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Principles Of Business Law - CHAPTER VI
























































Sec. 91. Failure to perform. For every breach of a contract,
regardless of how small or trifling the provision violated, the injured
party, usually called the obligee, is entitled to some relief. For a
violation of minor significance, he has as his only remedy the right
to recover damages. However, in an executory contract where the
provision is one of vital importance and the breach is material,
rescission of the agreement may be demanded. To illustrate: A
agrees to build a brick house for J5, according to agreed specifica-
tions, for $10,000, and to have it completed by a certain date. A
is ten days late in finishing the house. The breach being of minor
importance, B must accept and pay the contract price, less any
damages sustained by reason of the delay. On the other hand, let
us assume that the breach consisted in building a five-room house
instead of a seven-room house called for by the contract. Unques-
tionably, the breach of such an important provision would justify
B in rescinding the agreement by refusing to carry out the obliga-
tions which it imposed upon him.

Those terms of a contract, the breach of which justify rescission,
are called conditions. Conditions are of three kinds rjiamely, con-
ditions precedent, conditions concurrent, and conditions subse-
\tor purposes of our discussion, only the first two will be

quent. Jboi

Sec. 92. Conditions precedent. Most contracts are so drawn
that one of the parties must perform some duty before he obtains
a right against the other party. The performance of this duty is
called a condition precedent. In other words the promise to per-
form by the second party is dependent upon performance by the
first party. To take a simple illustration : A agrees to work for B
one month for $200. A's work for the month is a condition prece-
dent to his right to recover the $200.

Not all of the terms which impose a duty of performance on a
person are of sufficient importance to accord them the weight of
conditions precedent. If a provision is relatively insignificant, its
performance is not always required to precede recovery from the
second party. In such cases the party who was to receive perform-
ance merely deducts damages for the breach before performing on
his part. Three tests have been applied by the courts to determine
whether contract terms shall be treated as conditions precedent



The first test consists in answering this question: Is the breach,
jrfjmajftr ftr of minor impprtaiiP ? Provided it is of major import,
the term breached is deemed a condition precedent, while if it is of
minor significance it may usually be said that it is not a condition
precedent. The second guide is somewhat like the first, in that
courts considsiljaiterm breached not a condition precedent if dam-
agesarg^an adequate remedy for such a breach ; a term breached
wEIch cannot well be remedied by a payment of money damages,
or one in which it is extremely difficult to measure in money the
resulting damages, is a condition precedent and justifies rescission
ofjhe entire ^onlracLl The third test, which really gets at the gist
o:Tthe matter7 runs somewhat as follows: Dpes the failure tp per-
form thejjarticular provision change essentially the nature of the
2 Dof^^ expectations of

ie party entitled to performance? To illustrate : A agrees to ship
to B one thousand pounds of tea at a certain price and to send a
representative to put on a two-day demonstration at B's store. He
fails to send the representative, but desires to collect the purchase
price of the tea, less any damage suffered by his failure to send the
representative. Whether he may recover depends upon the effect
produced by his failure to send the salesman. If B had never be-
fore sold tea, or if the tea is a new brand just being introduced, un-
doubtedly such a breach would materially alter the balance of the
contract and therefore bar A's recovery. However, if B had sold
this same tea before, the failure to send the representative would
not fully defeat the justifiable expectations of the retailer.
VSec. 93. Time as a condition, Certain contract terms have be-
come so important as to merit special consideration. Among these
is the provision contained in various contracts calling for perform-
ance within a certain time. What is the result of a failure to per-
form within the time set? May the agreement be rescinded or
not? The answer to these questions depends upon the circum-
stances. The time stipulated for the completion of a contract,
which involves primarily the expenditure of labor and materials or
the production of a commodity of little value to anyone other than
the contracting party, is normally not considered of major signifi-
cance. Thus, the failure of a contractor to complete a house by the
date set in the contract would not justify rescission by the owner.
He could, however, deduct from the contract price such damages as
resulted from the delay.

