Yes Breach & Conditions

What is a breach?

An unjustified failure to perform

Is Anticipatory Repudiation a breach?

No, since performance is not due yet

When is performance NOT due?

IFTAM

1. Not timely

2. Failure/nonoccurrence of express condition precedent

3. Justification for nonperformance (mutual mistake, impracticability)

4. Anticipatory repudiation by the other party

5. Material breach (constructive condition) by the other party

What is a condition?

An act or event that must occur

What is an Express Condition?

Performance is reliant on an event that is not certain to occur.

Agreed to and imposed by the parties themselves.

Requires strict compliance.

Failure to satisfy discharges a party from further obligations.

Language should be “if; unless and until”

(e.g. Homeowner agrees to pay Builder $50,000 if and only if the new deck passes a city safety inspection by June 1.)

What is an Implied Condition?

imposed by the law to do justice

(e.g. Homeowner hires Painter for $10,000. Contract is silent on timing of payment. Law implies a condition: Painter must substantially complete before Homeowner must pay.)

What’s the difference between a Condition and Promise?

Condition: Reliant on the execution of something.

Promise: Nothing must occur.

Mark makes a promise saying, “I will begin painting on June 1^st.” Lisa says, “I’ll pay when you begin painting.” The condition of payment is reliant on Mark’s beginning of painting.

Is Substantial Performance enough for a condition?

No. Strict performance is required.

Is Substantial Performance enough for a Promise?

Yes (e.g. Jacoby & Youngs case)

There are some excuses for nonperformance of an express condition. What are they?

Summary of below:

1. Forfeiture by the court (painter done with 99% hypo)

2. Intentional waiver of the condition (e.g. homeowner tells contractor “don’t worry about the weekly report condition”)

3. Other party breaches first (no longer obligated to satisfy the condition)

4. If tenant made substantial improvements and landlord is not harmed (not fair)

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1. Forfeiture by the court
   Court excuses the condition if enforcing it would cause unfair loss of expected benefits after substantial performance.
   - (e.g. “Painter completes 99% of the job, misses a tiny detail, and the express condition states: “Payment only if all work is completed to the owner’s satisfaction.”
   

2. Waiver of the Condition

• The benefited party intentionally gives up the express condition.

Elements:

1. Clear intentional relinquishment of a known right/express condition

2. Only the benefiting party can waive it

3. Breach by the other party

• If the other party breaches first, you’re excused from performance

• e.g. Jack is supposed to pay Sarah only if Sarah delivers 100 widgets. Jack breaches the contract early by refusing to purchase any widgets. Sarah doesn’t need to satisfy the condition (deliver 100 widgets).

4. Lease Renewals

Tenant can be protected against an express condition if:

1. the tenant made substantial improvements showing intent of renewal

2. the landlord is not harmed by the delay

3. the lessee would sustain a substantial loss if the lease were not renewed

(Not allowed if it’s a material part of the exchange - e.g. non-payment of rent)

Hypo:

Sarah runs a bakery in a commercial space she has leased for 10 years. Her lease gives her an option to renew for another 5 years if she provides written notice by June 1^st. In reliance on staying, Sarah invested $150K in permanent improvements, remodeled the storefront, and built a customer base tied to this location. On June 5^th, Sarah realizes she forgot to renew. Landlord suffers no harm from the 4 day delay, but Sarah would lose her $150K improvements, established customer base, and her ability to operate without disruption.

What’s a Nonmaterial Breach? What’s the remedy?

Substantial but non-perfect performance occurred. Compensation for actual damages.

(Reading Pipes case)

What’s a Material Breach? What’s the remedy?

A breach so dominant or pervasive as to frustrate the purpose of the contract

Remedy: actual damages; potentially a suspension of the duty to perform

(e.g. Owner hires Builder to construct a home. Builder builds 60% of the house, then stops showing up. Builder demands payment.)

What’s a Total Breach? What’s the remedy?

An uncured material breach

Remedy: Termination plus damages

(e.g. Seller and Buyer enter a contract to deliver custom machinery for $200K. Seller completes the machine. When it comes time for payment, Buyer says, “I’m not paying. Do whatever you want.” Buyer explicitly refuses performance.)

What’s Anticipatory Repudiation?

A party anticipatory repudiates when it clearly manifests an intent not to perform. The intent must be a definite and unequivocal manifestation to not perform.

circumstances suggest that one party will not perform when performance is due.

(e.g. On January 1^st, Professor signs employment agreement for 2026-2027 school year starting in August. Professor tells law school on April 15^th, “I’m not coming. Forget it.”)

What are the remedy options for Anticipatory Repudiation?

1. do nothing and await performance (although you have duty to mitigate damages)

2. Seek assurances (e.g. are you going to perform or not?)

3. Cancel the contract (e.g. We accept your repudiation. Contract is terminated.

4. Claim for damages based on total breach (e.g. Law school doesn’t have to wait until August to sue. Law school can sue NOW for extra cost of hiring alternative faculty, admin costs of replacement, etc. Only limited to expectation damages.)

Does a material breach automatically terminate the contract?

No

How does a Material Breach become a Total Breach?

When the material breach was not cured timely.

A material breach was cured. Can the contract continue?

Yes

Time is of the essence and the cure was not made in a timely manner. Can the contract continue?

No. Becomes a total breach.

How do the obligations of the non-breaching party change under a total and material breach?

1. Total Breach: you can terminate performance.

2. Material Breach: you can pause performance.

What are the Material Breach Factors to determine if a breach was material (Restatement)?
What do you add to determine if it’s a Total Breach?

1. Deprivation – How much benefit did the nonbreaching party lose?

2. Compensation – Can money fix it?

3. Forfeiture – Will the breaching party suffer unfair forfeiture? (e.g. contractor paints 98% of home, homeowner says “no payment”)

4. Likelihood of Cure – Is the breach likely to be cured (incl. assurances)? (e.g. contractor installs wrong dishwasher, but says “I’ll come back tomorrow and replace it”)

5. Good Faith – Did the breaching party act in good faith?

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6. (Able to make other arrangements?) The breaching party’s effect on the non-breaching party efforts of making other arrangements (e.g. Photographer says, “Won’t be able to make it for your wedding” 3 days before. Couple can’t find a replacement since everyone is booked).

7. Is time of the essence? The extent to which the agreement makes clear that time is of the essence (not determinative)

In terms of policy, why allow Anticipatory Repudiation?

Allows parties to make alternative arrangements when the other party plans to not perform

Can you retract an Anticipatory Repudiation? If yes, what’s the exception?

Yes, unless:

1. The other party materially changes position (e.g. Law School hires new Professor)

2. The other party indicates the repudiation to be final (e.g. Law School says “Contract is terminated.”)

What are Reasonable Grounds for Insecurity?

The warning light for repudiation