B

DEFINITIONS AND CLASSIFICATIONS OF CONDITIONS.

A party to a contract may promise (1) to perform his part of the contract under any and all circumstances, i.e., he may promise absolutely, or he may promise (2) to perform upon a contingency, i.e., he may promise conditionally. Moreover, he may seem to promise absolutely, and the courts may say that the apparently absolute promise is really conditional. It is desirable, therefore, to get at the start a definition of a condition.

(a) Conditions.

"What is a condition? A condition is an operative fact, the occurrence of which will create some new legal relation (or extinguish an existing legal relation). It is generally not a promise, although the performance of an act promised is often a condition." "A condition in a promise limits the undertaking of the promisor to perform, either by confining the undertaking to the case where the condition happens, or to the case where it does not happen." 10

A condition going to the performance under an existing contract as distinguished from one going to the existence of the contract is one

external and of internal conditions. An external condition is said by him to be one created by the law instead of by the contract of the parties, i.e., is a fact which the law treats as a condition without regard to the intention of the parties (§ 300). An internal condition is defined by him as "a condition inserted by the parties, expressly or by implication, in the contract itself, as distinguished from a condition imposed by law," and the statement is made that "internal conditions alone are usually treated under the head of conditions" (§ 304). As Professor Harriman's theory of conditions implied by law is contrary to the view of such conditions presented in this Summary, his definitions of external and of internal conditions are not accepted.

"Generally in contracts when reference is made to conditions, what is meant is conditions qualifying liability under a contract or promise, not conditions qualifying the existence of a contract or promise." 2 Williston on Contracts, $666.

• Corbin's Cases on Contracts, 478.

"Breach of promise subjects the promisor to liability in damages, but does not necessarily excuse performance on the other side. Breach of condition prevents the party failing to perform from acquiring a right, or deprives him of one, but subjects him to no liability." 2 Williston on Contracts, $665.

"Accordingly, if the fact is a true condition, the happening or not happening of the event, as the case may be, may terminate the legal rights of the parties, and by the terms of the contract may result in the substitution of other specified legal liabilities for those which were to exist if the specified condition had not happened; but the happening of the condition alone is not a breach of a covenant and no right of action arises by reason thereof." 5 Page on Contracts, §2576.

10 2 Williston on Contracts, § 663.

which takes effect after the creation of the contract and before its termination. It is a fact or event creating or extinguishing some legal contractual relation.

"In its proper sense the word 'condition' means some operative fact subsequent to acceptance and prior to discharge, a fact upon which the rights and duties of the parties depend." 11

"A condition is a fact or event, which must [accompany12 or] precede some change in the legal relations of two [or more] parties.13 To constitute a condition, however, the fact in question must be uncertain. * The uncertainty in regard to a fact which makes that fact a condition, need not be objective uncertainty; it is sufficient if that uncertainty exists in the mind of the party who seeks to treat that fact as a condition."

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While Professor Langdell insisted, 15 and there is authority for that view, that a fact or event must be future as well as uncertain before it can be a condition, Professor Harriman would seem to be right in saying that uncertainty in the minds of the parties is enough.13 Professor Langdell's view may be conceded to be the more logical, but Professor Harriman's is more practical. If only a contract conditioned upon a present or past fact is not illegal because it constitutes a wager, as strong a public policy upholds it because of the uncertainty in the minds of the parties as confirms the validity of the

11 Corbin, Conditions in the Law of Contract, 28 Yale Law Journal, 739, 743. See Anson on Contracts (Corbin's 4th Amer. ed.) § 356.

12 This addition is supplied not because it is necessary nor because the author quoted would accept it as proper, for he probably would not do so, but simply in order not to prejudice the argument hereinafter made for the retention of the descriptive phrase "conditions concurrent" to apply to a peculiar kind of conditions precedent.

13 If the change amounts to the extinction of an existing legal relation, either primary or secondary, the fact or event operates as a condition subsequent. Some conditions are subsequent as regards some legal relations and at the same time precedent to others. See note 42, post.

14 Harriman on Contracts (2d ed.) § 299.

"A condition is an uncertain event upon the happening or not happening of which, as the case may be, the parties have agreed that the legal effect of part or all of the contract shall depend." 5 Page on Contracts, $2574.