A clause calling for performance within a certain time of a con-
tract for the sale of marketable goods is usually held to be a con-

lr richnor Bros. v. Evans, 1918, 98 Vt. 278, 102 Atl. 1031; p. 515.
'Bettini v. Gye, 1876, Q.B. Div. 183; p. 515.


dition precedent. 3 In contracts whereby retailers purchase goods
which are normally bought and sold in the market, performance by
the seller on the exact date specified is considered quite important.
Sales promotion campaigns and provision for the normal needs of
customers are built around delivery dates. To replace merchan-
dise not received promptly, other sources must be tapped. Failure
to comply in detail with the time provisions of such contracts usu-
ally justifies the buyer in rejecting performance at a later date.

An extended delay eventually becomes material in the perform-
ance of any contract and ultimately justifies rescission. If partial
performance has not taken place, a relatively short delay may jus-
tify rescission, whereas if performance is under way and time is not
of the essence, a delay of some time may be required before rescis-
sion is justified. In those cases which provide no specific date for
performance, it is implied that performance will take place within
a reasonable time, the length of time being dependent upon the na-
ture of the commodity involved and the surrounding circumstances.

In those contracts in which time for performance normally is
deemed not to be a condition precedent, performance on time may
be made a condition precedent by adding a clause that "time is the
essence in this agreement." In other words, the parties may stip-
ulate that something shall be important in a particular contract
which ordinarily is not so considered. In such a case, failure to
perform on time affords ground for rescission.

Sec. 94. An architect's certificate as a condition. The major-
ity of building contracts involving large sums of money provide
that payments to the contractor shall be made only upon presenta-
tion of a certificate signed by a certain architect. In case the ar-
chitect for some reason refuses to issue the certificate, the question
often arises as to whether the contractor may bring suit to recover
on the contract without producing the certificate. The majority
of the courts consider the procuring of the certificate, where the
contract calls for one, a condition precedent, but excuse the failure
to present it in certain cases. Thus, if the architect agreed upon
dies, becomes insane, or fraudulently, whimsically, or for no par-
ticular reason refuses to give his certificate, it is dispensed with.
Some conflict exists where the architect acts unreasonably, al-
though he honestly and in good faith refuses to grant the certifi-
cate. The better view in such a case seems to be that recovery on
the contract should be denied until the contractor does what is nec-
essary in order to obtain the certificate.

3 Sunshine Cloak & Suit Co. v. Roquette et al., 1915, 30 N.D. 143, 152 N.W. 359;
p. 516.


Sec. 95. Concurrent conditions. Many contracts are so drawn
that the parties thereto are to act simultaneously as to certain mat-
ters. Thus, an agreement which calls for a conveyance by A of a
certain farm upon payment of $20,000 by B is illustrative of such
a situation. The deed is to be delivered at the time payment is
made. Those terms of a contract which require both parties to the
agreement to perform at the same time are designated concurrent
conditions. Under thft terms of such an agreement, neither party
is placed in d^TaulLlintil the other has offered to perform. Such
otfer^or^his part is called a tender ; actual performance is unneces-
sary^JFor this reason B could not successfully sue A for failure to
deliver the deed until he had offered to make the payment required.
Actual payment is not required unless A offers to deliver the deed;
tender of payment is sufficient.

Sec. 96. Tender and its effect. A valid tender of money ow-
ing to a creditor has certain rather important effects. Although it
does not discharge or pay the debt it extinguishes nny lip.n

Secures the dftM- flnH ftt^g infprpsf. from

in case the creditor later brings suit recovering no more than the
amount tendered^ he must jpay his own com* *t&- Thus, any
mortgage or pledge of property is discharged by a tender as well as
by payment of the debt.

f a,n nnmrfr|it.jopn1 nffp.r in pay in lpgn.1

tender the pro^gr fliTTiP 1ir> t *4 t.hq p r np pr ti**- *o the creditor or
hisagent. A tender before the maturity of an obligation is not a
proper tender, and the creditor rests under no duty to accept it.
Tender of payment in something other than legal tender such as
a check is good unless the creditor refuses it because it is not legal
tender. If he refuses it for some other reason, a proper tender has
been made.

