George Mason School of Law
Contracts II
Conditions
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© F.H. Buckley
fbuckley@gmu.edu
1
Kinds of Terms
 Consider: I promise to help you on your
journey, the good Lord willin’ and the
crick don’t rise.
I’m
going
to
drown
2
Kinds of terms
 Consider: I promise to help you on your
journey provided the crick don’t rise.
 If the crick rises, am I in breach?
3
Kinds of terms
 Now consider: I promise to help you on
your journey provided the crick don’t
rise.
 So this is not a promise: let’s call it a nonpromissory condition
 If the event in question occurs, I am excused
from performance
4
Kinds of terms
 Now consider: I promise the crick won’t
rise.
 If the crick rises, am I in breach?
5
Kinds of conditions
 Now consider: I promise the crick won’t
rise.
 Is there a problem about promising the
occurrence of an event over which I have no
control?
6
Kinds of conditions
 Now consider: I promise the crick won’t
rise.
 Is there a problem about promising the
occurrence of an event over which I have no
control?
 Ever hear of earthquake insurance?
7
Different kinds of terms
 Some are obligations, some not
Promises
8
Other terms:
definitions,
recitals, nonpromissory
conditions, etc.
Express non-promissory
conditions: force majeur clauses
 A party is not liable for failure to perform the
party's obligations if such failure is as a result
of Acts of God (including fire, flood,
earthquake, storm, hurricane or other natural
disaster), war, invasion, act of foreign
enemies, hostilities (regardless of whether war
is declared), civil war, rebellion, revolution,
insurrection, military or usurped power or
confiscation, terrorist activities, nationalization,
government sanction, blockage, embargo,
labor dispute, strike, lockout or interruption or
failure of electricity or telephone service.
9
When will a court to imply a condition,
absent express language?
 What kind of gap-filling will the court do?
10
When will a court to imply a condition,
absent express language?
 Paradine v. Jane at 77
11
Prince Rupert
How willing is a court to imply a condition,
in the absence of express language?
 Paradine v. Jane at 77
 “If a lessee covenant to repair a house,
though it be burnt by lightning, or thrown
down by enemies, yet he ought to repair it.”
12
How willing is a court to imply a condition,
in the absence of express language?
 Paradine v. Jane at 77
 “If a lessee covenant to repair a house,
though it be burnt by lightning, or thrown
down by enemies, yet he ought to repair it.”
 But “If a house be destoyed by tempest, or
by enemies, the lessee is excused” (?!?)
13
How willing is a court to imply a condition,
in the absence of express language?
 Paradine v. Jane at 77
 “If a lessee covenant to repair a house,
though it be burnt by lightning, or thrown
down by enemies, yet he ought to repair it.”
 But “If a house be destoyed by tempest, or
by enemies, the lessee is excused” (?!?)
 Does it matter that the leasehold interest
had passed?
14
Stees p.74
 What are the possible legal outcomes
here?
Third and Minnesota, St Paul
15
Stees
 What are the possible legal outcomes
here?
 Builder assumes risk and is liable
 Owner assumes risk and is liable
 No one is liable
16
Stees
 What are the possible legal outcomes
here?
 Builder assumes risk and is liable in
damages for non-completion
17
Stees
 What are the possible legal outcomes
here?
 Builder assumes risk and is liable in
damages for non-completion
 If this seems hard, what might the builder do?
18
Stees
 What are the possible legal outcomes
here?
 Owner assumes risk
 And is liable for seller’s damages
19
Stees
 What are the possible legal outcomes
here?
 Owner assumes risk
 Cf. Restatement § 89 (Modification), Illustration 1:
By a written contract A agrees to excavate a cellar
for B for a stated price. Solid rock is unexpectedly
encountered and A so notifies B. A and B then orally
agree that A will remove the rock at a unit price
which is reasonable but nine times that used in
computing the original price, and A completes the
job. B is bound to pay the increased amount.
20
Stees
 What are the possible legal outcomes
here?
