[188] A promise was to pay a sum of money, on condition that, if a certain quantity of oil should arrive at certain ports, within two fixed days, both inclusive, the promise should be void: in an action upon this promise it was holden that the burden was on the defendants to prove the arrival of the oil; and that to constitute such arrival, the vessel must be moored within the time stipulated.

ASSUMPSIT on a written promise to pay the plaintiff 5198 dollars, 87 cents, with the following condition annexed, viz.,“on the condition that if a greater quantity of sperm oil should arrive in whaling vessels at Nantucket and New Bedford, on or between the first day of April and the first day of October of the present year, both inclusive, than arrived at said places, in whaling vessels, on or within the same term of time the last year, then this obligation to be void.” Dated April 14, 1819.

The consideration of the promise was a quantity of oil, sold by the plaintiff to the defendants. On the same day another note unconditional had been given by the defendants, for the value of the oil, estimated at sixty cents per gallon; and the note in suit was given to secure the residue of the price, estimated at eighty-five cents, to depend on the contingency mentioned in the said condition.

At the trial before the chief justice, the case depended upon the question whether a certain vessel, called the Lady Adams, with a cargo of oil, arrived at Nantucket on the first day of October, 1819, about which fact the evidence was contradictory. The judge ruled that the burden of proving the arrival within the time was on the defendants; and further that, although the vessel might have, within the time, gotten within the space which might be called Nantucket Roads, yet it was necessary that she should have come to anchor, or have been moored, somewhere within that space before the hour of twelve following the first day of October, in order to have arrived, within the meaning of the contract.

The opinion of the chief justice on both these points was objected to by the defendants, and the questions were saved. If it was wrong on either point, a new trial was to be had; otherwise judgment was to be rendered on the verdict, which was found for the plaintiff.

[189] Whitman, for the defendants. As the evidence at the trial was contradictory, the question on whom the burden of proof rested, became important. We hold that it was on the plaintiff. This was a condition precedent. Until it should happen, the promise did not take effect. On the occurrence of a certain contingent event, the promise was to be binding, and not otherwise. To entitle himself to enforce the promise, the plaintiff must show that the contingent event has actually occurred.

On the other point saved at the trial, the defendants insist that it was not required by the terms of this contract that the vessel should be moored. It is not denied that such would be the construction of a policy of insurance containing the same expression. But every contract is to be taken according to the intention of the parties to it, if such intention be legal, and capable of execution. The contemplation of parties to a policy of insurance is, that the vessel shall be safe before she shall be said to have arrived. So it is in some other maritime contracts. But in that now in question, nothing was in the minds of the parties, but that the fact of the arrival of so much oil should be known within the time limited. The subject matter in one case is safety, in the other it is information only. In this case the vessel would be said to have arrived, in common understanding, and according to the meaning of the parties^[1].

F. C. Gray, for the plaintiff.

PARKER, C. J.

The very words of the contract show that there was a promise to pay, which was to be defeated by the happening of an event, viz., the arrival of a certain quantity of oil, at the specified places, in a given time. It is like a bond with a condition; if the obligor would avoid the bond, he must show performance of the condition. The defendants, in this case, promise to pay a certain sum of money, on condition that the promise shall be void on the happening of an event. It is plain that the burden of proof is upon them; and if they fail to show that the event has happened, the promise remains good.

The other point is equally clear for the plaintiff. Oil [190] is to arrive at a given place before twelve o'clock at night. A vessel with oil heaves in sight, but she does not come to anchor before the hour is gone. In no sense can the oil be said to have arrived. The vessel is coming until she drops anchor, or is moored. She may sink, or take fire, and never arrive, however near she may be to her port. It is so in contracts of insurance; and the same reason applies to a case of this sort. Both parties put themselves upon a nice point in this contract; it was a kind of wager as to the quantity of oil which should arrive at the ports mentioned, before a certain period. They must be held strictly to their contract, there being no equity to interfere with the terms of it.

Judgment on the verdict.

[1] Vide 6 Mass. Rep. 313, Bill & Al. vs. Mason.

Floyd H. Norris as Amicus Curiae on behalf of Plaintiff and Appellant.

Felix H. McGinnis for Plaintiff and Appellant.

Launer, Chaffee & Hanna, Daniel L. Stack, Miller, Nisson, Kogler & Wenke and Clark Miller for Defendants and Respondents.

C. Douglas Wikle, Walter Atkinson, W. Alan Thody, Dell L. Falls, Cooper & Boller, Rowland, Paras & Clowdus and Gloyd T. Clowdus as Amici Curiae on behalf of Defendants and Respondents.

TRAYNOR, C. J.

In December 1960 defendant Bristol Development Company entered into a written contract with plaintiff engaging him as an architect to design an office building for a lot in Santa Ana and to assist in supervising construction.plaintiff's services were to be performed in two phases. He completed phase one, drafting preliminary plans and specifications, on January 20, 1961, and Bristol paid him $600.

The dispute concerns Bristol's obligation to pay plaintiff under phase two of the contract. The contract provided that "a condition precedent to any duty or obligation on the part [864] of the Owner [Bristol] to commence, continue or complete Phase 2 or to pay Architect any fee therefor, shall be the obtaining of economically satisfactory financing arrangements which will enable Owner, in its sole judgment, to construct the project at a cost which in the absolute decision of the Owner shall be economically feasible." It further provided that when Bristol notified plaintiff to proceed with phase two it should pay him an estimated 25 per cent of his fee, and that it would be obligated to pay the remaining 75 per cent "only from construction loan funds."

Using plaintiff's preliminary plans and specifications, Bristol obtained from a contractor an estimate of $1,020,850 as the cost of construction, including the architect's fee of 6 per cent. On the basis of this estimate, it received an offer from a savings and loan company for a construction loan upon condition that it show clear title to the Santa Ana lot and execute a first trust deed in favor of the loan company.

Shortly after obtaining this offer from the loan company, Bristol wrote plaintiff on March 14, 1961, to proceed under phase two of the contract. In accordance with the contract, Bristol paid plaintiff $12,000, an estimated 25 per cent of his total fee. Thereafter, plaintiff began to draft final plans and specifications for the building.

Bristol, however, was compelled to abandon the project because it was unable to show clear title to the Santa Ana lot and thus meet the requirements for obtaining a construction loan. Bristol's title became subject to dispute on May 23, 1961, when defendant James Freeman filed an action against Bristol claiming an adverse title. ^[684] On August 15, 1961, Bristol notified plaintiff to stop work on the project.