Sec. 97. Divisible contracts. An agreement may provide for
complete performance at one time, or the parties may have an un-
derstanding that the contract may be performed in stated install-
ments. In such instances two important questions arise: (1) Is the
contract divisible on both sides, such that the second party is under
a duty to perform in part after the first party performs an install-
ment? (2) Does a material breach of any installment justify a
rescission of the balance of the agreement? The answer to the first
question depends largely upon the wording of the contract. Where
the intention of the parties is not clear, it has to be gleaned from
previous dealings, custom of the trade, and surrounding circum-
stances. To illustrate: A contracts to purchase from B ten thou-
sand tons of coal at $5 a ton. It is provided that B shall deliver


one thousand tons a month as it is ordered out by A. Assuming
that B delivers the first month's supply, is A under a duty to pay
for it at the end of the month? Or may he wait until all of the
coal has been delivered? The tests set forth above must be applied
to the case. If, in the past, all shipments have been paid for at
the end of each month, the contract is probably divisible on both

The answer to the second question is in the affirmative. 4 Thus,
in the above illustration, assuming that B delivers only four hun-
dred tons the first month, A has the right to refuse subsequent ship*-
ments. He may, however, waive the breach and demand* full per-

Sec. 98. Anticipatory breach. The majority of the contracts
which are noITfully pui f oi l * performance or after the time for performance has arrived. It is
possible, however, for one party by his conduct to give the other
party a cause of action before the time for performance has arrived.
This situation is known as anticipatory breach. Thus, jfone party
to an agreement should directly inform the other thatTie^will not
perform, the tatter may take him at his word and termmate^TRe
Ugl'titiineijrl 1 : Tins termination may be immediately followed by an
action to recover damages, although the time for performance has
not yet arrived. 5 An anticipatory breach may be retracted unless
it has been acted upon by the one entitled to performance. Un-
less the latter has changed his position or reached some new agree-
ment in reliance upon the breach, the obligor is free to change his
mind and to carry out the original agreement.

The rule of anticipatory breach is not applicable to a promise to
pay a money debt, such as a note, bond, or book account. Al-
though the debtor, before maturity, denies that he will pay the
debt when it falls due, the creditor must wait until maturity before
bringing suit. In such cases it is not essential that he take action
immediately in order to reduce the damages that might otherwise
accrue, whereas, in the case of a contract for the erection of a build-
ing, it is necessary for the injured party to make another contract
as soon as possible after he is informed that the contractor has re-
fused to proceed with the contract.

Excuses for Nonperformance

Sec. 99. Waiver. Certain situations may arise after a contract
ias been entered into which have the effect of excusing nonper-

4 Producers' Coke Co. v. Hillman et al., 1914, 243 Pa. St. 313, 90 All. 144; p. 517.
s Amberg Granite Co. v. Marinette County et al., 1945, 247 Wise. 36, 18 N.W.(2)
196; p. 518.


formance. When one of the parties to the contract by his conduct
evidences an intention not to hold the other party to certain terms>
he is said to waive such provisions ; and he thereby paves the way
for noncompliance with such provisions. The essence of waiver is
conduct which indicates an intention not to enforce certain provi-
sions of an agreement. Usually waiver takes place after some de-
fault, and is determined by the proving of some action on the part
of the one entitled to performance which shows a willingness on his
part to forgive the breach. 6

Sec. 100. Prevention. There arises in every agreement an im-
plied condition that neither party will interfere with the other in
his performance. 7 Should such interference take place, the one at-
tempting performance is relieved of performing and may bring an
action to recover damages because of the other's breach of this
implied condition. To illustrate: Assume that A agrees to build
a garage for B for a certain sum. A sends out the necessary ma-
terials, but each time B refuses to allow them to be carried onto the
premises. Under such circumstances A may refuse to proceed and
can immediately demand restitution by way of damages.