 No one is liable
 The quicksand put an end to the contract
21
Stees
 What are the possible legal outcomes
here?
 Can you tell which from the language of
the contract?
22
Stees
 What doctrines might a court invoke to
put an end to all obligations under the
contracts?
23
Stees
 What doctrines might a court invoke to
put an end to all obligations under the
contracts?
 Mistake
 Frustration/Impracticability
 Condition
24
Stees
 Mistake
 Restatement § 152(1) Where a mistake of both
parties at the time of contract was made as to a
basic assumption on which the contract was
made has a material effect on the agreed
exchange of performances, the contract is
voidable by the adversely affected party unless
he bears the risk of the mistake ….
25
Stees
 Mistake
 No mistake if Assumption of risk
 Restatement § 154 A party bears the risk of mistake
when the risk is allocated to him by agreement of the
parties, or he is aware, at the time the contract is made,
that he has only limited knowledge with respect to the
facts to which the mistake relates but treats his limited
knowledge as sufficient, or the risk is allocated to him by
the court on the ground that it is reasonable in the
circumstances to do so.
26
Stees
 Frustration or Impracticability
 Restatement § 261 Where, after a contract is
made, a party’s performance is made
impracticable without his fault by the
occurrence of an event the non-occurrence of
which was a basic assumption on which the
contract was made, his duty to render that
performance is discharged, unless the language
or the circumstances indicate the contrary.
27
Stees
 (Non-promissory) Condition
 Restatement § 224 A condition is an event, not
certain to occur, which must occur, unless its
non-occurrence is excused, before performance
under a contract becomes due.
28
Stees
 (Non-promissory) Condition
 Restatement § 224 A condition is an event, not
certain to occur, which must occur, unless its
non-occurrence is excused, before performance
under a contract becomes due.
 Restatement § 225(3) Non-occurrence of a
condition is not a breach by a party unless he is
under a duty that the condition occur
29
Stees
 What did the court decide?
30
Stees
 What did the court decide?
 The contractor must perform his
engagement, unless prevented by the act of
God, the law, or the other party
 A presumption against non-promissory
conditions that excuse performance
31
Stees
 What did the court decide?
 He must perform his engagement, unless
prevented by the act of God, the law, or the
other party
 If the parties had bargained for an excuse,
the courts would honor this. What if we
thought we knew how they would have
bargained had they put their minds to it?
32
Stees
 What did the court decide?
 He must perform his engagement, unless
prevent by the act of God, the law, or the
other party
 If the parties had bargained for an excuse,
the courts would honor this. What if we
thought we knew how they would have
bargained had they put their minds to it?
 And just how do you think they would have
bargained?
33
Stees
 What did the court decide?
 Quicksand as an informational problem
 Who was in the best position to discover or
know of the problem?
34
Stees
 What if one party is contractually bound
to perform according to specifications
that are defective?
 U.S. v. Spearin at 78
35
Stees
 If contractors are liable for breach of
promise, what remedies might be
available to plaintiff homeowners?
36
Stees
 If contractors are liable for breach of
promise, what remedies might be
available to plaintiff-homeowners?
 Damages for breach (give plaintiff the
benefit of the bargain less the contract
price)
37
Stees
 If contractors are liable for breach of
promise, what remedies might be
available to plaintiff-homeowners?
 Damages for breach (give plaintiff the
benefit of the bargain less the contract
price)
 Set aside (rescind) the contract (absolve
plaintiff from paying the price)
38
Stees
 Set aside the contract (absolve plaintiff
from paying the price)
 Confusingly, this remedy is available
when the promise in question is a
condition
39
Now it gets confusing
 So the term condition can mean two
entirely different things
 That wasn’t very smart, was it?
40
Two kinds of conditions
 Non-promissory conditions are not
promises and excuse performance by
either party on their occurrence
41
Two kinds of conditions
 Promissory Conditions
 are promises (for which the innocent
party may receive consequential
damages on breach)
 and conditions (which excuse
performance by the innocent party)
42
Different kinds of conditions
 Some are obligations, some not
Promissory
Conditions
43
Non-promissory
Conditions
Promissory conditions:
The example at 615
 I agree to sell you my dog for $400,
delivery at your house on Thursday.
