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https://youtu.be/lTZLAKccatU?si=3_43PdMZpecvO0UN
Hi, contract students Professor Orenberg here and today I'm going to talk to you about conditions contractual conditions and I want to begin by simply
explaining what conditions are and I'm going to use an analogy here to a simple household object that you're familiar
with a light switch because conditions are effectively switches conditions are events not certain to occur that until
they occur some other contractual
0:29
obligation is not due that's a mouthful
0:32
so let's try to break down what that
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means
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first and foremost before learning this
0:36
lesson you'll need to know a few things
0:38
about contract interpretation because
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one of the first questions that we have
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is what is the meaning of terms in a
0:45
contract and one of those meanings is to
0:47
determine if something is a condition or
0:50
a promise so if you haven't yet check on
0:53
that lesson regarding canons of
0:56
construction and the application of
0:58
extrinsic evidence to understand the
0:59
meaning of contractual terms because
1:01
you'll need that here to determine
1:03
whether the term in a contract is a
1:06
promise a condition or both
1:08
this light switch is now going to stand
1:11
in for a promise and A promise is a
1:16
contractual obligation something that
1:18
has to be performed right contracts are
1:20
made of promises usually two or more
1:22
promises to parties promised mutually to
1:25
do something for each other and we might
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think that a contract creates an
1:29
obligation but often that obligation is
1:31
conditional and that's where the switch
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comes in
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this contractual obligation may be
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conditional on some condition occurring
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or not occurring so let's now talk about
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what is a condition in the terms of a
1:45
switch well let's look at a simple light
1:47
switch
Analogy
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here is a simple light switch you're
1:51
probably familiar with these from your
1:52
own home and it has two positions off
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and on it functions as a very similar
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simple way if the switch is in the on
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position current will flow between these
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poles and if it's in the off position
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they won't
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and so we can talk about a condition as
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being a condition precedent which means
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it begins in the off position and unless
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and until it is flipped on some
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resulting promise is not due we can also
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talk about things being conditions
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subsequent which means that they begin
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in the on condition the on position
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rather condition subsequent begin in the
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on position and then something may occur
2:33
to turn them off extinguishing the duty
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as I was doing some electrical wiring
2:38
around my own home I realized that this
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may not be the best analogy for
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conditions because some switches don't
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have on and off written on them and in
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fact could function differently
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depending on how they're wired this is
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what's called a three-way switch but the
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key idea is that and again you may have
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some of these at home it doesn't have on
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or off written on the plate here it
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depends which way is on or off on how it
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is wired it actually doesn't have just
3:05
two but rather three prongs and without
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getting into the details of wiring
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depending on how the switch is set up it
3:11
could function either to turn a light
3:13
off in this position or to turn a light
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on in this position it is simply a
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condition simply a switch but whether it
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is a condition precedent or a condition
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subsequent depends on how it is wired or
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how it is structured and this turns out
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to be a better analogy for how
3:28
conditions work in modern contract law
3:30
it turns out that in modern contract law
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most conditions could be framed or wired
3:36
as either conditions precedent or
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conditioned subsequent based on sort of
3:40
games of semantics and whether they turn
3:43
something on or turn something off it's
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really just a matter of well perspective
3:47
or wiring or again are are Artful
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semantic usage I might say I promise to
3:55
buy your car if inflation exceeds five
3:58
percent and that makes it sound like we
4:01
have a condition precedent unless and
4:03
until can inflation exceeds five percent
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my obligation to buy that car is not on
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I could also say I will buy your car
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unless by November 5th inflation dips
4:17
below five percent well now I have an
4:19
obligation that's on and
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the effect of inflation is to turn that
4:25
obligation off but really this is a
4:29
distinction without much of a difference
4:30
it's also a little bit more obtrused to
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think of things as conditioned
4:34
subsequent
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so we generally construe conditions
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generally to mean what used to be called
4:40
conditions precedent in other words the
4:42
condition has to occur in order for the
4:44
duty to come on there are some
4:46
exceptions to this of course as there
4:48
always are in contract law particularly
4:50
in the examples of insurance contracts
4:52
which do have conditions subsequent but
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as a general rule we're just going to
4:56
use the term condition to refer to this
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switch which has the function of turning
5:02
on or off some promise
5:06
now when we have a condition attached to
5:09
a promise we say that the promise is
5:11
conditional this is the condition and
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this is the conditional promise meaning
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the promise does not have to be
5:18
performed unless the condition operates
5:20
again it's like a light bulb with a
5:24
switch in the circuit instead of being
5:26
on all the time and do regardless of
5:29
anything some event not certain to occur
5:32
must occur in order for that obligation
5:35
to be turned on
5:38
these are also known as Express