"A condition in a contract is a provision therein qualifying the obligation assumed under the promise by making such obligation dependent on the happening or non-happening of some uncertain act or event." Vold, Express Conditions in Contracts, 4 Nebraska Law Bulletin, 215.

15 Langdell's Summary of Contracts, $26.

16 Seward and Scales v. Mitchell (1860) 1 Coldwell (Tenn.) 87, Costigan's Cases on Contracts, 497. See 1 Williston on Contracts, § 119.

17 Professor Langdell thought it was impossible to find a consideration for the promise of the man who loses where the parties conditioned their promises on the happening or not happening of some event which was present or past, but unknown to them. He said: "Thus, if a wager be made by mutual promises upon a race which has already taken place, but the result of which is unknown to the parties, it is the losing party alone who promises, and he really

compromise of an unfounded but honestly entertained claim that is not frivolous.18

(b) Express and Implied Conditions.

Conditions are classified in several ways. According to one classification, conditions are either 1, express; or 2, implied.

1. Express Conditions.

An express condition is one stated, or written out, in explicit terms. A condition will be express even though words of condition are not plainly used if, on a fair construction of the contract, it is ascertained that the parties actually expressed an intention that the condition should be attached to the promise. Or, as Professor Langdell phrased it in his Rules on Conditions: "An express condition, as its name imports, is one of which the evidence must be found in the language of the parties when read in the light of surrounding circumstances."19

2. Implied Conditions.

An implied condition is one which is not expressed in terms but which, for one reason or another, is nevertheless regarded as a part

receives no consideration for his promise." Langdell's Summary of Contracts, § 89.

Still in marine insurance a contract to insure a vessel at sea, "whether lost or not," has always been held to be on sufficient consideration. And it seems fair to say that a present or past event about which parties are uncertain should be regarded as to them as if future for all contract purposes. Even in the case of the wager suggested by Professor Langdell, that was so. March v. Pigot (1771) 3 Burr. 2802, mentioned by him, is the most striking instance. There a bet was made as to which of two fathers would live the longer, and at the time of the bet, unknown to the parties, one father was dead. There was held to be sufficient consideration.

A case like Smith v. Knight (1893) 88 Ia. 257 where the contract was that partners, who originally had not so provided, should settle on the basis of interest to the one who had contributed an excess of capital and where the court was anxious to apply Professor Langdell's view, may be supported on the ground that under the facts of that case only one party was even supposed to have a chance to gain by the agreement. The only uncertainty was as to the amount he would gain. It was like "betting on a sure thing" and no consideration should be found to exist in such a case.

Of a present or a past act or event as a condition if the truth in regard to its happening is unknown to the parties, it has been said that "Whether such an event is a true condition or not, its effect on the validity of the contract is the same [as if it is one]." 5 Page on Contracts, § 2591, p. 4551. See also Id., § 2594.

18 For the conflicting cases on this question of compromise see Callisher v. Bischoffsheim (1870) L. R. 5 Q. B. 449, and cases cited in 1 Williston on Contracts, § 135. See also Costigan's Cases on Contracts, 476-497.

19 See Appendix B, post.

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of the contract, or as affecting the contract as much as if it were a part of it.

Implied conditions are divided into those (1) implied by law; and (2) implied in fact.

(1) Conditions Implied by Law-Conditions implied by law are those read into the contract or applied to the contract by the courts not because the parties so intended, but because the conditions meet the needs of justice.20 In that respect such conditions differ from express conditions and from conditions implied in fact, both of which rest on real or supposed actual intention of the parties. Conditions implied by law are conditions supplied by the court to govern situations for which the parties did not expressly provide, because they never contemplated them, or, at least, if they did contemplate those situations, gave no clear and controlling intimation of their wishes as to what should be done if and when those situations should arise. They are conditions which do not rest on the intention which the parties are known to have had, but which are supplied by the courts in the interest of that fair dealing which the courts should require as between litigants."1

20 "You can always imply a condition in a contract. But why do you imply it? It is because of some belief as to the practice of the community or of a class, or because of some opinion as to policy, or, in short, because of some attitude of yours upon a matter not capable of exact quantitative measurement, and therefore not capable of founding_exact logical conclusions." Holmes, The Path of the Law, 10 Harvard Law Review, 466.