 I come to your house with my dog on
Thursday. You tell me you want it but
that you can’t pay me till Saturday
 Do I have to deliver the dog on
Thursday?
44
Promissory conditions
 UCC § 2-511(1). Unless otherwise
agreed, tender of payment is a
condition to the seller's duty to
tender and complete any delivery.
45
Promissory conditions
 UCC § 2-511(1). Unless otherwise
agreed, tender of payment is a
condition to the seller's duty to
tender and complete any delivery.
 Is this a promissory condition (i.e.,
are you in breach if you don’t pay?
46
Promissory conditions
Turn this around
 I agree to buy your dog for $400 at
your house on Thursday.
 I come to your house with $400 on
Thursday, but you tell me you won’t
give me the dog till Saturday
 Do I have to pay you on Thursday?
47
Promissory conditions
 UCC § 2-507(1). Tender of delivery
is a condition to the buyer's duty to
accept the goods
48
What does “condition” mean here?
 Not every promise is a promissory
condition, but only those promises
which must be performed as a
condition of the other party’s duty of
performance
 Tender or delivery and payment as
mutual conditions
 Both parties to stand “ready, willing and
able” to perform
49
Promissory and non-promissory
conditions
 In what respect do promissory and
non-promissory conditions resemble
each other?
50
Promissory and non-promissory
conditions
 In what respect do promissory and
non-promissory conditions resemble
each other?
 The non-breaching party is excused from
performance of a promissory condition,
and both parties are excused on the
occurrence of a non-promissory condition
51
Promissory and non-promissory
conditions
 In what respect do promissory and
non-promissory conditions NOT
resemble each other?
52
Promissory and non-promissory
conditions
 In what respect do promissory and
non-promissory conditions NOT
resemble each other?
 The breaching party is liable for damages
on breach of a promissory condition, but
not on the occurrence of a nonpromissory condition
53
What about non-sale of goods
 When does a promise amount to a
promissory condition?
54
What about non-sale of goods
 § 234(1). Order of Performances Where
all or part of the performances to be
exchanged under an exchange of
promises can be rendered simultaneously,
they are to that extent due
simultaneously, unless the language or
the circumstances indicate the contrary.
55
What about non-sale of goods
 § 234(1). Order of Performances Where
all or part of the performances to be
exchanged under an exchange of
promises can be rendered simultaneously,
they are to that extent due
simultaneously, unless the language or
the circumstances indicate the contrary.
 I.e., a presumption of conditions
56
What about non-sale of goods
 § 234(2) Except to the extent stated in
Subsection (1), where the performance of
only one party under such an exchange
requires a period of time, his performance
is due at an earlier time than that of the
other party, unless the language or the
circumstances indicate the contrary.
57
What about non-sale of goods
 § 234(2) Except to the extent stated in
Subsection (1), where the performance of
only one party under such an exchange
requires a period of time, his performance
is due at an earlier time than that of the
other party, unless the language or the
circumstances indicate the contrary.
 So he has to do everything before the
other party has to perform
58
What about non-sale of goods
 § 234(2) Except to the extent stated in
Subsection (1), where the performance of
only one party under such an exchange
requires a period of time, his performance
is due at an earlier time than that of the
other party, unless the language or the
circumstances indicate the contrary.
 “Work before pay”
59
Promissory conditions
 When I agree to build you a house,
when do you have to pay?
60
Work before Pay
Stewart v. Newbury at 626
 What did the contract say about
progress payments?
 The presumption: If you want progress
payments, you have to bargain for them
61
The duty to be ready, willing and able
Bell v. Elder at 616
62
Bell v. Elder
 What were the obligations of the
parties as to performance?
 Seller to provide the water, power and
roads
 Buyer to pay a hook-up fee and apply for a
building permit
63
Bell v. Elder
Elders
land
Purchaser Bell sues to recover deposit
because Elders failed to supply water
64
Bell
Bell v. Elder
 Was the buyer acting
opportunistically?