Plaintiff brought an action against Bristol and Freeman to recover for services performed under the contract and to foreclose a mechanic's lien on the Santa Ana lot. The trial court, sitting without a jury, found that Bristol's obligation to make further payment under the contract was conditioned upon the existence of construction loan funds. On the ground that this condition to plaintiff's right to further payment was not satisfied, the court entered judgment for defendants.plaintiff appeals.

The trial court properly admitted evidence extrinsic to the written instrument to determine the circumstances under [865] which the parties contracted and the purpose of the contract. (Code Civ. Proc., 1860; Civ. Code, 1647; see Corbin, The Interpretation of Words and the Parol Evidence Rule, 50 Cornell L.Q. 161.) There is no conflict in that evidence. Bristol contends, however, that an appellate court is compelled to accept any reasonable interpretation of a written instrument adopted by a trial court whether or not extrinsic evidence has been introduced to interpret the instrument and whether or not that evidence, if any, is in conflict. We do not agree with this contention.

Since there has been confusion concerning the rules for appellate review of the interpretation of written instruments (see Estate of Platt, 21 Cal.2d 343, 352 [131 P.2d 825] [concurring opinion]; Estate of Shannon, 231 Cal.App.2d 886, 889-890 [42 Cal.Rptr. 278]), it is appropriate here to define the scope of such review.

[1] The interpretation of a written instrument, even though it involves what might properly be called questions of fact (see Thayer, Preliminary Treatise on Evidence, pp. 202-204), is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. (See Civ. Code, 1635-1661; Code Civ. Proc., 1856-1866.) [2] Extrinsic evidence is "admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible" (Coast Bank v. Minderhout, 61 Cal.2d 311, 315 [38 Cal.Rptr. 505, 392 P.2d 265]; Nofziger v. Holman, 61 Cal.2d 526, 528 [39 Cal.Rptr. 384, 393 P.2d 696]; Imbach v. Schultz, 58 Cal.2d 858, 860 [27 Cal.Rptr. 160, 377 P.2d 272]), and it is the instrument itself that must be given effect. (Civ. Code, 1638, 1639; Code Civ. Proc., 1856.) [3] It is therefore solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence. [4] Accordingly, "An appellate court is not bound by a construction of the contract based solely upon the terms of the written instrument without the aid of evidence [citations], where there is no conflict in the evidence [citations], or a determination has been made upon incompetent evidence [citation]." (Estate of Platt, 21 Cal.2d 343, 352 [131 P.2d 825]. Accord, Moore v. Wood, 26 Cal.2d 621, 629-630 [160 P.2d 772]; Western Coal & Mining Co. v. Jones, 27 Cal.2d 819, 826-827 [167 P.2d 719, 164 A.L.R. 685]; Estate of [866] Wunderle, 30 Cal.2d 274, 280 [181 P.2d 874]; Estate of Fleming, 31 Cal.2d 514, 523 [190 P.2d 611]; Meyer v. State Board of Equalization, 42 Cal.2d 376, 381 [267 P.2d 257].) ^[685]

[5] It is true that cases have said that even in the absence of extrinsic evidence the trial court's interpretation of a written instrument must be accepted "if such interpretation is reasonable, or if [it] is one of two or more reasonable constructions of the instrument" (Prickett v. Royal Ins. Co., 56 Cal.2d 234, 237 [14 Cal.Rptr. 675, 363 P.2d 907, 86 A.L.R.2d 711]; Lundin v. Hallmark Productions, Inc. 161 Cal.App.2d 698, 701 [327 P.2d 166]), or if it is "equally tenable" with the appellate court's interpretation (Estate of Northcutt, 16 Cal.2d 683, 690 [107 P.2d 607]; accord, Estate of Cuneo, 60 Cal.2d 196, 201 [32 Cal.Rptr. 409, 384 P.2d 1]). Such statements are not in conflict with Estate of Platt, supra, 21 Cal.2d 343, if they are interpreted, as they should be, to mean only that an appellate court must determine that the trial court's interpretation is erroneous before it may properly reverse a judgment. (See Estate of Shannon, 231 Cal.App.2d 886, 893 [42 Cal.Rptr. 278].) They do not mean that the appellate court is absolved of its duty to interpret the instrument.

Since there is no conflict in the extrinsic evidence in the present case we must make an independent determination of the meaning of the contract. After providing for payment of an estimated 25 per cent of plaintiff's fee upon written notice to proceed with phase two, paragraph 4 of the contract makes the following provisions for payment: [867]

"4. ..."

"(a) ..."

"(b) Upon completion of final working plans, specifications and engineering, or authorized commencement of construction, whichever is later, a sum equal to Seventy-Five (75%) Per Cent of the fee for services in Phase 2, less all previous payments made on account of fee; provided, however, that this payment shall be made only from construction loan funds."

"(c) The balance of the fee shall be paid in equal monthly payments commencing with the first day of the month following payments as set forth in Paragraph 4(b); provided, however, that Ten (10%) Per Cent of the fee based upon the reasonable estimated cost of construction shall be withheld until thirty (30) days after the Notice of Completion of the project has been filed."

"(d) If any work designed or specified by the Architect is abandoned of [sic] suspended in whole or in part, the Architect is to be paid forthwith to the extent that his services have been rendered under the preceding terms of this paragraph. Should such abandonment or suspension occur before the Architect has completed any particular phase of the work which entitles him to a partial payment as aforesaid, the Architect's fee shall be prorated based upon the percentage of the work completed under that particular phase and shall be payable forthwith."

[6] Invoking the provision that "payment shall be made only from construction loan funds," Bristol contends that since such funds were not obtained it is obligated to pay plaintiff no more than he has already received under the contract.

Plaintiff, on the other hand, contends that he performed 95 per cent of his work on phase two and is entitled to that portion of his fee under subdivision (d) of paragraph 4 less the previous payment he received. He contends that subdivision (d) is a "savings clause" designed to secure partial payment if, for any reason, including the lack of funds, the project was abandoned or suspended.plaintiff would limit the construction loan condition to subdivision (b), for it provides "that this payment shall be made only from construction loan funds" (emphasis added), whereas the other subdivisions are not expressly so conditioned.