5:39
conditions and they're usually easy to
5:42
find because they will be written in the
5:44
contract itself that's why I started
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this lesson saying you'll need to
5:48
understand contract interpretation and
5:50
apply those tools to determine whether
5:52
something is in fact a condition whether
5:55
it's a promise whether it's both
5:57
something known as a promissory
5:59
condition or or perhaps whether it's
6:01
something else or neither like recitals
6:03
it requires the skill of interpretation
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to answer the question why is something
6:08
a condition the answer may be found in
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the express language for example I will
6:13
pay you for the car if and only if
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inflation exceeds five percent that's
6:19
pretty clear Express language but we
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might also look at facts and
6:24
circumstances trade usage all the
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aspects that pertain to contract
6:28
interpretation also pertain to
6:30
determining whether something is a
6:32
condition a promise both or something
6:35
else
6:37
that's Express conditions and again
6:39
they're quite simple because they only
6:40
have two positions on or off occurred or
6:44
didn't occur complete incomplete circuit
6:48
on circuit off the effect of them is
6:50
rather simple so the art and the skill
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in understanding Express conditions
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again is a contract interpretation
6:58
skill where we have to understand what
7:00
parties meant when they said a certain
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thing did they intend for this to
7:05
operate in that way or not
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there is however a concept that goes
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beyond the language of the contract we
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have implied terms in a contract we also
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have implied conditions
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let me give you an example to think
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about and then I'll explain why implied
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conditions are necessary if I promise to
7:25
sell you my car for twenty thousand
7:26
dollars
7:27
and I show up at the appointed time and
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you don't have the money do I have to
7:31
deliver the car to you
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the answer is surely no of course I
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don't have to give you the car but why I
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promise to sell you the car promises
7:41
must be kept what is operating here that
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allows me not to deliver the car on that
7:47
given day even though I promised to
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the answer is the existence of implied
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conditions parties don't always say
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everything they mean in fact no contract
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is totally complete and there is an
7:59
assumption of mutuality in contracts
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that my promise to you is based on my
8:04
receipt of your return promise to me and
8:07
vice versa making these implied
8:09
conditions concurrent to one another or
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let's just call them implied conditions
Implied Conditions
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but it turns out implied conditions look
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and function a little different than
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Express conditions do
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as a reminder here's our illustration of
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an Express Condition it's in the form of
8:25
a switch which has two two different uh
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statuses either on or off we discussed
8:32
how perhaps on or off could be switched
8:35
with one another and that is represented
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by being blank and not on off written on
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it because whether this is on or or this
8:43
position is on uh whether Up is on or
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whether down is on depends on other
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features that are not really important
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to understanding the function of
8:52
conditions the key thing to understand
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is that this condition has only two
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positions on or off and that makes it an
8:59
Express condition
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this dimmer switch however represents an
9:04
implied condition because implied
9:05
conditions regard a different doctrine
9:08
that we understand as having degrees of
9:11
performance
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and that's Illustrated here by these
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these uh levels of contractual
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performance shown by this switch it can
9:19
be either off partially performed all
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the way to fully performed as the switch
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dims up or down the lights
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and we treat implied conditions in this
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way for reasons that are better
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explained in a future lesson on
9:35
substantial performance and material
9:36
breach the case by the way that relates
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to this issue is Jacob and young V Kent
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where judge Cardozo explained the
9:44
importance of having the doctrine of
9:46
substantial performance for these
9:47
implied conditions
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but effectively the way that it works is
9:52
that even though we have implied
9:54
conditions to each other to perform our
9:55
mutual obligations I don't necessarily
9:58
have to fully perform in order to
10:00
receive the benefits of the contract at
10:02
law as you can see on the switch there
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are different levels that it can
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illuminate a light which reflect the
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idea that performance could be partially
10:11
performed completely performed and there
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are gradations or distinctions that have
10:17
an effect on the other party's Mutual
10:18
obligation so if we have an implied
10:21
condition that implied condition
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functions like a light switch and it
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doesn't just have one position on or off
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rather it could be
10:28
slightly on
10:30
all the way to fully on and the
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difference is that a contract uh
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will almost always have some implied
10:38
conditions in it the parties have mutual
10:40
obligations to one another
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if one party's conditions are completely
10:45
performed the other party has
10:47
illuminated it has illuminated or caused
10:49
their duty to become due if the
10:52
performance is not completely performed
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we have to do a separate analysis of
10:56
whether or not performance is
10:57
substantial enough to trigger Mutual
11:00
obligations
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and the answer to that question will
11:03
depend on an analysis found in
11:04
restatement section 242.
