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Establishing Conditions in Contracts

What happens if one party doesn’t fulfill their end of the bargain in a contract? Professor Richard Epstein of NYU School of Law gives an overview of the law of simultaneous conditions, where one party doesn’t deliver and the other party therefore doesn’t need to pay, and the law of sequential conditions, which are more complicated because the transaction happens over time and an interruption of part might interfere with the remaining part of the bargain. The Doctrine of Implication, which says that skeletal terms should be provided and additional terms determined to maximize the efficiency of the relationship, governs the Law of Conditions in contracts law overall. https://youtube.com/watch?v=M9lsuscxEzQ


Oftentimes, people have sequential promises: if you do this I can do that, if you do the other thing, I can do something else. If you have what is known as a complete contingent state contract, there will be no surprises. Most people, however, when they draft an agreement simply talk about the basic elements so that is left to implication to fill in the gaps. So I agree to sell you certain goods which you agree to deliver me. The day comes for the delivery and you don’t do it. Am I still required to pay for the goods and then sue you for their non-delivery or can I withhold the payment by virtue of the fact that you haven’t delivered? The general answers to the law of conditions is that in order to make the exchange efficient, no person is essentially required to put himself at risk to the other party which is in breach. So, if you do not deliver me the goods on time by the law of constructive conditions, I do not pay for them um on the time. If I, in fact, am not prepared to pay for the goods, you, in turn, do not have to deliver. So that’s the basic pattern of simultaneous conditions. Situation becomes more complicated when it turns out that the conditions are not simultaneous but they’re sequential. And so what I have to do is to pay you money and you agree to build me a house and I am going to make progress payments to you and now it turns out I can pay the money in one fell swoop but the construction will take several years to complete or several months. Generally speaking what people do by way of business is they basically break the big contract into little contracts so that after the first month I owe you a progress payment, after the second month another progress payment and so forth. These contracts become very difficult if either the performance or the payment, say in the middle of this process is not done and it’s the same basic point that one makes everywhere in the law of contract. If people keep the transaction on tracks, everybody knows what’s to be done. When they go off the tracks, often the agreement is not complete and so judges have to fill in the terms and the basic intuition that they have is filling that set of terms in the event of breach which reduces the likelihood of their occurrence and furthermore makes sure that the innocent party is most likely uh to regain its lost ground. And the law of conditions is a huge part of the law of contract under the doctrine of implication, the general premise of which is if the skeletal terms are given, imply the additional terms so as to maximize the efficiency of the relationship. That is, to make sure that you increase the prospects of joint gain ah through proper performance on both sides.

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