The construction loan condition, however, cannot reasonably be limited to subdivision (b), for subdivisions (c) and [868] (d) both refer to the terms of subdivision (b) and must therefore be interpreted with reference to those terms. Thus, the "balance of the fee" payable "in equal monthly payments" under subdivision (c) necessarily refers to the preceding subdivisions of paragraph 4. ^[686] In the absence of evidence to the contrary, subdivision (d), upon which plaintiff relies, must likewise be interpreted to incorporate the construction loan condition (Civ. Code, 1641), for it makes explicit reference to payment under preceding subdivisions by language such as "under the preceding terms" and "partial payment as aforesaid." Subdivision (d) merely provides for accelerated payment upon the happening of a contingency. It contemplates, however, that construction shall have begun, for it provides for prorated payment upon the abandonment or suspension in whole or in part of "any work designed or specified by the Architect." Implicit in the scheme is the purpose to provide, after initial payments, for a series of payments from construction loan funds, with accelerated payment from such funds in the event that construction was abandoned or suspended. Although plaintiff was guaranteed an estimated 25 per cent of his fee if the project was frustrated before construction, further payment was contemplated only upon the commencement of construction. This interpretation is supported by evidence that plaintiff knew that Bristol's ability to undertake construction turned upon the availability of loan funds. Accordingly, the trial court properly determined that payments beyond an estimated 25 per cent of plaintiff's fee for phase two were to be made only from construction loan funds.

[7] When "payment of money is to be made from a specific fund, and not otherwise, the failure of such fund will defeat the right of recovery." (Rains v. Arnett, 189 Cal.App.2d 337, 347 [11 Cal.Rptr. 299].) Although there are exceptions to this rule, plaintiff has neither alleged nor proved facts that entitle him to recover on the ground of any exception.

[8] Each party to a contract has a duty to do what the contract presupposes he will do to accomplish its purpose. (Bewick v. Mecham, 26 Cal.2d 92, 99 [156 P.2d 757, 157 A.L.R. 1277].) [9] Thus, "A party who prevents fulfillment of a condition of his own obligation ... cannot rely [869] on such condition to defeat his liability." (Bewick v. Mecham, supra, 26 Cal.2d at p. 99; Pacific Venture Corp. v. Huey, 15 Cal.2d 711, 717 [104 P.2d 641].)plaintiff, however, has not shown that Bristol failed to make the proper and reasonable efforts that were contemplated to secure the loan from which he was to be paid. (Cf. Rosenheim v. Howze, 179 Cal. 309 [176 P. 456].) The risk that a loan might not be obtained even though Bristol acted properly and in good faith was a risk clearly anticipated even though the reason the loan failed may not have been foreseen.

[10] Nor has plaintiff established grounds for applying the doctrine of equitable estoppel to deny Bristol the right to invoke the construction loan condition. (See Code Civ. Proc., 1962, subd. 3.) If, by its letter of March 14, asking plaintiff to proceed with his work under phase two of the contract, Bristol had induced plaintiff to believe that funds had been obtained, and if plaintiff had reasonably relied upon such representation, Bristol could not invoke the condition to defeat its contractual liability. Reasonable reliance resulting in a foreseeable prejudicial change in position is the essence of equitable estoppel, and therefore a compelling basis for preventing a party from invoking a condition that he represented as being satisfied. (See Crestline Mobile Homes Mfg. Co. v. Pacific Finance Corp., 54 Cal.2d 773, 778-781 [8 Cal.Rptr. 448, 356 P.2d 192]; cf. Drennan v. Star Paving Co., 51 Cal.2d 409, 414-415 [333 P.2d 757].) Bristol, however, did not represent that funds had been obtained, and plaintiff did not reasonably rely upon the existence of construction loan funds when he undertook work under phase two of the contract. A representative of Bristol told plaintiff before he began phase two of his work that although Bristol would be able to pay plaintiff $12,000, an estimated 25 per cent of his fee, "they would not be able to proceed unless actual construction funds were obtained."plaintiff, knowing that funds had not been obtained, nevertheless chose to proceed with his work on the project.

[11] Finally, plaintiff has not shown that Bristol breached the duty to give him notice when it became clear that construction funds could not be obtained. Without such funds the purpose of the contract would have been frustrated and plaintiff could not have been paid the balance of his fee.plaintiff therefore would have been excused from performing so long as there was a reasonable doubt as to his compensation. Whether or not such funds were obtained was a matter [870] peculiarly within Bristol's knowledge. Accordingly, Bristol had a duty to notify plaintiff that the project was imperiled when Freeman filed his action against Bristol on May 23, for Bristol then knew or should have known that it would be unable to obtain a loan.plaintiff, however, has not shown that he failed to receive such notice, and even if it is assumed that he had no notice, he did not prove the extent to which he suffered damages by continuing to work after he should have received notice.

The judgment is affirmed.

McComb, J., Peters, J., Tobriner, J., Peek, J., Mosk, J., and Burke, J., concurred.

[684] 1. Freeman had previously conveyed the Santa Ana lot to Bristol on October 1, 1960, with the understanding that Bristol would construct an office building upon the lot and pay Freeman an annuity.

[685] 2. We disapprove language in Estate of Rule, 25 Cal.2d 1, 11 [152 P.2d 1003, 155 A.L.R. 1319], to the effect that an appellate court must accept a trial court's interpretation of a written instrument when "conflicting inferences may be drawn" from extrinsic evidence. The rule of Estate of Platt, 21 Cal.2d 343, 352 [131 P.2d 825], and the cases applying it make it clear that it is only when conflicting inferences arise from conflicting evidence, not from uncontroverted evidence, that the trial court's resolution is binding. "The very possibility of ... conflicting inferences, actually conflicting interpretations, far from relieving the appellate court of the responsibility of interpretation, signalizes the necessity of its assuming that responsibility." (Estate of Rule, supra, 25 Cal.2d at p. 17 [dissenting opinion].) Language in E. K. Wood Lumber Co. v. Higgins, 54 Cal.2d 91, 94 [4 Cal.Rptr. 523, 351 P.2d 795]; Faus v. Pacific Electric Ry. Co., 146 Cal.App.2d 370, 375 [303 P.2d 814]; Overton v. Vita-Food Corp., 94 Cal.App.2d 367, 370 [210 P.2d 757], invoking Estate of Rule, is likewise disapproved. A similar statement concerning conflicting inferences from uncontroverted evidence in Estate of Jones, 55 Cal.2d 531, 538 [11 Cal.Rptr. 574, 360 P.2d 70], is also disapproved. The cases cited in support of such a rule by the Jones case did not involve the interpretation of written instruments.