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at some point the contract has been
11:10
unperformed for so long and to such an
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extent that the obligation is forever
11:14
extinguished and that light switch is in
11:17
the off position but again with implied
11:19
conditions as distinguished from Express
11:21
conditions there are levels or
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gradations of performance known as well
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starting with nothing or total breach to
11:31
material breach to substantial
11:33
performance all the way to complete
11:35
performance and each of them have a
11:37
different effect on the other party's
11:38
obligations to perform and the
11:40
liabilities from the party who failed to
11:43
perform
Substantial Performance
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using our dimmer switch example
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we have a variety of performances going
11:51
from very dim to all the way illuminated
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and so it's the same in the case of
11:58
performance let's say I promise to sell
12:01
you my car and you promise to pay twenty
12:03
thousand dollars and you show up with 19
12:07
999 dollars I think it's fair to say
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that your performance is almost complete
12:13
you are one twenty thousandth short of
12:16
full performance maybe that's even
12:18
indistinguishable from Full performance
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or full illumination of this light bulb
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if we were looking at it as a dimmer
12:25
switch we'd be well past 99 illuminated
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now if we were looking at it from the
12:30
perspective of a standard switch that
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switch is not thrown until the threshold
12:34
is totally met nineteen thousand nine
12:36
hundred ninety nine is not twenty
12:38
thousand but that's a harsh result and
12:41
so we have a doctrine of substantial
12:42
performance in the case where you have
12:44
nineteen thousand nine hundred ninety
12:46
nine out of twenty thousand dollars
12:47
ready and waiting for me I most likely
12:49
have to perform my implied condition uh
12:53
conditional promise to deliver the car
12:54
to you
12:55
but how much is enough well that's where
12:58
the doctrine of substantial performance
13:00
comes in how much performance on your
13:03
end is required to trigger my obligation
13:06
on my end and we'll have to do a five
13:09
Factor balancing test to determine
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whether or not the performance is
13:13
substantial or whether there's been a
13:15
material breach
13:16
by the way if the performance is
13:18
complete the solution is easy in the
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case of complete performance the other
13:22
party has to perform and there's no
13:24
liability for breach in the case of a
13:27
substantial but incomplete performance
13:28
the other party has to perform but there
13:31
is some liability for whatever the
13:32
difference is between full performance
13:34
and the performance that was rendered if
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the performance is insubstantial if
13:39
there has been a material breach the
13:41
other party has the right to withhold
13:43
his her or their Mutual obligations in a
13:47
way of basically getting self-help by
13:50
saying I'm not going to pay you until
13:52
you render performance onto me and that
13:55
might incentivize you to complete your
13:57
performance or at least substantially
13:59
perform
14:00
at some point however I've done enough
14:02
waiting for you to perform your
14:04
obligation and I can declare that you
14:06
have totally breached the agreement the
14:08
light has gone out and now I have the
14:10
right to cancel the contract and seek
14:12
performance from someone else
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so let's recap what we learned about
14:17
conditions today understanding whether a
14:19
term in a contract is a condition a
14:22
promise or both a promissory condition
14:25
is a question of contract interpretation
14:27
so if I were to ask you is this term a
14:30
condition the answer would have to rely
14:32
on for example using the canons of
14:35
construction to determine the meaning of
14:37
intrinsic evidence or determining
14:40
whether there is a latent ambiguity in
14:42
that evidence making it susceptible to
14:44
extrinsic evidence or applying the
14:45
pro-evidence rule to see if preliminary
14:47
negotiations can add or change a term in
14:51
the purported agreement those are all
14:53
skills previously learned in the lesson
14:56
on contract interpretation and basically
14:58
we use those skills to determine whether
15:00
a term is in fact a condition a promise
15:04
or both
15:05
now that relates to express terms and
15:07
express conditions which are either
15:09
fully performed or not performed
15:12
there is also a concept called an
15:14
implied condition just like there are
15:16
implied terms terms can be implied in
15:18
law in fact under the duty of good faith
15:20
and fair dealing likewise there is a
15:23
concept of mutuality that implies
15:25
conditions concurrent uh or or
15:28
conditions generally where one party's
15:30
substantial performance triggers the
15:32
other party's Mutual obligation
15:35
I hope this lesson helped you understand
15:37
what are conditions and how to find them
15:39
I'll see you in the next video