PastPaperHero | Performance, breach, and discharge - Conditions (express and constructive)

Learning Outcomes

This article explains conditions in contract law for the MBE, including:

Distinguishing conditions from contractual promises and identifying language that creates express conditions, constructive conditions, or mixed promise‑condition terms in bar-style fact patterns.
Classifying conditions as precedent, concurrent, or subsequent, and assessing how each type affects when duties arise, must be performed, or are discharged.
Applying substantial performance and material breach analysis to constructive conditions, and contrasting this with the strict compliance required for express conditions and the UCC perfect tender rule.
Evaluating when nonoccurrence of a condition merely excuses the other party’s performance versus when it also constitutes a breach giving rise to damages.
Analysing how doctrines such as waiver, hindrance or failure to cooperate, estoppel, breach, anticipatory repudiation, impossibility, and impracticability can excuse or modify conditions on an exam.
Determining the availability of contract, restitution, and reliance remedies when an express condition fails and a party risks forfeiture after partial performance.
Structuring an MBE or essay answer that clearly identifies the relevant condition, states the governing rule, applies it to the facts in a stepwise manner, and concludes who must perform and what remedies are available.

MBE Syllabus

For the MBE, you are required to understand performance, breach, and discharge in contract law, with a focus on the following syllabus points:

The definition and operation of express and constructive (implied) conditions.
The distinction between conditions and promises (covenants).
The classification of conditions as precedent, concurrent, and subsequent.
The doctrine of substantial performance and its interaction with constructive conditions.
The effect of failure or nonoccurrence of a condition on the other party’s duty to perform.
The ways in which conditions may be excused or waived (waiver, hindrance, estoppel, impracticability, impossibility, breach, and repudiation).
The consequences of breach of condition versus breach of promise, including material versus minor breach.
The discharge of contractual duties when conditions fail, are excused, or are replaced (e.g., by novation, accord and satisfaction).
The order of performance in bilateral contracts and the role of constructive conditions of exchange.
The special role of conditions in UCC Article 2 (perfect tender and installment contracts).

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

Which of the following best describes a constructive condition?
1. A condition expressly stated in the contract.
2. A condition implied by law to ensure fairness.
3. A condition that excuses all performance.
4. A condition that cannot be waived.
If a party fails to strictly satisfy an express condition precedent, what is the usual result?
1. The other party's duty to perform is excused.
2. The contract is automatically modified.
3. The breaching party may recover full contract price.
4. The condition is ignored if performance is substantial.
Under the doctrine of substantial performance, which of the following is true?
1. It applies to all contracts, including those for the sale of goods.
2. It excuses performance of express conditions.
3. It allows recovery if a constructive condition is nearly, but not perfectly, satisfied.
4. It requires strict compliance with every term.
Which of the following is NOT a way in which a condition may be excused?
1. Waiver by the protected party.
2. Hindrance or failure to cooperate.
3. Substantial performance of an express condition.
4. Actual breach by the other party.

Introduction

Contracts often make one party’s duty to perform dependent on the occurrence of an event, known as a condition. Understanding how conditions operate is essential for determining when a party’s performance is due, when nonperformance is excused, and when a contract is discharged. This article explains the difference between express and constructive conditions, the consequences of their failure, and the doctrine of substantial performance.

Key Term: Condition
An event, not certain to occur, which must occur before a party’s contractual duty becomes due or continues, or which, if it occurs, terminates an existing duty.

Conditions are about the timing and existence of duties: they tell you whether and when a duty to perform arises or is cut off. On the MBE, many performance and breach questions turn on whether a term is (i) a condition, (ii) a promise, or (iii) both.

If a condition fails, the protected party’s duty is excused; there is usually no breach if neither party promised that the condition would occur.
If a promise is broken, the promisor is in breach and liable for damages, but the other party’s duties are discharged only if the breach is material.
Parties can sometimes draft a term so that it is both a condition and a promise (e.g., “Buyer promises to obtain financing, and Seller’s duty is conditioned on Buyer obtaining financing”).

Key Term: Promise
A contractual undertaking to do or refrain from doing something; its breach gives rise to damages and, if material, may discharge the other party’s remaining duties.

A central interpretive question in condition problems is: Did a party agree to make an event happen (a promise) or merely agree that its own duty would depend on whether the event occurs (a condition)?