65
Bell v. Elder
 Here there was no order as to when
each party should do their work and
“work before pay” applied to both
parties
 Presumption of simultaneous performances
66
Divisibility
 Can a party in breach of a promissory
condition resist forfeiture by asserting
that conditions are divisible?
67
Divisibility
 Suppose that a builder contracts to
build seven motels in seven different
cities.
 Separate payment and completion
schedule for each motel.
 Builder defaults on last motel.
 Could buyer rescind on all?
68
Divisibility
 Restatement § 240. If the performances to be
exchanged under an exchange of promises can
be apportioned into corresponding pairs of part
performances so that the parts of each pair are
properly regarded as agreed equivalents, a
party’s performance of his part of such a pair
has the same effect on the other’s duties to
render performance of the agreed equivalent
as it would have if only that pair of
performances had been promised.
69
Divisibility
 Restatement § 240. If the performances to be
exchanged under an exchange of promises can
be apportioned into corresponding pairs of part
performances so that the parts of each pair are
properly regarded as agreed equivalents, a
party’s performance of his part of such a pair
has the same effect on the other’s duties to
render performance of the agreed equivalent
as it would have if only that pair of
performances had been promised.
70
Divisibility
 Same case, but now:
 All motels built to the same specifications
 Builder to be paid $7M for the seven
motels.
71
Divisibility
 Same case, but now:
 All motels built to the same specifications
 Builder to be paid $7M for the seven
motels
 Restatement § 240, illustration 5
72
John. v. United Advertising 620
 Are highway signs different?
73
Englewood CO
John v. United Advertsing
 Are highway signs different?
 Is this like losing your GPS signal at a
crucial point?
 “Take the first available U-Turn”
74
John v. United Advertsing
 What are the options for the court?
75
John v. United Advertsing
 What are the options for the court?
 Set aside the entire contract
 Set aside the severable parts of it
76
John v. United Advertsing
 A “material failure” of the entire
contract?
 Restatement § 237. Except as stated in § 240,
it is a condition of each party’s remaining duties
to render performances to be exchanged under
an exchange of promises that there be no
uncured material failure by the other party to
render any such performance due at an earlier
time.
77
John v. United Advertsing
 A severable contract
 Sever the breaches and enforce as to the
rest?
 Supposing the contract had omitted the
divisibility clause?
78
Divisibility in the UCC
 UCC § 2-307 Delivery in Single Lot or Several
Lots. Unless otherwise agreed all goods called
for by a contract for sale must be tendered in a
single delivery and payment is due only on
such tender but where the circumstances give
either party the right to make or demand
delivery in lots the price if it can be
apportioned may be demanded for each lot.
 A presumption of non-divisibility
79
Divisibility in the UCC
 UCC § 2-307 Delivery in Single Lot or Several
Lots. Unless otherwise agreed all goods called
for by a contract for sale must be tendered in a
single delivery and payment is due only on
such tender but where the circumstances give
either party the right to make or demand
delivery in lots the price if it can be
apportioned may be demanded for each lot.
 But this might be rebutted if separate
deliveries contemplated
80
UCC § 2-612: Installment
Contracts

81
§ 2-612(1) An "installment contract" is one
which requires or authorizes the delivery of
goods in separate lots to be separately
accepted, even though the contract contains a
clause "each delivery is a separate contract" or
its equivalent
UCC § 2-612: Installment
Contracts

82
§ 2-612(2) The buyer may reject any
installment which is non-conforming if the nonconformity substantially impairs the value of
that installment and cannot be cured or if the
non-conformity is a defect in the required
documents
UCC § 2-612: Installment
Contracts
 § 2-612(3) Whenever non-conformity or
default with respect to one or more
installments substantially impairs the value of
the whole contract there is a breach of the
whole.