[686] 3. Although neither the amount of each monthly payment nor the number of payments was specified, the amount and number could be determined from the time estimated to construct the building.

Action by Jacob & Youngs, Incorporated, against George E. Kent. From an order of the Appellate Division (187 App. Div. 100,175 N. Y. Supp. 281), reversing judgment for defendant entered on verdict directed by the court and granting new trial, defendant appeals.

Order affirmed and judgment absolute directed in favor of plaintiff.

McLaughlin, Pound, and Andrews, JJ., dissenting. [890]
[230 N.Y. 239]Appeal from Supreme Court, Appellate Division, First department.
[230 N.Y. 240]Henry W. Hardon, of New York City, for appellant.

Frederick Hulse and Cornelius J. Sullivan, Jr., both of New York City, for respondent.

CARDOZO, J.

The plaintiff built a country residence for the defendant at a cost of upwards of $77,000, and now sues to recover a balance of $3,483.46, remaining unpaid. The work of construction ceased in June, 1914, and the defendant then began to occupy the dwelling. There was no complaint of defective performance until March, 1915. One of the specifications for the plumbing work provides that--

‘All wrought-iron pipe must be well galvanized, lap welded pipe of the grade known as ‘standard pipe’ of Reading manufacture.'

The defendant learned in March, 1915, that some of the pipe, instead of being made in Reading, was the product of other factories. The plaintiff was accordingly directed by the architect to do the work anew. The plumbing was then encased within the walls except in a few places where it had to be exposed. Obedience to the order meant more than the substitution of other pipe. It meant the demolition at great expense of substantial parts of [230 N.Y. 241]the completed structure. The plaintiff left the work untouched, and asked for a certificate that the final payment was due. Refusal of the certificate was followed by this suit.

The evidence sustains a finding that the omission of the prescribed brand of pipe was neither fraudulent nor willful. It was the result of the oversight and inattention of the plaintiff's subcontractor. Reading pipe is distinguished from Cohoes pipe and other brands only by the name of the manufacturer stamped upon it at intervals of between six and seven feet. Even the defendant's architect, though he inspected the pipe upon arrival, failed to notice the discrepancy. The plaintiff tried to show that the brands installed, though made by other manufacturers, were the same in quality, in appearance, in market value, and in cost as the brand stated in the contract-that they were, indeed, the same thing, though manufactured in another place. The evidence was excluded, and a verdict directed for the defendant. The Appellate Division reversed, and granted a new trial.

[1] We think the evidence, if admitted, would have supplied some basis for the inference that the defect was insignificant in its relation to the project. The courts never say that one who makes a contract fills the measure of his duty by less than full performance. They do say, however, that an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of a condition to be followed by a forfeiture. Spence v. Ham, 163 N. Y. 220, 57 N. E. 412,51 L. R. A. 238; Woodward v. Fuller, 80 N. Y. 312; Glacius v. Black, 67 N. Y. 563, 566;Bowen v. Kimbell, 203 Mass. 364, 370, 89 N. E. 542,133 Am. St. Rep. 302. The distinction is akin to that between dependent and independent promises, or between promises and conditions. Anson on Contracts (Corbin's Ed.) § 367; 2 Williston on Contracts, § 842. Some promises are so plainly independent that they can never [230 N.Y. 242]by fair construction be conditions of one another. Rosenthal Paper Co. v. Nat. Folding Box & Paper Co., 226 N. Y. 313, 123 N. E. 766;Bogardus v. N. Y. Life Ins. Co., 101 N. Y. 328, 4 N. E. 522. Others are so plainly dependent that they must always be conditions. Others, though dependent and thus conditions when there is departure in point of substance, will be viewed as independent and collateral when the departure is insignificant. 2 Williston on Contracts, §§ 841, 842; Eastern Forge Co. v. Corbin, 182 Mass. 590, 592, 66 N. E. 419; Robinson v. Mollett, L. R., 7 Eng. & Ir. App. 802, 814; Miller v. Benjamin, 142 N. Y. 613, 37 N. E. 631. Considerations partly of justice and partly of presumable intention are to tell us whether this or that promise shall be placed in one class or in another. The simple and the uniform will call for different remedies from the multifarious and the intricate. The margin of departure within the range of normal expectation upon a sale of common chattels will vary from the margin to be expected upon a contract for the construction of a mansion or a ‘skyscraper.’ There will be harshness sometimes and oppression in the implication of a condition when the thing upon which labor has been expended is incapable of surrender because united to the land, and equity and reason in the implication of a like condition when the subject-matter, if defective, is in shape to be returned. From the conclusion that promises may not be treated as dependent to the extent of their uttermost minutiae without a sacrifice of justice, the progress is a short one to the conclusion that they may not be so treated without a perversion of intention. Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable. If something else is in view, it must not be left to implication. There will be no assumption of a purpose to visit venial faults with oppressive retribution.

Those who think more of symmetry and logic in the development of legal rules than of practical adaptation to the attainment of a just result will be troubled by a classification[230 N.Y. 243]where the lines of division are so wavering and blurred. Something, doubtless, may be said on the score of consistency and certainty in favor of a stricter standard. The courts have balanced such considerations against those of equity and fairness, and found the latter to be the weightier. The decisions in this state commit us to the liberal view, which is making its way, nowadays, in jurisdictions slow to welcome it. Dakin & Co. v. Lee, 1916, 1 K. B. 566, 579. Where the line is to be drawn between the important and the trivial cannot be settled by a formula. ‘In the nature of the case precise boundaries are impossible.’ 2 Williston on Contracts, § 841. The same omission may take on one aspect or another according to its setting. Substitution of equivalents may not have the same significance in fields of art on the one side and in those of mere utility on the other. Nowhere will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract. Crouch v. Gutmann, 134 N. Y. 45, 51,31 N. E. 271,30 Am. St. Rep. 608. There is no general license to install whatever, in the builder's judgment, may be regarded as ‘just as good.’ Easthampton L. & C. Co., Ltd., v. Worthington, 186 N. Y. 407, 412,79 N. E. 323. The question is one of degree, to be answered, if there is doubt, by the triers of the facts (Crouch v. Gutmann; Woodward v. Fuller, supra), and, if the inferences are certain, by the judges of the law (Easthampton L. & C. Co., Ltd., v. Worthington, supra). We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence. Then only can we tell whether literal fulfillment is to be implied by law as a condition. This is not to say that the parties are not free by apt and certain words to effectuate a purpose that performance of every term shall be a condition of recovery. That question is not here. This is merely to say that the law will be slow to impute the purpose, in the silence of the parties, where the significance [230 N.Y. 244]of the default is grievously out of proportion to the oppression of the forfeiture. The willful transgressor must accept the penalty of his transgression. Schultze v. Goodstein, 180 N. Y. 248, 251,73 N. E. 21;Desmond-Dunne Co. v. Friedman-Doscher Co., 162 N. Y. 486, 490,56 N. E. 995. For him there is no occasion to mitigate the rigor of implied conditions. The transgressor whose default is unintentional and trivial may hope for mercy if he will offer atonement for his wrong. Spence v. Ham, supra.