If the language is “If X occurs, I will perform,” X is usually a condition.
If the language is “I will do X,” that is a promise.
If the language is mixed (“I promise to do X, and my duty is conditional on X”), X is both a promise and a condition. Nonoccurrence both prevents the other party’s duty from arising and also constitutes breach by the promisor.

A pure condition allocates risk: the party whose duty is conditional on the event is willing to perform only if the event occurs. A promise allocates responsibility: the promisor must make the event happen or be liable in damages. And a term that is both a condition and a promise does both: it allocates risk and imposes responsibility.

Courts disfavor forfeitures. When language is ambiguous, courts prefer to construe a term as a promise or as a constructive condition (allowing substantial performance and damages) rather than as a strict express condition that forfeits the entire contract. You should therefore be slow to find an express condition unless the language clearly indicates that the parties intended a “no occurrence, no duty” arrangement.

Conditions and the Constructive Condition of Exchange

In bilateral contracts, especially under common law, courts assume that the performances are to be exchanged. To operationalise this, courts supply a constructive condition of exchange.

Key Term: Constructive Condition of Exchange
A court‑imposed rule that one party’s performance (or tender) is a condition to the other party’s performance, so that neither must perform unless the other has substantially performed or is ready, willing, and able to perform.

This is the backbone of common‑law performance and breach questions. In a typical service or construction contract, the contractor’s substantial performance is a condition of the owner’s duty to pay. If substantial performance is lacking, the owner’s nonpayment is not a breach; the contractor’s defect is the breach.

In most bilateral contracts:

When one party’s performance takes time (build a house) and the other’s is payment, the longer performance is usually a condition precedent to the payment obligation. The builder must substantially perform before the owner’s duty to pay arises.
When both performances can be rendered at the same time (exchange of goods for money at closing), the obligations are usually concurrent conditions: each party’s tender is a condition of the other’s duty.

Courts also require good faith in satisfying or relying on conditions. A party cannot:

Fail to make reasonable efforts to cause a condition to occur.
Prevent or hinder a condition and then rely on its nonoccurrence.
In bad faith insist that a satisfaction or certification condition has not been met.

Key Term: Tender
An offer by a party to perform, made in such a way that, if the other party does not cooperate or accept, the tendering party is treated as having performed for condition purposes.

Tender is important for concurrent conditions: if you are ready, willing, and able to perform and you make a proper tender, you generally satisfy your side of the constructive condition even if the other side refuses. On an MBE fact pattern, if the seller shows up at the agreed time with the deed and the buyer refuses to pay, the seller has satisfied the constructive condition of exchange and the buyer is in breach.

Types of Conditions

Conditions can be express (stated in the contract) or constructive (implied by law). They are further classified by their timing and function.

Express Conditions

An express condition is one that the parties have specifically included in their agreement, often using language such as “on condition that,” “provided that,” “unless and until,” or “if and only if.” Express conditions must be strictly satisfied unless excused.

Key Term: Express Condition
A condition explicitly stated in the contract, requiring strict compliance for the duty to arise or continue.

Express conditions give parties powerful protection but can be harsh if not met. If an express condition precedent to one party’s performance does not occur, that party’s duty simply never matures. There is no breach by the party whose duty was conditioned, because their duty never became due.

Typical fact patterns:

“Time is of the essence” clauses making timely performance an express condition of payment.
“Subject to Buyer obtaining a loan at X% or less” clauses in land-sale contracts.
“Payment is due upon issuance of architect’s certificate of completion” in construction contracts.
Insurance policies that provide coverage “provided that the insured gives written notice within 30 days.”

Courts will not lightly infer such conditions; they look for clear conditional language. They also consider whether treating a term as an express condition would cause a disproportionate forfeiture (e.g., one minor defect wiping out a large payment). In rare cases, especially where the condition is not a central part of the exchange and the forfeiture would be extreme, a court may excuse an express condition to avoid such a result.

Some useful interpretive points:

Language of condition: “on condition that,” “so long as,” “provided that,” “unless and until,” “if, and only if,” “no liability unless.” This strongly suggests an express condition.
Language of promise: “shall,” “agrees to,” “promises to,” “must.” This usually indicates a promise, not a condition.
Mixed language may indicate both: “Buyer promises to obtain financing, and Seller’s obligation to convey is conditioned upon Buyer so doing.”

