you purchased Method of Creation

4-14 Implied in fact −Conditions that are not expressed in words but that must exist in order for the terms of the contract to make sense and are assumed by the parties to the contract Method of Creation

4-15 It is important to note that express conditions trump implied in fact conditions. A court will not “ insert terms into an agreement by implication unless the implication arises from the language employed or is indispensable to effectuate the intention of the parties.” Method of Creation

4-16 Implied in law –Conditions that are not expressed in words but are imposed by the court to ensure fairness and justice as a result of its determination Method of Creation

4-17 Time for performance –A condition that requires each party be given a reasonable time to complete performance Method of Creation

4-18 Through an examination of the terms of the contract, the paralegal student can determine if and when performance may become due. Conditions may take many forms and it is important that they are properly categorized so that their impact on the agreement as a whole can be determined. Method of Creation

4-19 What paralegal students need to know comes from their kindergarten days The courts expect people to treat others fairly and in a manner in which we would like to be treated, by implying the condition that neither party do anything to harm the other’s interest in the subject matter of the agreement, nor that either party do anything to injure the other party’s right to receive the fruits of the contract Method of Creation

4-20 Through an examination of the terms of the contract, the paralegal student can determine if and when performance may become due. Conditions may take many forms and it is important that they are properly categorized so that their impact on the agreement as a whole can be determined Method of Creation

4-21 Summary Contractual conditions are those terms, other than the actual performance promises, that the parties incorporate as part of the contract. They deal with when and how the parties are to perform

4-22 Summary Conditions precedent deal with an occurrence that must come before the party’s obligation to perform Conditions subsequent deal with events that occur after a party’s performance pursuant to the contract and they release the parties from having to finish performance or totally excuse previous performance without penalty Concurrent conditions deal with obligations to perform that occur simultaneously

4-23 Summary Conditions may be: 1.Express: They are specifically stated in words by the parties themselves 2.Implied in fact: Those occurrences must take place in order for the parties to perform. In good faith, the parties expect these conditions without having to say them 3.Implied in law: They are imposed by the court out of fairness and justice