Sec. 101. Additional hardship. One who desires to be relieved
of his duty to perform in the event that unusual circumstances
later intervene had best provide therefor in his contract. 8 To this
end the contracts of many industrial concerns provide that the
manufacturer shall be released in case of fire, strikes, difficulty in
obtaining raw materials, or other incidents over which it has no
control. To be effective, however, it is generally held that such
provisions must be included in the body of the agreement. The
mere fact that such a statement appears at the top of a letterhead
upon which the agreement is written does not affect the rights of
the parties unless attention is directed to it at some place in the

In this connection it should be emphasized that conditions aris-
ing to make performance more difficult or burdensome never afford
ground for rescission. Thus, if a building which has been almost
completed is destroyed by a tornado, the contractor is still under a
duty to build; he should have protected himself with insurance
during the course of construction or shifted the risk to the owner by
a provision in the contract.

Sec. 102. ^Impossibility of performance. True impossibility of
performance Sterns from the nature of the thing promised rather

6 Jacob Trinley & Sons v. Cotter et al., 1945, 93 N.H. 268, 41 A.(2) 243; p. 519.
7 Seggerbruch v. Stosor, 1941, 309 111. App. 385, 33 N.E.(2) 159; p, 521.
a City of Minneapolis v. Republic Creosoting Co. et al., 1924, 161 Minn. 178, 201
N.W. 414; p. 523.


than from the inability of the particular party to carry out his
agreement, except in those cases involving personal services. Real
impossibility normally relieves a promisor of his duty to perform,
.but if such impossibility develops out of negligence or lack of dili-
gence on his part, no release is granted to him. Furthermore, in
some cases the ability to perform is the essence of the contract, it
having been contemplated at the time of the agreement that per-
formance may or may not have been possible. A promisor who
knowingly accepts the risk of performance under such circum-
stances is in no position to ask relief when it is later determined
that he will be unable to perform.

To illustrate, let us assume that A contracts to sell and deliver
500 bales of cotton from a certain plantation. Actually A raises
only 200 bales and seeks to be released of his duty to deliver the
balance. Naturally, if his inability to deliver has developed out
of the fact that he failed to plant a sufficient acreage or was care-
less in his planting, cultivation, or harvesting of the crop, A should
not be relieved of his duty to deliver. However, if he planted
enough to have produced 800 bales under normal conditions, but
the weather or other factors were such as to decrease the yield ma-
terially below that which was normally grown, failure to perform
would be excused. In such a case he is obligated to deliver the 200
bales at the contract price, providing the buyer desires such partial
performance. Had the parties at the time of making the contract
taken into account such contingencies and A had nevertheless
promised performance, impossibility could not be effectively urged
by him as a defense. It is because people seldom take such factors
into consideration when making a contract that relief is provided
when impossibility develops.

Sec. 103. Change of law. There are four groups of cases in
which impossibility of performance may properly be offered as an
excuse for nonperformance. The first of these deals with those
situations in which performance becomes illegal because of the en-
actment of some law or some act on the part of the government.
Illustrative of this situation are those instances in which a manu-
facturer is prevented from making delivery of merchandise because
the armed forces make a superior demand for it. In this connection
it should be noted that governmental action which merely makes
an agreement more burdensome than was anticipated does not af-
ford a basis for relief.

Sec. 104. Death or illness. Death or incapacitating illness of
one party to a contract requiring personal services constitutes an-
other form of impossibility. Ordinary contracts are not termi-
nated by reason of the death or illness of one of the contracting


parties. Thus, if A contracts to furnish B with fifteen tables ac-
cording to certain specifications for a price of $10 each, the tables
must still be delivered, although A becomes ill and is unable per-
sonally to do the work as he had orginally planned. However, had
B provided that the tables were to be built personally by A, failure
to perform would have been excused by A's illness.

All contracts which require the personal supervision or services
of one of the parties are terminated by the death of such party. In
contracts for personal services, illness excuses a laborer for his in-
ability to perform but it does not bar the employer from terminat-
ing the contract of employment, provided the employee's absence
constitutes a material breach. In such cases, the employee is
merely relieved of paying damages for the breach.

In a contract for personal services one in which the employer-
employee relationship exists death of the employer, as well as of
the employee, terminates the relation. His estate is not liable to
the employee in damages for prematurely terminating the contract
in such a case.