Express conditions can affect:

The coming into existence of a duty (condition precedent to formation or effectiveness: “This agreement shall not take effect unless approved by the board.”).
The maturity of a duty (condition precedent to performance: “Payment is due if the architect issues a certificate.”).
The continuation of a duty (condition subsequent: “Employee will remain employed unless her license is revoked.”).

On the MBE, pay close attention to whether the language clearly makes an event a prerequisite to any duty, or merely describes expected circumstances. If the language could reasonably be read either way, courts will often treat it as a promise or constructive condition to avoid forfeiture.

Constructive (Implied) Conditions

A constructive condition is not stated in the contract but is imposed by law to ensure fairness and the orderly exchange of performances. The most important constructive condition is the constructive condition of exchange—the principle that one party’s substantial performance is a precondition to the other party’s duty to perform.

Key Term: Constructive Condition
A condition implied by law (rather than by the parties’ words) to govern the sequence and dependencies of performance, generally satisfied by substantial performance.

Common examples:

In a construction contract without explicit conditional language, the contractor’s substantial performance is a constructive condition of the owner’s duty to pay.
In a service contract payable “on completion,” substantial completion will usually trigger payment, subject to offsets.
In a bilateral sale of land contract, Buyer’s tender of the price and Seller’s tender of the deed are concurrent constructive conditions.

Because constructive conditions are imposed by courts to prevent injustice, they require substantial, not perfect, performance. They are also flexible: courts will adjust the order of performance based on which party’s performance reasonably comes first (e.g., in a contract to build a house and then pay, the builder’s performance comes first).

For exam purposes:

If there is no clear conditional language, assume a constructive condition and apply substantial performance/material breach analysis.
If the contract is divisible (separate prices for separate units of performance), constructive conditions apply unit by unit: substantial performance of a unit triggers payment for that unit.

Classification by Timing

Conditions are also classified by when they operate:

Condition Precedent: Must occur before a duty to perform arises.
Condition Concurrent: Must occur (or be tendered) simultaneously with the other party’s performance.
Condition Subsequent: Terminates an existing duty if it occurs after performance has begun.

Key Term: Condition Precedent
An event that must occur before a party’s contractual obligation becomes due.

Key Term: Condition Concurrent
A pair of conditions under which each party’s performance is due only if the other party is ready and willing to perform at the same time.

Key Term: Condition Subsequent
An event that, if it occurs after performance has begun, extinguishes a party’s duty to perform.

Examples:

Precedent: “Seller will convey Blackacre to Buyer if Buyer obtains financing by May 1.”
Concurrent: In most cash-for-goods sales, each party’s duty is concurrent: Buyer must tender payment while Seller tenders the goods.
Subsequent: “Employee will remain employed at X salary unless her professional license is revoked.”

In a dispute, the burden of proof usually differs:

The party seeking to enforce a duty bears the burden of proving that any condition precedent occurred.
The party seeking to be discharged by a condition subsequent bears the burden of proving that the condition subsequent occurred.

When contract language is unclear about timing, courts often default to treating obligations as concurrent: each side must be ready and able to perform, and neither can sue the other without first performing or tendering.

Effect of Conditions

If a condition precedent or concurrent is not satisfied, the corresponding duty does not arise. If a condition subsequent occurs, the duty is discharged going forward.

The failure of an express condition generally excuses the other party’s performance, unless the condition is excused or waived. The nonoccurrence of a condition is not a breach unless a party promised to cause the condition to occur.

At the pleading stage, nonoccurrence of a condition precedent must usually be specifically denied; otherwise it is deemed admitted (this occasionally shows up in Civil Procedure questions).

Exam Tip
Ask: “Did the parties promise the event or merely make their duties conditional on it?”

If they promised it: nonoccurrence is a breach (plus possible failure of a constructive condition).

If they did not promise it: nonoccurrence is usually just failure of a condition, excusing the other side, but not necessarily a breach by anyone.

Also ask: “Is the event within a party’s control?” If a party agrees to an event within its control (e.g., “Buyer will obtain financing by 1 June”), courts are more likely to treat it at least partly as a promise, so that doing nothing (no effort to obtain financing) can be a breach.