[2] In the circumstances of this case, we think the measure of the allowance is not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing. Some of the exposed sections might perhaps have been replaced at moderate expense. The defendant did not limit his demand to them, but treated the plumbing as a unit to be corrected from cellar to roof. In point of fact, the plaintiff never reached the stage at which evidence of the extent of the allowance became necessary. The trial court had excluded evidence that the defect was unsubstantial, and in view of that ruling there was no occasion for the plaintiff to go farther with an offer of proof. We think, however, that the offer, if it had been made, would not of necessity have been defective because directed to difference in value. It is true that in most cases the cost of replacement is the measure. Spence v. Ham, supra. The owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value. Specifications call, let us say, for a foundation built of granite quarried in Vermont. On the completion of the building, the owner learns that through the blunder of a subcontractor part of the foundation has been built of granite of the same quality quarried in New Hampshire. The measure of allowance is not the cost of reconstruction. ‘There may be [230 N.Y. 245]omissions of that which could not afterwards be supplied exactly as called for by the contract without taking down the building to its foundations, and at the same time the omission may not affect the value of the building for use or otherwise, except so slightly as to be hardly appreciable.’ Handy v. Bliss, 204 Mass. 513, 519, 90 N. E. 864,134 Am. St. Rep. 673. Cf. Foeller v. Heintz, 137 Wis. 169, 178, 118 N. W. 543,24 L. R. A. (N. S.) 321; [892] Oberlies v. Bullinger, 132 N. Y. 598, 601,30 N. E. 999; 2 Williston on Contracts, § 805, p. 1541. The rule that gives a remedy in cases of substantial performance with compensation for defects of trivial or inappreciable importance has been developed by the courts as an instrument of justice. The measure of the allowance must be shaped to the same end.

The order should be affirmed, and judgment absolute directed in favor of the plaintiff upon the stipulation, with costs in all courts.

McLAUGHLIN, J.

I dissent. The plaintiff did not perform its contract. Its failure to do so was either intentional or due to gross neglect which, under the uncontradicted facts, amounted to the same thing, nor did it make any proof of the cost of compliance, where compliance was possible.

Under its contract it obligated itself to use in the plumbing only pipe (between 2,000 and 2,500 feet) made by the Reading Manufacturing Company. The first pipe delivered was about 1,000 feet and the plaintiff's superintendent then called the attention of the foreman of the subcontractor, who was doing the plumbing, to the fact that the specifications annexed to the contract required all pipe used in the plumbing to be of the Reading Manufacturing Company. They then examined it for the purpose of ascertaining whether this delivery was of that manufacture and found it was. Thereafter, as pipe was required in the progress of the work, the foreman of the subcontractor would leave word at its [230 N.Y. 246]shop that he wanted a specified number of feet of pipe, without in any way indicating of what manufacture. Pipe would thereafter be delivered and installed in the building, without any examination whatever. Indeed, no examination, so far as appears, was made by the plaintiff, the subcontractor, defendant's architect, or any one else, of any of the pipe except the first delivery, until after the building had been completed. Plaintiff's architect then refused to give the certificate of completion, upon which the final payment depended, because all of the pipe used in the plumbing was not of the kind called for by the contract. After such refusal, the subcontractor removed the covering or insulation from about 900 feet of pipe which was exposed in the basement, cellar, and attic, and all but 70 feet was found to have been manufactured, not by the Reading Company, but by other manufacturers, some by the Cohoes Rolling Mill Company, some by the National Steel Works, some by the South Chester Tubing Company, and some which bore no manufacturer's mark at all. The balance of the pipe had been so installed in the building that an inspection of it could not be had without demolishing, in part at least, the building itself.

I am of the opinion the trial court was right in directing a verdict for the defendant. The plaintiff agreed that all the pipe used should be of the Reading Manufacturing Company. Only about two-fifths of it, so far as appears, was of that kind. If more were used, then the burden of proving that fact was upon the plaintiff, which it could easily have done, since it knew where the pipe was obtained. The question of substantial performance of a contract of the character of the one under consideration depends in no small degree upon the good faith of the contractor. If the plaintiff had intended to, and had, complied with the terms of the contract except as to minor omissions, due to inadvertence, then he might be allowed to recover the contract price, less the amount [230 N.Y. 247]necessary to fully compensate the defendant for damages caused by such omissions. Woodward v. Fuller, 80 N. Y. 312; Nolan v. Whitney, 88 N. Y. 648. But that is not this case. It installed between 2,000 and 2,500 feet of pipe, of which only 1,000 feet at most complied with the contract. No explanation was given why pipe called for by the contract was not used, nor that any effort made to show what it would cost to remove the pipe of other manufacturers and install that of the Reading Manufacturing Company. The defendant had a right to contract for what he wanted. He had a right before making payment to get what the contract called for. It is no answer to this suggestion to say that the pipe put in was just as good as that made by the Reading Manufacturing Company, or that the difference in value between such pipe and the pipe made by the Reading Manufacturing Company would be either ‘nominal or nothing.’ Defendant contracted for pipe made by the Reading Manufacturing Company. What his reason was for requiring this kind of pipe is of no importance. He wanted that and was entitled to it. It may have been a mere whim on his part, but even so, he had a right to this kind of pipe, regardless of whether some other kind, according to the opinion of the contractor or experts, would have been ‘just as good, better, or done just as well.’ He agreed to pay only upon condition that the pipe installed were made by that company and he ought not to be compelled to pay unless that condition be performed. Schultze v. Goodstein, 180 N. Y. 248, 73 N. E. 21; Spence v. Ham, supra; Steel S. & E. C. Co. v. Stock, 225 N. Y. 173, 121 N. E. 786;Van Clief v. Van Vechten, 130 N. Y. 571, 29 N. E. 1017;Glacius v. Black, 50 N. Y. 145, 10 Am. Rep. 449;Smith v. Brady, 17 N. Y. 173, and authorities cited on [893] page 185, 72 Am. Dec. 442. The rule, therefore, of substantial performance, with damages for unsubstantial omissions, has no application. Crouch v. Gutmann, 134 N. Y. 45, 31 N. E. 271,30 Am. St. Rep. 608;Spence v. Ham, 163 N. Y. 220, 57 N. E. 412,51 L. R. A. 238.

