Conditions and Performance: Express, Constructive, and Substantial Performance

Types of Conditions

A condition is an event that must occur (or fail to occur) before a contractual duty becomes absolute. Classify by timing and by source.

By timing:

• Condition precedent — an event that must occur BEFORE a duty to perform arises ('Buyer's duty to pay is conditioned on obtaining financing'). If it never occurs, the duty never matures.
• Condition subsequent — an event whose occurrence DISCHARGES an existing duty ('the duty continues until X happens'). Rare on the bar.
• Concurrent conditions — each party's performance is conditioned on the other's; the default for simultaneous exchanges (cash sale: tender of goods and tender of payment are concurrent conditions).

By source:

• Express conditions — explicitly stated by the parties; strictly construed and require strict (literal) compliance. Watch the signal words: 'on condition that,' 'provided that,' 'if,' 'unless,' 'subject to,' 'when.'
• Constructive (implied-in-law) conditions of exchange — supplied by the court to order performances; these require only substantial performance, not perfection.

Distinguish a condition (no liability for non-occurrence — the duty simply never arises) from a promise (its breach gives rise to damages). A term can be both. When in doubt, courts prefer to read language as a promise rather than a condition to avoid forfeiture.

Substantial Performance and Material Breach

For constructive conditions of exchange, the common law applies the substantial performance doctrine. A party who renders substantial — though not perfect — performance has satisfied the constructive condition, so the other party's duty to perform (e.g., to pay) becomes due. The performing party recovers the contract price minus the cost to remedy the minor defects (or minus diminution in value where remedy would cause economic waste, as in Jacob & Youngs v. Kent — the wrong brand of pipe inside finished walls).

If the breach is material, however, the breaching party has NOT satisfied the constructive condition; the non-breaching party may suspend their own performance and, if the breach is not cured, terminate and sue. A material breacher cannot recover on the contract (though restitution for benefit conferred may be available).

Factors Determining Material vs. Minor Breach (Restatement 241)

A willful breach weighs heavily toward materiality and can defeat the substantial-performance defense. Time of the essence: ordinarily late performance is only a minor breach (damages for delay), but if the contract makes time 'of the essence' or timeliness is critical, a delay becomes material.

Excuse of Conditions and Divisibility

Even an unsatisfied express condition can be excused, so that the conditioned duty becomes enforceable despite non-occurrence:

• Waiver — the party benefited by the condition voluntarily relinquishes it (a minor/non-material condition can be waived without consideration; the waiver may be retracted before reliance unless it concerns a material part).
• Estoppel — the beneficiary represents the condition need not occur and the other relies.
• Prevention / hindrance — a party who wrongfully prevents or hinders the occurrence of a condition cannot insist on it (implied duty of good faith and cooperation).
• Prospective inability / repudiation — if the other party repudiates or is unable to perform, the condition to one's own performance may be excused.
• Avoidance of forfeiture — where strict insistence on a non-material condition would cause disproportionate forfeiture, courts excuse it (Restatement 229).
• Impossibility / impracticability of the condition itself.

Divisible (installment) contracts: Where a contract can be split into corresponding pairs of part-performances ('per ton,' 'per unit,' monthly installments), a breach as to one unit does not necessarily bar recovery for properly performed units. The party recovers pro rata for each divisible portion substantially performed. Contrast an entire contract, where complete performance is a constructive condition to any recovery (subject to substantial performance and restitution).

Order of performance: Where one party's performance takes time and the other's is instantaneous (build a house, then pay), the law makes completion of the longer performance a constructive condition precedent to the instantaneous one — the builder must substantially perform before payment is due. Where both can occur at once (a cash sale), performances are concurrent conditions and each party must tender to put the other in breach. Identifying the order tells you who must move first and who may rightfully withhold.

Quiz the timing: A party who suspends performance for a breach that turns out to be only minor has itself committed a breach by withholding. So before suspending, classify the breach as material — suspending on a minor breach is a costly essay trap that flips the breaching and non-breaching roles.