Worked Example 1.1

A contract states: “Seller will deliver goods to Buyer on condition that Buyer secures financing by June 1.” Buyer fails to obtain financing by June 1. Is Seller obligated to deliver the goods?

Answer:
No. The financing requirement is an express condition precedent. Because Buyer did not satisfy the condition, Seller’s duty to deliver never arises. Unless Buyer also promised to obtain financing (for example, promised to make reasonable efforts), there is no breach—just a failure of a condition that excuses Seller.

If the facts added that Buyer never met with any lender, a court might imply a promise to use reasonable efforts and find Buyer in breach of that implied promise, while still recognising that Seller’s duty to deliver never matured because the condition failed.

Substantial Performance and Constructive Conditions

While express conditions require strict compliance, constructive conditions are satisfied by substantial performance. Under the doctrine of substantial performance, if a party has made a good faith effort and any failure is not material, the other party’s duty to perform becomes absolute, but damages may be awarded for the deficiency.

Key Term: Substantial Performance
Performance that, although not perfect, is sufficiently complete and in good faith to trigger the other party’s duty under a constructive condition, subject to damages for minor defects.

Whether performance is substantial is the flip side of the material breach question.

Key Term: Material Breach
A failure to perform that so undermines the contract’s purpose that it deprives the other party of the substantial benefit of the bargain, thereby discharging that party’s remaining duties.

Courts consider, among other factors:

The extent to which the injured party is deprived of the expected benefit.
The adequacy of monetary compensation for any shortfall.
The extent of the breaching party’s performance and good faith.
The hardship on the breaching party if the breach is treated as material.
Whether the breach was willful or merely negligent.
The likelihood that the breaching party will cure the defect promptly.

If a breach is material, the constructive condition of exchange is not satisfied, and the other party may withhold performance and sue for damages. If the breach is minor, the condition is deemed substantially satisfied, and the other party must still perform but can claim damages.

Key Term: Divisible Contract
A contract in which performance can be divided into distinct units (e.g., per installment or per phase), so that substantial performance of one unit can trigger payment for that unit even if later units are not performed.

Divisibility often softens the consequences of a breach: a contractor may recover for completed phases even if later phases are defective or not completed, so long as the contract is properly divisible and the price is apportioned by unit or stage.

In exam analysis, always ask:

Is the contract entire (one lump-sum price for the whole job) or divisible?
Has the breaching party substantially performed the whole contract (entire contract) or at least one severable part (divisible contract)?

Worked Example 1.2

A builder contracts to construct a house for Owner for $200,000. The contract does not specify that payment is conditional on perfect completion. The builder completes the house, but uses a slightly different brand of paint in one room. Owner refuses to pay. Is Owner excused from payment?

Answer:
No. The builder has substantially performed under a constructive condition of exchange. Owner must pay, but may recover damages for the minor defect (e.g., cost to repaint). The use of a different but comparable brand in one room is a minor deviation, not a material breach.

Note how substantial performance works in practice:

The contract price is due (because the constructive condition is satisfied).
The nonbreaching party gets an offset equal to either the cost of correction (if not economically wasteful) or the diminution in value.
The breaching party does not forfeit the entire contract price for trivial defects.

If the builder had instead installed a substantially different, much cheaper roofing material throughout, likely depriving Owner of a central aspect of the bargain, the breach would probably be material, and Owner could refuse to pay until the defect is cured.

Conditions in Sale of Goods – Perfect Tender

Under the UCC, a seller’s obligation in a single-delivery contract for the sale of goods is governed by the perfect tender rule, not by substantial performance.

Key Term: Perfect Tender Rule
In a single-delivery sale of goods, the buyer may reject the goods if they or the tender fail in any respect to conform to the contract, subject to the seller’s right to cure.

Substantial performance doctrine does not apply to one-shot sales of goods questions on the MBE. Distinguish:

Common law service/construction contracts: constructive conditions + substantial performance.
UCC sales of goods: perfect tender, with specific cure and installment contract rules.

The perfect tender rule functions like an express condition imposed by law: conforming tender is a condition of the buyer’s duty to pay.