[230 N.Y. 248]What was said by this court in Smith v. Brady, supra, is quite applicable here:

‘I suppose it will be conceded that every one has a right to build his house, his cottage or his store after such a model and in such style as shall best accord with his notions of utility or be most agreeable to his fancy. The specifications of the contract become the law between the parties until voluntarily changed. If the owner prefers a plain and simple Doric column, and has so provided in the agreement, the contractor has no right to put in its place the more costly and elegant Corinthian. If the owner, having regard to strength and durability, has contracted for walls of specified materials to be laid in a particular manner, or for a given number of joists and beams, the builder has no right to substitute his own judgment or that of others. Having departed from the agreement, if performance has not been waived by the other party, the law will not allow him to allege that he has made as good a building as the one he engaged to erect. He can demand payment only upon and according to the terms of his contract, and if the conditions on which payment is due have not been performed, then the right to demand it does not exist. To hold a different doctrine would be simply to make another contract, and would be giving to parties an encouragement to violate their engagements, which the just policy of the law does not permit.’ (17 N. Y. 186, 72 Am. Dec. 422).

I am of the opinion the trial court did not err in ruling on the admission of evidence or in directing a verdict for the defendant.

For the foregoing reasons I think the judgment of the Appellate Division should be reversed and the judgment of the Trial Term affirmed.

HISCOCK, C. J., and HOGAN and CRANE, JJ., concur with CARDOZO, J.

POUND and ANDREWS, JJ., concur with McLAUGHLIN, J.

Order affirmed, etc.

Edgar R. Bain, Lellington, N. C., and Holt Felmet, Angier, N. C., for appellants.

Jack Crawley, Asst. U. S. Atty., Raleigh, N. C. (Thomas P. McNamara, U. S. Atty., and Joseph W. Dean, Asst. U. S. Atty., Raleigh, N. C., on brief), for appellee.

Before RUSSELL, FIELD and WIDENER, Circuit Judges.

WIDENER, Circuit Judge:

Plaintiff-appellants sued to recover for losses to their 1973 tobacco crop due to alleged rain damage. The crops were insured by defendant-appellee, Federal Crop [696] Insurance Corporation (FCIC). Suits were brought in a state court in North Carolina and removed to the United States District Court. The three suits are not distinguishable factually so far as we are concerned here and involve identical questions of law. They were combined for disposition in the district court and for appeal. The district court granted summary judgment for the defendant and dismissed all three actions. We remand for further proceedings. Since we find for the plaintiffs as to the construction of the policy, we express no opinion on the procedural questions.

Federal Crop Insurance Corporation, an agency of the United States, in 1973, issued three policies to the Howards, insuring their tobacco crops, to be grown on six farms, against weather damage and other hazards.

The Howards (plaintiffs) established production of tobacco on their acreage, and have alleged that their 1973 crop was extensively damaged by heavy rains, resulting in a gross loss to the three plaintiffs in excess of $35,000. The plaintiffs harvested and sold the depleted crop and timely filed notice and proof of loss with FCIC, but, prior to inspection by the adjuster for FCIC, the Howards had either plowed or disked under the tobacco fields in question to prepare the same for sowing a cover crop of rye to preserve the soil. When the FCIC adjuster later inspected the fields, he found the stalks had been largely obscured or obliterated by plowing or disking and denied the claims, apparently on the ground that the plaintiffs had violated a portion of the policy which provides that the stalks on any acreage with respect to which a loss is claimed shall not be destroyed until the corporation makes an inspection.

The holding of the district court is best capsuled in its own words:

"The inquiry here is whether compliance by the insureds with this provision of the policy was a condition precedent to the recovery. The court concludes that it was and that the failure of the insureds to comply worked a forfeiture of benefits for the alleged loss."^[1]

There is no question but that apparently after notice of loss was given to defendant, but before inspection by the adjuster, plaintiffs plowed under the tobacco stalks and sowed some of the land with a cover crop, rye. The question is whether, under paragraph 5(f) of the tobacco endorsement to the policy of insurance, the act of plowing under the tobacco stalks forfeits the coverage of the policy. Paragraph 5 of the tobacco endorsement is entitled Claims. Pertinent to this case are subparagraphs 5(b) and 5(f), which are as follows:

"5(b) It shall be a condition precedent to the payment of any loss that the insured establish the production of the insured crop on a unit and that such loss has been directly caused by one or more of the hazards insured against during the insurance period for the crop year for which the loss is claimed, and furnish any other information regarding the manner and extent of loss as may be required by the Corporation. (Emphasis added)"

"5(f) The tobacco stalks on any acreage of tobacco of types 11a, 11b, 12, 13, or 14 with respect to which a loss is claimed shall not be destroyed until the Corporation makes an inspection. (Emphasis added)"

The arguments of both parties are predicated upon the same two assumptions. First, if subparagraph 5(f) creates a condition precedent, its violation caused a forfeiture of plaintiffs' coverage. Second, if subparagraph 5(f) creates an obligation (variously called a promise or covenant) upon plaintiffs not to plow under the tobacco stalks, defendant may recover from plaintiffs (either in an original action, or, in this case, by a counterclaim, or as a matter of defense) for whatever damage it sustained [697] because of the elimination of the stalks. However, a violation of subparagraph 5(f) would not, under the second premise, standing alone, cause a forfeiture of the policy.

Generally accepted law provides us with guidelines here. There is a general legal policy opposed to forfeitures. United States v. One Ford Coach, 307 U.S. 219, 226, 59 S.Ct. 861, 83 L.Ed. 1249 (1939); Baca v. Commissioner of Internal Revenue, 326 F.2d 189, 191 (5th Cir. 1963). Insurance policies are generally construed most strongly against the insurer. Henderson v. Hartford Accident & Indemnity Co., 268 N.C. 129, 150 S.E.2d 17, 19 (1966). When it is doubtful whether words create a promise or a condition precedent, they will be construed as creating a promise. Harris and Harris Const. Co. v. Crain and Denbo, Inc., 256 N.C. 110, 123 S.E.2d 590, 595 (1962). The provisions of a contract will not be construed as conditions precedent in the absence of language plainly requiring such construction. Harris, 123 S.E.2d at 596. And Harris, at 123 S.E.2d 590, 595, cites Jones v. Palace Realty Co., 226 N.C. 303, 37 S.E.2d 906 (1946), and Restatement of the Law, Contracts, § 261.