Sec. 105. Destruction of subject matter. Many agreements
involve certain subject matter, the continued existence of which is
essential to the completion of the contract. As a result, we have
the rule that destruction of any subject matter which is essential
to the completion of the contract will operate to relieve the parties
from the obligations assumed by their agreement. Another situa-
tion somewhat analogous arises where property which one of the
parties expected to use in performance is destroyed. If a factory
from which the owner expected to deliver certain shoes is destroyed
by fire, performance is not excused, inasmuch as performance is
still possible, although an undue hardship may result. 9 But, had
the contract stipulated that the shoes were to be delivered from this
particular factory, its destruction would have operated to excuse a
failure to perform. Stated in other language, the destruction of
the source from which one of the parties expects to make perform-
ance does not relieve him. He is still under duty to obtain the
property from some other source. A destruction of the source from
which he has agreed to make delivery will excuse him, as he is not
at liberty to use any other source.

A few of the liberal states have held that, if both parties under-
stood delivery was to be made from a certain source, even though
it was not expressly so agreed, destruction of the source of supply
will relieve the obligor from performing. In these few states the
courts read in an implied term to the effect that delivery is to be
made from the anticipated source.

e Booth v,Spuyteu Duyvil Rolling Mill Co, 1875, 60 NX 487; p* 524,


Sec, 106. Essential element lacking, This last form of impos-
sibility has never been very satisfactorily defined. Apparently,
where some element or property which the parties assumed existed
or would exist, and which is essential to the performance of the con-
tract, fails to exist, the agreement may be rescinded. Mere addi-
tional burden or hardship is not sufficient to relieve one of the du-
ties imposed by the agreement; but it must definitely be proved
that performance is substantially impossible because of the missing
element. To illustrate: A contracts to build an office building at a
certain location. Because of the nature of the soi], it is utterly im-
possible to build the type of building provided for in the agree-
ment; the agreement must therefore be terminated. The missing
element is a proper condition of the soil.

Sec. 107. Right to recover for part performance impossibil-
ity. Often impossibility of performance becomes apparent only
after the agreement has been partially performed. Thus, one coat
of paint is placed upon a house before it is destroyed. In such
cases, is the loss of the work already completed to fall upon the one
doing the work, or upon the party who was to have the benefit of
the labor? Most states permit the person who has partially per-
formed to recover for the benefit the other party would have re-
ceived had impossibility not arisen. This is simply another way
of saying that the recipient of the work must pay for all labor and
material expended up to the date of impossibility, provided the la-
bor and material had attached to the property of the one for whom
the work was being done. 10

Care should be taken in such cases, however, to differentiate be-
tween impossibility and mere additional burden. The destruction
of a partially completed building does not make possible recovery
for the work done. Performance is still possible by starting con-
struction anew, although the cost will be greater than was antici-
pated. The additional cost in the latter case must be borne by the

Part performance also arises in a different connection; namely,
in those cases in which the seller is unable to deliver all the goods
or produce called for by the contract. In such cases, if the buyer
elects to accept delivery of the limited amount available, he must
compensate for it at the agreed rate of payment. A seller who has
obligated himself to several buyers, but because of impossibility has
only a limited supply, is required to apportion his product among
the various buyers who desire to take part performance.

Sec. 108. Willful breach recovery for benefits. Contracts
which are willfully breached after part performance has taken place

10 Carrol V, Bowersock, 1917, 100 Kan. 270, 164 Pac. 143; p. 624.


may or may not confer some benefit on the promisee. Even though
a benefit has been conferred, it may be such a one as the promisee
may or may not be able to return to the other party. In construc-
tion contracts and others of similar nature, in which the benefit
received from partial performance cannot be returned, the person
entitled to performance is not required to pay for the benefit con-
ferred upon him. 11 The other party is penalized to that extent be-
cause of his failure to perform. Where the breach is unintentional
resulting from a mistake or a misunderstanding the party must
pay for the net benefit which he has received.

In those contracts in which benefits are conferred through par-
tial performance, which benefits can be returned, the benefited
party must either return the benefits or pay the reasonable value
of the benefit which he has received. Thus, in contracts for the
sale and purchase of goods, the buyer who receives only a portion of
the goods contracted for must either pay their reasonable value,
less the damages resulting from the failure to receive the balance
of the goods, or return the goods received. He cannot keep the
goods and at the same time refuse to pay for the benefits received
from them.