83
Promises vs. Conditions
Nonpromissory
Conditions
84
Promissory
Conditions
Bare
promises
Three different kinds of terms
 Non-promissory conditions
 On its occurrence both parties excused
 Promissory conditions
 On its breach, innocent party may
rescind or sue for damages
 Bare promises
 On its breach, innocent party can sue for
damages, but not rescind
85
Howard at 625
86
Howard
 What are the farmer’s remedies if he
did not comply with clause 5(b)?
87
Howard
 What are the farmer’s remedies if he
did not comply with clause 5(b)?
 Could he be sued for failure to comply
with it?
88
Howard
 What are the farmer’s remedies if he
did not comply with clause 5(b)?
 Could he be sued for failure to comply
with it?
 So a non-promissory condition
89
Howard
 And for non-compliance with Clause
5(f)?
90
Howard
 Qu. Clause 5(f)
 If this is not met, Can Howard recover?
 If this is not met, is Howard liable in
damages?
91
Howard
 What are the options?
92
Howard
 What are the options?
 Bare promise: Not a condition precedent, but a
promise that the event will happen, breach of
which gives FCIC a damages remedy at best
 Promissory condition: A promise that the event
will happen plus non-occurrence excuses the other
party from performance
 Condition precedent: No promise that event will
happen, but non-performance excuses both
parties
93
Howard
 What are the options?
 Held a Bare promise
94
What are the presumptions in
the Restatement?
 Restatement § 227(1) In resolving doubts as
to whether an event is made a condition of an
obligor's duty, and as to the nature of such an
event, an interpretation is preferred that will
reduce the obligee's risk of forfeiture, unless
the event is within the obligee's control or the
circumstances indicate that he has assumed
the risk.
 On “forfeiture”, see comment b
95
What are the presumptions in
the Restatement?
 Restatement § 227(1) In resolving doubts as
to whether an event is made a condition of an
obligor's duty, and as to the nature of such an
event, an interpretation is preferred that will
reduce the obligee's risk of forfeiture, unless
the event is within the obligee's control or the
circumstances indicate that he has assumed
the risk.
 So a presumption against promissory and
non-promissory conditions
96
What are the presumptions in
the Restatement?
 Restatement § 227(2) Unless the contract is of
a type under which only one party generally
undertakes duties, when it is doubtful whether
(a) a duty is imposed on an obligee that an
event occur, or (b) the event is made a
condition of the obligor's duty, or (c) the event
is made a condition of the obligor's duty and a
duty is imposed on the obligee that the event
occur,
 (a) = bare promise by obligee
 (b) = non-promissory condition
 (c) = promissory condition by obligee
97
What are the presumptions in
the Restatement?
 Restatement § 227(2) Unless the contract is of
a type under which only one party generally
undertakes duties, when it is doubtful whether
(a) a duty is imposed on an obligee that an
event occur, or (b) the event is made a
condition of the obligor's duty, or (c) the event
is made a condition of the obligor's duty and a
duty is imposed on the obligee that the event
occur, the first interpretation is preferred if the
event is within the obligee's control.
 I.e., bare promise
98
Conditions precedent and subsequent
 What’s the difference?
99
Defining Conditions
 Conditions precedent: The obligations
of the parties will not arise if x has
occurred.
 Conditions subsequent: The
obligations of the parties are
suspended if x occurs.
100
Conditions precedent and subsequent
 Conditions precedent
 Restatement § 224 A condition is an event,
not certain to occur, which must occur,
unless its non-occurrence is excused, before
performance under a contract becomes due.
101
Conditions precedent and subsequent
 Conditions subsequent
 Restatement § 230 “the occurrence of
an event is to terminate an obligor’s
duty”
 Cf. Restatement § 224 cmt e
102
Conditions precedent and subsequent
 Conditions subsequent
 Restatement § 230 “the occurrence of
an event is to terminate an obligor’s
duty”
 But not under 230(2) if the obligor is in
breach of duties of good faith and fair
dealing or no undue hardship to obligor
103
What are the presumptions in
the Restatement?