However, under Article 2:

The seller may cure a nonconforming tender if there is still time left under the contract or if the seller reasonably believed the goods would be acceptable.
In installment contracts, the buyer can reject only an installment whose nonconformity substantially impairs its value and cannot be cured; rejection of the whole contract requires that the nonconformity substantially impair the value of the entire contract.

So even in sales of goods, you must ask whether the contract is for a single delivery (strict perfect tender) or for multiple installments (more forgiving).

Classification by Satisfaction – Satisfaction Clauses

Some contracts state that performance is due only if a party is “satisfied” with the other’s performance.

Key Term: Satisfaction Clause
A contractual provision making a party’s duty conditional on that party’s satisfaction with the other’s performance.

Courts apply different standards:

If satisfaction concerns commercial quality or fitness (e.g., “if the machine works satisfactorily”), an objective “reasonable person” standard applies: the party may withhold performance only if a reasonable person would be dissatisfied.
If satisfaction concerns personal taste or judgment (e.g., a portrait, a custom song), a subjective good faith standard applies: the party must honestly, though not necessarily reasonably, be dissatisfied.

A satisfaction clause is usually treated as an express condition of the protected party’s duty, but the satisfaction standard (objective vs subjective) limits how easily that condition can be claimed to have failed.

Third-party certification clauses (e.g., architect’s certificate, engineer’s approval) are similar: the certificate is usually an express condition, but the certifier must act in good faith and according to the contract; wrongful refusal to certify can excuse the condition.

When analysing satisfaction clauses on the MBE:

Identify the type of satisfaction (commercial vs personal).
Identify the standard (reasonable person vs honest dissatisfaction).
Determine whether the purported dissatisfaction is genuine (subjective) or reasonable (objective) and whether the party has cooperated in good faith.

Worked Example 1.3

A contract states: “Painter will be paid if Owner is satisfied with the work.” Painter completes the work, but Owner refuses to inspect or give feedback. Is Painter entitled to payment?

Answer:
Yes. Owner’s failure to cooperate excuses the satisfaction condition. A party cannot rely on the nonoccurrence of a condition it wrongfully prevents. Painter may recover the contract price, subject to damages if the work is objectively unsatisfactory (if an objective standard applies) or subject to evidence that Owner is honestly dissatisfied (if a subjective standard applies).

Breach of Condition vs. Breach of Promise

It is essential to distinguish between a condition and a promise. Failure of a condition excuses performance; breach of a promise gives rise to damages but does not necessarily excuse the other party’s performance unless the breach is material.

How courts construe ambiguous language

Courts often treat ambiguous language as creating a promise rather than an express condition. This allows the court to avoid a complete forfeiture by awarding damages instead of excusing the other party’s performance entirely.

Typical conditional-sounding phrases that might not create strict conditions if context suggests otherwise:

“When completed, payment shall be due.”
“Payment is due upon completion.” (often read as timing language, enforced through constructive conditions).
“Delivery is expected by June 1.” (often treated as a promise regarding time, but not an express condition unless “time is of the essence” or other strong language is used).

By contrast, phrases like “on condition that,” “provided that,” “unless,” and “if and only if” are strong indicators of an express condition.

When a term is both a promise and a condition, two consequences follow when the event does not occur:

The other party’s duty does not arise (failure of the condition), and
The promisor is in breach (for failing to perform the promise).

Exam Warning

Do not confuse substantial performance (which applies to constructive conditions and promises) with strict compliance (required for express conditions). Failure to strictly satisfy an express condition usually excuses the other party’s performance entirely, even if performance is substantial.

Worked Example 1.4

Owner hires Roofer to replace a roof “provided that the work is completed by June 1, time being of the essence.” Roofer finishes on June 3 due to minor weather delays. Owner refuses to pay anything, claiming the express condition failed. There is no evidence Roofer deliberately delayed.

Answer:
Because the contract uses strong conditional language (“provided that” and “time being of the essence”), timely completion by June 1 is likely an express condition to Owner’s duty to pay. Strict compliance is required. Absent excuse or waiver, Owner’s duty to pay is discharged. Roofer may, however, be able to recover in restitution for the benefit conferred (value of the roof) to avoid unjust enrichment, but not on the contract price.

Note the remedial structure:

Contract claim fails because condition to payment did not occur.
Restitution may still be available to prevent Owner’s unjust enrichment.