"Often, however, the court cannot solve the problem before it by mere interpretation of words. It is then necessary to resort to general rules of law even though they were unknown to the parties, to fairness and morality, to the prevailing mores of the time and place. This process may be called one of judicial construction. The line separating mere interpretation from judicial construction, although logically quite clear, will always be practically indistinct and difficult of determination, especially because the courts so frequently construct under the guise of mere interpretation." Anson on Contracts (Corbin's 4th Amer. ed.) § 353. Query as to the distinction between interpretation and construction? See 33 Harvard Law Review, 384, note 16. See also note 298, post.

21 Professor Corbin's name for such conditions is constructive conditions. Since implied in law conditions are really "supplied by law conditions," his name for them is in line with the attempt of English writers to have quasi contracts called constructive contracts. See 33 Harvard Law Review at p. 380, note 9. Professor Corbin says:

"A certain fact may operate as a condition because the parties intended that it should and said so in words. [Footnote: If they used words that are now interpreted by the court as creating a condition, but in fact the parties did not intend the words to be thus interpreted, the condition is express even though it was unintended]. It is then an express condition. It may operate as a condition, because the parties intended that it should, such intention being reasonably inferable from conduct other than words. It is then a condition implied in fact. Lastly, it may operate as a condition because the court believes that the parties would have intended it to operate as such if they had thought about it at all, or because the court believes that by reason of the mores of the time justice requires that it should so operate. It may then be described as

Conditions implied by law in bilateral contracts, as will be noted later also, ought to have been treated by the courts as in the nature of equitable defenses22 based upon non-performance by the party who is said to break the condition, since in each case the other party says in effect to the wrongdoer: "You have not performed your promise, [or "you are not going to perform your promise"] and hence it is not fair to compel me to perform."23

a condition implied by law, or better a constructive condition." Corbin, Conditions in the Law of Contract, 28 Yale Law Journal, 739, 743-744. See also Anson on Contracts (Corbin's 4th Amer. ed.) § 357.

22 For an attempted justification of the phrase "in the nature of equitable defenses" see note 141, post.

23 The writer has borrowed this doctrine from Professor Williston, who insists to his classes that: "The fundamental equity that one party should not be compelled to perform his promise when he has not received or is not going to receive [all, or at least, substantially all, of] what was promised him in exchange is the basis of conditions implied by law." The fact that the writer adopts Professor Williston's view of conditions implied by law in preference to that of Professor Langdell, who seems not to have had to its full extent the equitable defense conception of conditions implied by law, will explain for the most part why he rewords some of Professor Langdell's rules on conditions and adds exceptions to others.

It should be noticed that Professor Harriman does not agree with this description of conditions implied by law. He says: "It has been urged by Professor Keener [Quasi-contracts, p. 225] that the conditions implied by law are not true conditions, because they are only found when the party to a contract has failed to protect himself by the insertion of express conditions. With regard to a certain class of conditions, which are really external to the contract, this criticism is sound; but with reference to internal conditions it is not well taken. Internal conditions are always gathered from the contract itself, and when they are implied by the law they are always implied because the law supposes that the intention of the parties is to treat a given fact as a condition, even though they have not manifested that intention in express words. The fact that the court always tries to discover the intention of the parties by looking at the entire contract, and that such intention is the sole rule for determining whether a given fact is or is not a condition, shows clearly that an internal condition implied by law is just as much a part of the real contract of the parties as if the condition had been set forth in express words. When the court goes beyond the contract itself, however, as it sometimes does, and attempts to introduce conditions which cannot possibly be based upon any construction of the contract, then it is not enforcing the contract obligation, but is modifying that obligation by taking other things than the contract into consideration." Harriman on Contracts (2d ed.) § 315.

But in the passage just quoted Professor Harriman seems to indulge in a fallacy. Express internal conditions and internal conditions implied in fact of course depend upon the intent of the parties revealed in the very terms of the contract made by them or necessarily deduced from those terms, but internal conditions implied by law can be said to do so only by resort to a fiction. The court, in implying the last mentioned internal conditions, asks what would have been the intention of the parties if the unprovided for contingency to be met had suggested itself to their minds and if they had been actuated by just motives. Now that is a very different thing from the query which the court propounds in the case of internal conditions express or implied in fact, for in regard to such conditions the court asks, what do the terms of the contract made by the parties show that they actually intended should govern in the contingency which arose? Professor Harriman confuses a fictitious or constructive intent with actual intent, and therein lies his error. Professor