Plaintiffs rely most strongly upon the fact that the term "condition precedent" is included in subparagraph 5(b) but not in subparagraph 5(f). It is true that whether a contract provision is construed as a condition or an obligation does not depend entirely upon whether the word "condition" is expressly used. Appleman, Insurance Law and Practice (1972), vol. 6A, § 4144. However, the persuasive force of plaintiffs' argument in this case is found in the use of the term "condition precedent" in subparagraph 5(b) but not in subparagraph 5(f). Thus, it is argued that the ancient maxim to be applied is that the expression of one thing is the exclusion of another.

The defendant places principal reliance upon the decision of this court in Fidelity-Phenix Fire Insurance Company v. Pilot Freight Carriers, 193 F.2d 812, 31 A.L.R.2d 839 (4th Cir. 1952). Suit there was predicated upon a loss resulting from theft out of a truck covered by defendant's policy protecting plaintiff from such a loss. The insurance company defended upon the grounds that the plaintiff had left the truck unattended without the alarm system being on. The policy contained six paragraphs limiting coverage. Two of those imposed what was called a "condition precedent." They largely related to the installation of specified safety equipment. Several others, including paragraph 5, pertinent in that case, started with the phrase, "It is further warranted." In paragraph 5, the insured warranted that the alarm system would be on whenever the vehicle was left unattended. Paragraph 6 starts with the language: "The assured agrees, by acceptance of this policy, that the foregoing conditions precedent relate to matters material to the acceptance of the risk by the insurer." Plaintiff recovered in the district court, but judgment on its behalf was reversed because of a breach of warranty of paragraph 5, the truck had been left unattended with the alarm off. In that case, plaintiff relied upon the fact that the words "condition precedent" were used in some of the paragraphs but the word "warranted" was used in the paragraph in issue. In rejecting that contention, this court said that "warranty" and "condition precedent" are often used interchangeably to create a condition of the insured's promise, and "[m]anifestly the terms `condition precedent' and `warranty' were intended to have the same meaning and effect." 193 F.2d at 816.

Fidelity-Phenix thus does not support defendant's contention here. Although there is some resemblance between the two cases, analysis shows that the issues are actually entirely different. Unlike the case at bar, each paragraph in Fidelity-Phenix contained either the term "condition precedent" or the term "warranted." We held that, in that situation, the two terms had the same effect in that they both involved forfeiture. That is well established law. See Appleman, Insurance Law and Practice (1972), vol. 6A, § 4144. In the case at bar, the term "warranty" or "warranted" is in no way involved, either in terms or by way of like language, as it was in Fidelity-Phenix. The issue upon which this case [698] turns, then, was not involved in Fidelity-Phenix.

The Restatement of the Law of Contracts states:

"§ 261. INTERPRETATION OF DOUBTFUL WORDS AS PROMISE OR CONDITION.

Where it is doubtful whether words create a promise or an express condition, they are interpreted as creating a promise; but the same words may sometimes mean that one party promises a performance and that the other party's promise is conditional on that performance."

Two illustrations (one involving a promise, the other a condition) are used in the Restatement:

"2. A, an insurance company, issues to B a policy of insurance containing promises by A that are in terms conditional on the happening of certain events. The policy contains this clause: `provided, in case differences shall arise touching any loss, the matter shall be submitted to impartial arbitrators, whose award shall be binding on the parties.' This is a promise to arbitrate and does not make an award a condition precedent of the insurer's duty to pay.

3. A, an insurance company, issues to B an insurance policy in usual form containing this clause: `In the event of disagreement as to the amount of loss it shall be ascertained by two appraisers and an umpire. The loss shall not be payable until 60 days after the award of the appraisers when such an appraisal is required.' This provision is not merely a promise to arbitrate differences but makes an award a condition of the insurer's duty to pay in case of disagreement." (Emphasis added)

We believe that subparagraph 5(f) in the policy here under consideration fits illustration 2 rather than illustration 3. Illustration 2 specifies something to be done, whereas subparagraph 5(f) specifies something not to be done. Unlike illustration 3, subparagraph 5(f) does not state any conditions under which the insurance shall "not be payable," or use any words of like import. We hold that the district court erroneously held, on the motion for summary judgment, that subparagraph 5(f) established a condition precedent to plaintiffs' recovery which forfeited the coverage.^[2]

From our holding that defendant's motion for summary judgment was improperly allowed, it does not follow the plaintiffs' motion for summary judgment should have been granted, for if subparagraph 5(f) be not construed as a condition precedent, there are other questions of fact to be determined.^[3] At this point, we merely hold that the district court erred in holding, on the motion for summary judgment, that subparagraph 5(f) constituted a condition precedent with resulting forfeiture.

The explanation defendant makes for including subparagraph 5(f) in the tobacco endorsement is that it is necessary that the stalks remain standing in order for the Corporation to evaluate the extent of loss and [699] to determine whether loss resulted from some cause not covered by the policy. However, was subparagraph 5(f) inserted because without it the Corporation's opportunities for proof would be more difficult, or because they would be impossible? Plaintiffs point out that the Tobacco Endorsement, with subparagraph 5(f), was adopted in 1970, and crop insurance goes back long before that date. Nothing is shown as to the Corporation's prior 1970 practice of evaluating losses. Such a showing might have a bearing upon establishing defendant's intention in including 5(f). Plaintiffs state, and defendant does not deny, that another division of the Department of Agriculture, or the North Carolina Department, urged that tobacco stalks be cut as soon as possible after harvesting as a means of pest control. Such an explanation might refute the idea that plaintiffs plowed under the stalks for any fraudulent purpose. Could these conflicting directives affect the reasonableness of plaintiffs' interpretation of defendant's prohibition upon plowing under the stalks prior to adjustment?

We express no opinion on these questions because they were not before the district court and are mentioned to us largely by way of argument rather than from the record. No question of ambiguity was raised in the court below or here and no question of the applicability of paragraph 5(c) to this case was alluded to other than in the defendant's pleadings, so we also do not reach those questions. Nothing we say here should preclude FCIC from asserting as a defense that the plowing or disking under of the stalks caused damage to FCIC if, for example, the amount of the loss was thereby made more difficult or impossible to ascertain whether the plowing or disking under was done with bad purpose or innocently. To repeat, our narrow holding is that merely plowing or disking under the stalks does not of itself operate to forfeit coverage under the policy.