If the clause simply said “work to be completed by June 1” with no “provided that” and no “time is of the essence” language, a court might treat the date as a promise rather than an express condition. The two-day delay would then likely be a minor breach: Owner would owe the contract price but could claim any provable delay damages.

Excuse and Waiver of Conditions

A condition may be excused in several ways. Once a condition is excused, the protected party’s duty becomes unconditional (subject to any breach by the other side).

The main doctrines are:

Waiver
Hindrance or failure to cooperate
Estoppel
Actual breach or anticipatory repudiation
Impossibility, impracticability, or frustration affecting the condition
Prospective relinquishment by contract modification or novation

Key Term: Waiver
The voluntary, intentional relinquishment of a known right or condition by the party protected by that condition.

A party can waive a condition by words or conduct inconsistent with insisting on its occurrence (e.g., accepting performance without insisting on a condition). A waiver:

Must be made by the party benefited by the condition.
Can often be retracted as to future performance, unless the other party has materially relied on the waiver.

Key Term: Hindrance
Conduct by a party that wrongfully prevents or interferes with the occurrence of a condition, thereby excusing the condition.

If a party’s lack of cooperation or active obstruction prevents the condition from occurring, the condition is deemed excused. A party cannot benefit from its own wrongful prevention.

Key Term: Estoppel
A bar that arises when one party’s representation or conduct reasonably induces another to rely, and it would be unjust to allow the first party to assert the original right or condition.

If the protected party indicates that a condition will not be enforced, and the other party reasonably relies, the protected party is estopped from insisting on the condition, at least to the extent of the reliance.

Actual material breach or anticipatory repudiation by the other party also excuses remaining conditions on your own performance. You do not have to satisfy conditions to a party who has already materially breached or clearly repudiated.

Key Term: Anticipatory Repudiation
A clear and unequivocal statement or act before performance is due that the party will not perform, which allows the nonrepudiating party to treat it as a present material breach and excuses further performance (including any conditions on that performance).

Impossibility, impracticability, or frustration can also excuse conditions when they prevent occurrence of the condition and the risk of the event was not allocated to the party. For example, if a condition requires government approval that becomes legally impossible due to a change in law, the condition may be excused.

From an exam standpoint, when you see a condition that has not occurred, always ask:

Did the protected party waive the condition?
Did the protected party’s behaviour prevent the condition?
Did the other side’s breach or repudiation excuse the need for the condition?
Has an unexpected supervening event made the condition impossible or impracticable?

Worked Example 1.5

A contract requires “contractor’s written application for payment, certified by the architect, as a condition precedent to Owner’s duty to pay.” Contractor finishes the work; the architect negligently refuses to issue the certificate despite satisfactory work. Owner knows this but tells Contractor, “Don’t worry about the certificate; I will pay you anyway when my financing comes through.” Contractor, relying on this, does not sue the architect. Later, Owner refuses to pay, citing the missing certificate.

Answer:
Owner’s statement and conduct constitute a waiver of the express condition (architect’s certificate), and Contractor reasonably relied on that waiver. Owner is estopped from insisting on the certificate. The condition is excused; Contractor can enforce Owner’s payment obligation, subject to any defenses unrelated to the certificate.

Worked Example 1.6

Tenant leases space from Landlord for five years, rent payable on the first of each month, “conditioned upon Tenant’s timely payment.” For the first year, Landlord accepts rent paid on the 10th of each month without objection. In month 13, Landlord declares the lease terminated because Tenant again pays on the 10th.

Answer:
Timely payment is drafted as an express condition of Landlord’s continuing duty not to terminate. However, by repeatedly accepting late payments without objection, Landlord has waived strict enforcement of the timing condition. Landlord may prospectively reinstate strict compliance by giving clear notice and a reasonable opportunity to comply, but cannot retroactively treat the past late payments as grounds for termination.

Conditions and Material Breach – Putting It Together

Express conditions focus on strict occurrence of an event. Constructive conditions and promises focus on whether performance was substantial or whether breach was material.

When facing a fact pattern in which one side withholds performance, ask:

Was their duty conditional on an express condition that failed?
Was their duty conditional on the other side’s constructive condition of exchange, and was there a material breach?
Has the condition been waived or excused by hindrance, estoppel, breach, or repudiation?

