2.2 Conditions, Breach & The Foreseeability of Contract Damages
Distinguish express conditions requiring strict literal compliance from constructive promises satisfied by substantial performance, while analyzing expectation damages, consequential damages under Hadley v. Baxendale, and Statute of Frauds merchant confirmations.
🎯 Essential Doctrinal Takeaways
- Express conditions require strict literal compliance; substantial performance applies only to constructive (implied) conditions.
- Under Hadley v. Baxendale, consequential damages are recoverable only if reasonably foreseeable at contract formation.
- Under UCC § 2-201(2), a written confirmatory memo between merchants satisfies the Statute of Frauds if no objection is sent within 10 days.
- Parol evidence is admissible to show that a completely integrated contract was subject to an oral condition precedent to formation.
Contractual duties may be absolute or conditional. An express condition is an agreed event that must occur before performance becomes due. Express conditions demand strict literal compliance; if an express condition fails, the obligor's duty to perform never arises. The equitable doctrine of substantial performance applies only to constructive promises to prevent forfeiture.
When a breach occurs, contract damages aim to place the non-breaching party in the position they would have occupied had the contract been fully performed (expectation interest). Consequential damages, however, are subject to the strict foreseeability limitation established in Hadley v. Baxendale (1854) and Restatement (Second) of Contracts § 351.
Under UCC § 2-201(2), the merchant's confirmatory memorandum exception allows an oral agreement for goods over $500 to be enforced against a recipient who receives a written confirmation sufficient against the sender and fails to provide written objection within 10 days of receipt.
⚠️ NextGen Bar Examination Traps & Pitfalls
- Applying the doctrine of substantial performance (Jacob & Youngs v. Kent) to forgive non-compliance with an express condition.
- Awarding lost profits that resulted from special circumstances never communicated to the breaching party.
- Assuming a merger clause bars evidence that the contract never became effective due to failure of an oral condition precedent.
Interactive Knowledge Checkpoint
A homeowner contracts with a master builder to construct a luxury residence for $1,200,000. The contract contains an express clause stating: 'Payment of the final $150,000 progress installment is expressly conditioned upon the builder obtaining and presenting a certificate of occupancy signed by the Chief Municipal Building Inspector.' The builder completes construction with minor cosmetic deviations, but the Chief Inspector refuses to sign because one exterior handrail is half an inch lower than code. The builder sues for the final $150,000, arguing substantial performance. Can the builder recover on the contract?