In a somewhat similar situation, however, the courts seem to
reach a different result. Where real estate is sold on an install-
ment contract, title to be conveyed when all installments are paid,
the courts hold that in case the buyer discontinues his payments,
the seller may retain all payments made prior to default.


Sec. 109. Specific performance distinguished. As stated be-
fore, every breach of a contract, regardless of how trivial in nature,
gives rise to a cause of action by the injured party. He is in all
cases permitted to recover a judgment which will compensate for
the damages sustained. In addition, there are a few instances in
which a court of equity .will compej^the promisor to carry out
express terms of the contract. .This is known as specific
gnce, and can"be insisted~upon (mlyjr^excpp^^i^l rases \
far-wMcITthe recovery oi damages^does not fully compensate the
injuredj^ty. 12 That line of cases in which the contract calls for
the delivery of property having some peculiar or intrinsic value fur-
nishes the most typical illustration of contracts which may be spe-
cifically enforced. Thus, an agreement which calls for the delivery
of a relic of ancient days may be specifically enforced. A more

11 Johnson et al. v. Fehsefeldt, 1908, 106 Minn. 202, 118 N.W. 797; p. 525.
* Rigs v. Sokal et ux., 1945, 318 Mass. 337, 61 N.E.(2) 538; p. 526.


common type of contract, which is often the subject of specific per*
formance, involves contracts for the sale of real estate. The courts
have always held that a certain piece of real estate may have in-
trinsic worth; therefore, recovery of damages may not fully com-
pensate. Specific performance may be demanded whenever the
grantor refuses to deed real estate as provided by agreement.

Sec. 110. Measure of damages. The amount of damages re-
covered in any case is usually a matter for the jury to determine,
after proper instructions have been received from the court. The
recovery allowed is dependent largely upon the evidence presented
to the jury. The amount of the judgment varies directly with the
proof concerning the injury. It is the duty of the jury to compen-
sate the plaintiff for the loss he has suffered; therefore, if the evi-
dence discloses that no material injury resulted from a breach, only
nominal damages are allowed nominal damages being some small
and inconsequential sum allowed merely to denote that a cause of
action existed. However, assuming that the breach causes actual
loss, it becomes the duty of the jury to place the plaintiff in as good
a position as he would have enjoyed so far as the payment of
money can do so had performance taken place. The judge ac-
cepts the conclusion reached by the jury, unless he feels that it has
given improper weight to the evidence, in which case he may set
aside the verdict of the jury and order a new trial.

The plaintiff in a cause of action is not entitled to recover the
amount which he expends for attorney's fees, unless the contract
so provides or special legislation permits it in the particular case.
Court costs, however, which include witness' fees, filing costs, and
so forth, are assessed against the defendant in case judgment is
rendered against him.

Sec. 111. Damages must result from breach. The damages
which the jury find to be sustained in any case must be such as the
parties contemplate would normally arise from the breach. Un-
usual and unexpected damage resulting from peculiar facts un-
known to both parties at the time the agreement was entered into
should not influence the amount of the recovery. The time-worn
example of this rule is a case in which an owner of a grist mill con-
tracted for the transportation of a broken shaft to an engineer, who
was to make another one for him. The carrier was unaware that
the mill could not be operated without it, and there was some de-
lay on its part in transporting the shaft. It was decided that the
owner was not entitled to recover in damages an amount equal to
the loss of profits during the period of the delay. Such might have
been the result, however, had the carrier been notified of the pur-
pose for which the shaft was being shipped.


Sec. 112. Duty to mitigate damages. As soon as a contract
has been breached, it becomes the duty of the party suffering dam-
ages to reduce the actual loss to the lowest possible point. He can-
not add to his injury or permit the damages to be enhanced when
it is reasonably within his power to prevent such occurrence. 13
Thus, an employee who has been wrongfully discharged cannot sit
idly by and expect to draw his pay. A duty is imposed upon him
to seek other work of the same general character. This burden is
not extended to the point where he must leave a particular locality
and look for work elsewhere ; neither is he required to accept work
of an entirely different nature.