If the dispute is about quality or completeness of performance in a service or construction contract, you are usually in the world of constructive conditions and substantial performance. If the dispute is about a specific event named in the contract (financing, approval, certificates, “provided that”), you are usually in the world of express conditions.

Worked Example 1.7

Owner hires Painter to paint a house for $10,000, payment “upon completion of the work.” After Painter has completed about half the work, Owner refuses to let Painter back on the property and hires someone else. Painter sues for the full contract price.

Answer:
Painter’s completion of the work is a constructive condition to Owner’s duty to pay. Painter has not substantially performed; the breach (incomplete work) would normally prevent recovery of the contract price. But here Owner wrongfully prevented completion (hindrance), which excuses the condition of complete performance. Painter can recover damages equal to the contract price minus Owner’s cost to have someone else finish the job (expectation damages), or, at minimum, the reasonable value of the work done (restitution).

Conditions Precedent to Contract Effectiveness

Some conditions relate not to performance of an existing contract, but to whether a contract ever becomes binding at all. These are sometimes called conditions precedent to formation or effectiveness.

Examples:

“This agreement shall not take effect unless approved by the board of directors.”
“This contract is not binding until signed by both parties.”
“This policy is void unless the first premium is paid by 1 March.”

If such a condition does not occur, there is no contract at all, or the contract never becomes effective. On the MBE, this matters for:

Whether either party can sue for breach (no contract, no breach).
Whether parol evidence can be used to prove the existence of such an oral condition (it can; parol evidence does not bar proof of a condition precedent to the effectiveness of a written agreement).

This last point is frequently tested: the parol evidence rule prevents earlier or contemporaneous agreements that contradict a final written contract from altering its terms. But it does not prevent a party from showing that the parties agreed the written contract would take effect only upon the occurrence of some condition.

Conditions Subsequent and Ongoing Duties

Conditions subsequent cut off existing duties. They often appear in employment and insurance contracts:

“Employee will remain employed unless her license is revoked.”
“Coverage is excluded if the insured fails to give notice of a claim within 30 days.”

The nonoccurrence of a condition subsequent means the duty continues; the occurrence discharges it. The party invoking a condition subsequent usually bears the burden of proving it occurred.

Courts sometimes recharacterise purported “conditions subsequent” as promises, especially where treating them as conditions would create forfeitures (e.g., late notice in insurance contracts). Many jurisdictions now require an insurer denying coverage based on late notice to show prejudice from the delay; the late notice is then a breach of a promise, not a strict condition forfeiting coverage.

Worked Example 1.8

Surgeon is employed by Hospital under a five-year contract. The contract provides: “Hospital may terminate this agreement if Surgeon’s medical license is revoked.” After two years, Surgeon’s license is revoked for misconduct. Hospital terminates the contract. Surgeon sues for breach.

Answer:
The license revocation is a condition subsequent to Hospital’s duty to continue employing Surgeon. Once the condition occurs, Hospital’s duty is discharged and termination is permissible. Hospital must prove that the license was in fact revoked, but if it is, there is no breach in terminating.

Conditions, Forfeiture, and Restitution

When an express condition fails, the general rule is that the protected party’s duty is discharged. But what about any benefit already conferred by the party whose performance was conditioned?

If the express condition is not satisfied, the party cannot recover on the contract.
However, that party may often recover in restitution for the value of benefits conferred, to avoid unjust enrichment.

Courts are more likely to excuse or mitigate the effect of an express condition when:

The condition is not a material part of the exchange (more in the nature of a technicality).
The forfeiture (loss to the performing party) would be disproportionate to the other side’s loss.
The condition relates to the timing or mode of performance rather than its substance.

Worked Example 1.9

Contractor agrees to build a small extension for Owner for $50,000, “payment expressly conditioned on Contractor obtaining a certificate from the city inspector by 1 September.” Contractor finishes the extension by 1 September, applies for the certificate on time, but due to the inspector’s backlog the certificate issues on 15 September. Owner refuses to pay, claiming failure of the express condition.

Answer:
The certificate requirement is drafted as an express condition, but the delay is caused by the inspector, not by Contractor. Contractor did all that was required. Many courts would excuse strict compliance with the timing of the certificate to avoid disproportionate forfeiture and treat the condition as satisfied or excused. Owner’s duty to pay arises; Owner can still claim damages if there is some actual defect, but cannot avoid payment entirely based on the delayed certificate.