 Restatement § 227(3) An interpretation
is preferred under which an event is a
condition of an obligor’s duty is
preferred over an interpretation under
which the non-occurrence of the event is
a ground for discharge of that duty after
it becomes a duty to perform
 That is, a presumption of a condition
precedent over a condition subsequent
104
Conditions precedent and subsequent
 Gray v. Gardner at 633
105
Conditions precedent and subsequent
 Gray v. Gardner
 Parties bargain for a price by providing
that the contract is void if a greater
amount of sperm oil arrive than in the
same period of the prior year
 Buyer to pay a premium if a shortage
106
Conditions precedent and subsequent
 Gray v. Gardner
 Parties bargain for a price by providing
that the contract is void if a greater
amount of sperm oil arrive than in the
same period of the prior year
 If a condition precedent the contract did
not arise, as the plaintiff must show the
condition happened
107
Conditions precedent and subsequent
 Gray v. Gardner
 Parties bargain for a price by providing
that the contract is void if a greater
amount of sperm oil arrive than in the
same period of the prior year
 If a condition subsequent the contract did
arise, and the onus is on the defendant to
show the condition happened
108
Conditions precedent and subsequent
 Gray v. Gardner
 Parties bargain for a price by providing
that the contract is void if a greater
amount of sperm oil arrive than in the
same period of the prior year
 Held a condition subsequent: onus on
defendant
109
Drafting CP and CS clauses
 Draft the Gray v. Gardner promise
 as a CP
 as a CS
110
Attorney-approval clauses at 635
 I agree “subject to my lawyer’s
approval.”
 Gaglia v. Kirchner at 643
 If a buyer has an attorney approval clause,
can the seller back out before such
approval is given?
111
George Mason School of Law
Contracts II
Conditions
This file may be downloaded only by registered students in my
class, and may not be shared by them
© F.H. Buckley
fbuckley@gmu.edu
112
113
114
Recall the different kind of
terms in Howard
Nonpromissory
Conditions
115
Promissory
Conditions
Bare
promises
Non-promissory Conditions
 Restatement § 224 A condition is an event,
not certain to occur, which must occur,
unless its non-occurrence is excused,
before performance under a contract
becomes due.
116
Promissory Conditions
 Restatement § 225(3) Non-occurrence of a
condition is not a breach by a party unless
he is under a duty that the condition occur
117
Promises and Conditions
Conditions
118
Conditions Precedent
Promissory
No liability if non-occurrence
Restatement § 224
Liability if non-occurrence
Restatement § 225(3)
Promises and Conditions
Conditions
Conditions Precedent
(related to Mistake
and Frustration)
119
Promissory
Bare Promises
 Restatement § 227(2) Unless the contract is of a type
under which only one party generally undertakes duties,
when it is doubtful whether (a) a duty is imposed on an
obligee that an event occur, or (b) the event is made a
condition of the obligor's duty, or (c) the event is made a
condition of the obligor's duty and a duty is imposed on
the obligee that the event occur,
 (a) = bare promise by obligee
 (b) = non-promissory condition
 (c) = promissory condition by obligee
120
Promises and Conditions
Promises
Conditions
121
Bare Promises
(Warranties)
Promises and Conditions
Promises
Conditions
Warranties
Election
Forfeiture
122
Damages
Damages only
Promises and Conditions
Promises
Conditions
Warranties
Election
Forfeiture
123
Damages
Damages only
Modification, Waiver,
Estoppel: Clark v. West at 636
The dirty little secret of textbook publishing revealed
124
Modification, Waiver,
Estoppel
 Distinguish Modifications, waiver,
estoppel
125
Modification, Waiver,
Estoppel
 Modifications are bilateral agreements
to vary obligations under a contract
 Promises are modified
126
Modification, Waiver,
Estoppel
 Modifications are bilateral agreements
to vary obligations under a contract
 Waivers are unilateral acts by one
party to excuse another’s
performance of an obligation
 Conditions are waived
127
Modification, Waiver,
Estoppel
 Modifications are bilateral agreements
to vary obligations under a contract
 Waivers are unilateral acts by one
party to excuse another’s
performance of an obligation
 (Promissory) Estoppel bars a
promisor from enforcing a right
where he knows that a promisee has
detrimentally relied on him.