Sec. 113. Liquidated damages. In order to avoid the expenses
of litigation, it is customary in certain types of contracts to provide
for the amount of damages to be paid for the breach of particular
terms. These provisions^ are legal forms, and will be enforced so long_as
the court does not^consider the stipulation to be a penalty for fail-
ure to perform, rather than compensation 7or damages. Should
EKe court find the ternTtO have been inserted primarily to force ac-
tual performance and not to compensate for probable injury, it will
not be enforced. In order to be construed as liquidated damages,
the amount of recovery agreed upon must bear a close relation to
the probable damage to be sustained by the breach. Once having
arrived at the conclusion that the parties intended to compensate
for possible damages, the court will not permit either of them to
introduce evidence showing the amount of actual damages; recov-
ery is allowed for the amount agreed upon by the parties, although
actually the damages suffered may vary somewhat from those
agreed upon in the contract. 14

Review Questions and Problems

1. What is a condition precedent? What is the effect of failure to
perform a condition precedent? What tests are employed in the deter-
mination of whether a particular provision is a condition precedent?

2. A contracts to paint a picture of B's wife and to have it completed
by October 1. He fails to complete the picture until the following Jan-
uary. May B rescind the agreement?

3. A contracts to build a house for B with the provision that pay-
ments are to be made to A only after a certificate is issued by C, who
prepared the plans for B. C refuses to issue any certificate because he
is not employed by B as a supervising architect. May A recover with-
out the certificate?

4. What circumstances determine the divisibility of a contract?
What is the effect of a material breach of one installment of a contract?

13 Clark v. Marsiglia, 1845, 1 Den. (N.Y.) 317; p. 528.
"Keeble v. Keeble, 1888, 85 Ala. 552, 5 So. 149; p. 529,


5. X Company sold some lightning rod cable to R, a retailer, and
promised to send a salesman to introduce it in that territory, R had not
previously sold lightning rod of this type and X Company failed to send
a salesman to help him introduce it in his area. R desires to rescind his
agreement and return the cable to X Company. Has he the right to do

6. A, a school teacher, is hired by the B School Board for a term of
eight months at $100 a month. After school has been in progress for two
months, the school building is destroyed by fire. The Board refuses to
pay any further salary to A. May he recover?

7. What is meant by impossibility of performance? Name four sit-
uations in which impossibility will operate as an excuse for failure to per-

8. A contracted to install a ventilating system in a specified building.
The work had been completed, with the exception of connecting one of the
fans, when the building and its contents were destroyed by fire. Must
A or the owner of the building bear the loss of the ventilating system?

9. What effect has death or illness upon the ordinary contract? Does
the same result obtain in a contract for personal services?

10. A contracted to perform certain excavation work for the city of
Chicago. After he had completed about one half of the work he refused
to continue, because of the pressure of other work. The city procured
another contractor to complete the work at approximately one half the
original contract price. Has the original contractor a right to recover for
the work performed by him?

11. A contracted to sell to B a necklace worn at one time by Queen
Elizabeth of England. The contract price was $15,000. A refused to
perform and offered to pay damages. B brought a bill for specific per-
formance of the agreement. Should he succeed?

12. What should be the proper measure of damages for breach of a
contract? May one party to an agreement enhance the damage by full
performance when the other party has refused to proceed with the agree-

13. What is meant by liquidated damages? How do they differ from
a penalty? When would a clause calling for the payment of liquidated
damages be inserted in a contract?

14. M y who had given to // a mortgage on certain property as security
for a loan of $3,000 and interest, offered at maturity the proper amount
in payment of the debt. H, being mistaken as to the amount of interest
due, refused to accept the payment. He later began foreclosure proceed-
ings. Had he a right to foreclose?

15. P, at an agreed rate, contracted to haul the cement needed by D
on a certain job. Later D's employees unionized and refused to unload
the cement from P's trucks because the drivers of the trucks were not
members of a union. D engaged another hauler to deliver the cement
and when sued for damages by P asserted impossibility as a defense.
Was the defense good?

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