On an exam, if the condition is largely procedural, the nonoccurrence was not the contractor’s fault, and enforcing it strictly would create a large forfeiture, consider whether the condition should be treated as excused or as substantially satisfied.

Conditions and Reasonable Efforts

When a condition depends on one party’s efforts (e.g., obtaining financing, securing a permit), courts usually imply a promise to use reasonable efforts to make the condition occur. Failure to use such efforts can itself be a breach and may excuse the condition.

This implied duty is one aspect of the broader obligation of good faith and fair dealing in contract performance. A party whose performance is conditional cannot sit on its hands and then claim the condition failed where the contract reasonably contemplates that the party will try to bring about the condition.

Worked Example 1.10

A buyer agreed to purchase a seller’s house for $250,000 “on condition that the buyer obtain mortgage financing within 30 days.” Thirty days later, the buyer told the seller that the buyer would not purchase the house because the buyer had not obtained mortgage financing. The seller asked the buyer where the buyer had tried to obtain mortgage financing, and the buyer responded, “I was busy and didn’t have time to seek mortgage financing.”

Answer:
The financing term is drafted as a condition, but courts will imply a promise that Buyer use reasonable efforts to obtain financing. Buyer’s complete failure to try is a breach of that implied promise and wrongful prevention of the condition. The nonoccurrence of the condition is excused, and Seller can sue Buyer for breach.

This is a classic MBE pattern: language that looks like a pure condition, but the facts reveal that the party did nothing to cause the condition. In that situation, courts are likely to treat the “condition” as both a condition and a promise and to excuse the condition when the promisor prevents its occurrence.

Revision Tip

Look for language in the contract—words like “provided that,” “on condition that,” “unless,” “subject to,” or “if and only if”—to identify express conditions. If such language is absent, courts are more likely to treat the term as a promise or constructive condition. On the MBE, this often determines whether strict compliance or substantial performance is required.

Also ask:

Is the event within one party’s control? If so, courts often imply a duty to make reasonable efforts.
Would nonoccurrence cause a large forfeiture relative to the protected party’s loss? If so, consider whether the condition might be excused or treated as satisfied.
Did the other party rely on a waiver or assurance that a condition would not be enforced? If so, consider estoppel.

Key Point Checklist

This article has covered the following key knowledge points:

Conditions are events that must occur before or after a duty to perform arises or is discharged.
Express conditions require strict compliance; constructive conditions require substantial performance.
Conditions are classified as precedent, concurrent, or subsequent based on timing.
Failure of a condition precedent or concurrent generally excuses performance; occurrence of a condition subsequent discharges a duty.
Substantial performance of a constructive condition triggers the other party’s duty, subject to damages for defects; material breach prevents the constructive condition from being satisfied.
Under the UCC perfect tender rule, substantial performance does not apply to single-delivery sales of goods.
Breach of a condition excuses performance; breach of a promise gives rise to damages, and only a material breach discharges the other party’s duty.
Courts disfavor forfeitures and construe ambiguous terms as promises or constructive conditions rather than strict express conditions.
Conditions may be excused by waiver, hindrance or failure to cooperate, estoppel, impossibility/impracticability, or actual breach/anticipatory repudiation.
Satisfaction clauses are treated as conditions but are limited by objective or subjective good-faith standards.
Distinguishing conditions from promises, and express from constructive conditions, is central to analysing performance, breach, and discharge on the MBE.
Restitution may be available when an express condition fails and the performing party has conferred a benefit.
When a condition depends on one party’s efforts, courts often imply a promise to use reasonable efforts, and failure to do so can excuse the condition.
Parol evidence can be used to prove conditions precedent to the effectiveness of a written agreement.
Divisible contracts allow recovery for completed units even if later units are not performed or are defective.

Key Terms and Concepts

Condition
Express Condition
Constructive Condition
Constructive Condition of Exchange
Condition Precedent
Condition Concurrent
Condition Subsequent
Tender
Substantial Performance
Material Breach
Divisible Contract
Perfect Tender Rule
Promise
Satisfaction Clause
Waiver
Hindrance
Estoppel
Anticipatory Repudiation

Performance, breach, and discharge - Conditions (express and...