128
Modification, Waiver,
Estoppel at common law
Agreement
Required?
Modification
Waiver
Estoppel
129
Reliance
required?
Modification, Waiver,
Estoppel at common law
Modification
Waiver
Estoppel
130
Agreement
Required?
Reliance
required?
yes
no
Modification, Waiver,
Estoppel at common law
Agreement
Required?
Reliance
required?
Modification
yes
no
Waiver
no
no
Estoppel
131
Modification, Waiver,
Estoppel at common law
132
Agreement
Required?
Reliance
required?
Modification
yes
no
Waiver
no
no
Estoppel
no
yes
Clark v. West
 What was the promise?
 Now you know why textbooks are so
long.
133
Clark v. West
 What was the promise?
 Now you know why textbooks are so
long.
 Facts alleged on 647
 Would this be enough for an estoppel?
 A waiver?
134
UCC § 2-209. Modification, Rescission
and Waiver
(1) An agreement modifying a contract within this Article needs no
consideration to be binding.
(2) A signed agreement which excludes modification or rescission
except by a signed writing cannot be otherwise modified or rescinded,
but except as between merchants such a requirement on a form
supplied by the merchant must be separately signed by the other party.
(3) The requirements of the statute of frauds section of this Article
(Section 2-201) must be satisfied if the contract as modified is within its
provisions.
(4) Although an attempt at modification or rescission does not satisfy
the requirements of subsection (2) or (3) it can operate as a waiver.
(5) A party who has made a waiver affecting an executory portion of
the contract may retract the waiver by reasonable notification received
by the other party that strict performance will be required of any term
waived, unless the retraction would be unjust in view of a material
change of position in reliance on the waiver.
135
Wisconsin Knife Works at 639
 What was the contract?
136
Wisconsin Knife Works at 639
 What was the contract?
Metal Crafters
Spade bit
blank
Wisconsin
Spade bit
Black & Decker
Spade Bits
137
Wisconsin Knife Works
 What was the contract?
 Wisconsin orders 280,000 blanks from
Metal Crafters in Aug-Sept 1981 for
delivery in Oct-Nov
 New purchase orders in July 1982
 Seller not able to deliver until December
1982—13 months late
 Jan 1983—144,000 blanks produced but
Wisconsin rescinds
138
Wisconsin Knife Works
 What was the evidence of
modification and what are the
problems under the UCC?
139
The UCC: Consideration
is out
2-209(1) An agreement modifying a
contract within this Article needs no
consideration to be binding.
Posner: Replaced by good faith
§ 1-304. Obligation of Good Faith.
Every contract or duty within [the
Uniform Commercial Code] imposes an
obligation of good faith in its performance
and enforcement.
140
What was the problem
with UCC 2-209(2)?
A signed agreement which excludes
modification or rescission except by a
signed writing cannot be otherwise
modified or rescinded, but except as
between merchants such a requirement
on a form supplied by the merchant
must be separately signed by the other
party.
141
What was the problem
with UCC 2-209(2)?
Was there a signed modification
here?
Why would Wisconsin have wanted
a “no modification” clause and why
are they standard?
142
What does the proviso do?
A signed agreement which excludes
modification or rescission except by a signed
writing cannot be otherwise modified or
rescinded, but except as between merchants
such a requirement on a form supplied by the
merchant must be separately signed by the
other party.
Does this refer to the agreement or to the
modification?
143
What does the proviso do?
A signed agreement which excludes
modification or rescission except by a signed
writing cannot be otherwise modified or
rescinded, but except as between merchants
such a requirement on a form supplied by the
merchant must be separately signed by the
other party.
What does this mean?
144
I.e., consumer must sign
A signed agreement which excludes
modification or rescission except by a
signed writing cannot be otherwise
modified or rescinded, but except as
between merchants such a requirement
on a form supplied by the merchant
must be separately signed by the other
party.
145
Posner on modifications
How did Posner decide on modifications?
146
Posner on waiver
How did Posner decide on waiver?
147
How did Posner decide
on Waiver?
2-209(4) Although an attempt at
modification or rescission does not
satisfy the requirements of subsection
(2) or (3) it can operate as a waiver.
148
Wisconsin Knife Works
 When does something which fails as a
modification succeed as a waiver in 2209(4)?
 “can operate as a waiver”
149
Wisconsin Knife Works
 Does something which fails as a
modification always succeed as a
waiver in 2-209(4)?
150
Wisconsin Knife Works
 When does something which fails as a
modification succeed as a waiver in 2209(4)?
 Posner: so as not to render 2-209(2)
otiose, let’s add a reliance
requirement to 2-209(4)
151
Wisconsin Knife Works
 When does something which fails as a
modification succeed as a waiver in 2209(4)?
 Posner: so as not to render 2-209(2)
otiose, let’s add a reliance requirement
to 2-209(4)
 But is 2-209(5) then otiose?
152
Wisconsin Knife Works
 But is 2-209(5) then otiose?
 2-209(5) A party who has made a waiver
affecting an executory portion of the contract
may retract the waiver by reasonable
notification received by the other party that
strict performance will be required of any term
waived, unless the retraction would be unjust
in view of a material change of position in
reliance on the waiver.
153
Wisconsin Knife Works
 Posner: under 2-209(5), one who
waives can retract if he waives before
the other party relies
 So 2-209(5) estoppel wouldn’t work but
2-209(4) waiver might
154
Wisconsin Knife Works
 Why does Easterbrook dissent?
155
Wisconsin Knife Works
 Why does Easterbrook dissent?
 Waiver has never required reliance
156
Wisconsin Knife Works
 Why does Easterbrook dissent?
 Waiver has never required reliance
 Waiver in 2-209(4) might encompass
either past or future performance
 Estoppel in 2-209(5) refers only to future
(executory) performance
157
Wisconsin Knife Works
 UCC § 1-107. Waiver or Renunciation of
Claim or Right After Breach. Any claim
or right arising out of an alleged breach
can be discharged in whole or in part
without consideration by a written
waiver or renunciation signed and
delivered by the aggrieved party.
158
Wisconsin Knife Works
 So how would Easterbrook prevent 2209(2) from being otiose?
159
Wisconsin Knife Works
 So how would Easterbrook prevent 2209(2) from being otiose?
 A stricter standard of proof as to
intention?
160
Avoiding forfeiture: Common Law
161
Agreement
Required?
Reliance
required?
Modification
yes
no
Waiver
no
no
Estoppel
no
yes
Avoiding forfeiture: UCC
Modification
Agreement
Required?
Reliance
required?
no consideration
needed 2-209(1)
no
Good Faith in § 1304
But no
modification clause
enforced 2-209(2)
Waiver
162
Estoppel
Avoiding forfeiture: UCC
Agreement
Required?
Reliance
required?
No
Yes: Posner
Modification
Waiver
No: Easterbrook
Estoppel
163
Avoiding forfeiture: UCC
Agreement
Required?
Reliance
required?
No
Executory only 2209(5)
Modification
Waiver
Estoppel
164
Why no waiver in Suzuki at
646?
165
Why no waiver in Suzuki at
657?
 Did Suzuki waive Kummer’s failure to
order Suzuki parts?
166
Why no waiver in Suzuki at
657?
 The onus of proof to satisfy 2-209(4)
 unequivocal and unambiguous actions
needed for a waiver
167
Why no waiver in Suzuki?
 Termination clauses and agency costs
 Wisconsin Fair Dealership Law, 1974

168
135.03 Cancellation and alteration of
dealerships. No grantor, directly or through any
officer, agent or employee, may terminate, cancel, fail
to renew or substantially change the competitive
circumstances of a dealership agreement without good
cause. The burden of proving good cause is on the
grantor.