The case is remanded for further proceedings not inconsistent with this opinion.

VACATED AND REMANDED.

[1] The district court also relied upon language in subparagraph 5(b), infra, which required as a condition precedent to payment that the insured, in addition to establishing his production and loss from an insured case, "furnish any other information regarding the manner and extent of loss as may be required by the Corporation." The court construed the preservation of the stalks as such "information." We see no language in the policy or connection in the record to indicate this is the case.

[2] The district court also referred to subparagraph 5(f) as a condition subsequent. The difference in terminology is of no consequence here.

[3] Even apart from our interpretation of paragraph 5(f), plaintiffs' motion for summary judgment should not have been allowed. Plaintiffs' notice is predicated upon the assumption that defendant's entire defense was based upon its interpretation of paragraph 5(f). Actually, defendant denied paragraph VII of plaintiffs' complaint, which constituted a denial that plaintiffs suffered loss in the amount claimed; also it alluded to paragraph 5(c) which under certain circumstances may require a total production figure equal to the insurance provided. Plaintiffs' affidavit, which was not denied by a counteraffidavit, does state the amount of loss. Said affidavit does not, however, state facts sufficient to absolutely establish that said loss occurred as a result of a risk covered by the policy or to exclude all other possible defenses. Plaintiffs' assumption that liability was denied solely because of their acts of plowing under the tobacco stalks is apparently based upon the discovery deposition of adjuster Burr. Such a conclusion does not conclusively appear from Burr's deposition. But, even if it does so appear, the defendant would not be bound absolutely by Burr's testimony. Although Burr was an agent of the Corporation, his admission would be no more than evidence and not necessarily conclusive.

 NICHOLS
AND
RAYNBRED.

Hill. 12 Jac. Rot. 131.
[K.B. 1615]

Assumpsit.

Suff. Jenk. Cent. 296. 4 Co. 94. 17.38. Ben. 150. Dy.30.a. Yelv. 134. 4 Leo. 3. 3 Cro. 543. Promise for promise. Post. 106.

Nichols brought an assumpsit against Raynbred, declaring that in consideration, that Nichols promised to deliver the defendant to his own use a cow, the defendant promised to deliver him 50 shillings: adjudged for the plaintiff in both Courts, that the plaintiff need not to aver the delivery of the cow, because it is promise for promise. Note here the promises must be at one instant, for else they will be both nuda pacta.

Kingston
v.
Preston

E. 13 Geo. 3.
Court of King's Bench, 1773.

"It was an action of debt, for non-performance of covenants contained in certain articles of agreement between the plaintiff and the defendant. The declaration stated;—That, by articles made the 24th of March, 1770, the plaintiff, for the considerations therein-after mentioned, covenanted, with the defendant, to serve him for one year and a quarter next ensuing, as a covenant-servant, in his trade of a silk-mercer, at £200 a year, and in consideration of the premises, the defendant covenanted, that at the end of the year and a quarter, he would give up his business of a mercer to the plaintiff, and a nephew of the defendant, or some other person to be nominated. by the defendant, and give up to them his stock in trade, at a fair valuation ; and that, between the young traders, deeds of partnership should be executed for 14 years, and from and immediately after the execution of, the said deeds, the defendant would permit the said young traders to carry on the said business in the [2 Douglas 690] defendant's house.—Then the declaration stated a covenant by the plaintiff, that he would accept the business and stock in trade, at a fair valuation, with the defendant's nephew, or such other person, &c. and execute such deeds of partnership, and, further, that the plaintiff should, and would, at, and before, the sealing and delivery of the deeds, cause and procure good and sufficient security to be given to the defendant, to be approved of by the defendant, for the payment of £250 monthly, to the defendant, in lieu of a moiety of the monthly produce of the stock in trade, until the value of the stock should be reduced to £4000.—Then the plaintiff averred, that he had performed, and been ready to perform, his covenants, and assigned for breach on the part of the defendant, that he had refused to surrender and give up his business, at the end of the said year and a quarter.—The defendant pleaded, 1. That the plaintiff did not offer sufficient security; and, 2. That he did not give sufficient security for the payment of the £250, &c.—And the plaintiff demurred generally to both pleas.—On the part of the plaintiff, the case was argued by Mr. Buller, who contended, that the covenants were mutual and independant, and, therefore, a plea of the breach of one of the covenants to be performed by the plaintiff was no bar to an action for a breach by the defendant of one of which he had bound himself to perform, but that the defendant might have his remedy for the breach by the plaintiff, in a separate action. On the other side, Mr. Grose insisted, that the covenants were dependant in their nature, and, therefore, performance must be alleged: the security to be given for the money, was manifestly the chief object of the transaction, and it would be highly unreasonable to construe the agreement, so as to oblige the defendant to give up a beneficial business, and valuable stock in trade, and trust to the plaintiff's personal security, (who might, and, indeed, was admitted to be worth nothing,) for the performance of his part.

In delivering the judgment of the Court, Lord Mansfield expressed himself to the following effect: There are three kinds of covenants: 1. Such as are called mutual and independant, where either party may recover damages from the other, for the injury he may have received by a breach of the covenants in his favour, and where it is no excuse for the defendant, to allege a breach of the covenants on the part of the plaintiff. 2. There are covenants which are conditions and dependant, in which the [2 Douglas 691] performance of one depends on the prior performance of another, and, therefore, till this prior condition is performed, the other party is not liable to an action on his covenant^[1]. 3. There is also [99 Eng. Rep. 438] a third sort of covenants, which are mutual conditions to be performed at the same time; and, in these, if one party was ready, and offered, to perform his part, and the other neglected, or refused, to perform his, he who was ready, and offered, has fulfilled his engagement, and may maintain an action for the default of the other; though it is not certain that either is obliged to do the first act.—His Lordship then proceeded to say, that the dependance, or independance, of covenants, was to be collected from the evident sense and meaning of the parties^[3], and, that, however transposed they might be in the deed, their precedency must depend on the order of time in which the intent of the transaction requires their performance. That, in the case before the Court, it would be the greatest injustice if the plaintiff should prevail: the essence of the agreement was, that the defendant should not trust to the personal security of the plaintiff, but, before he delivered up his stock and business, should have good security for the payment of the money. The giving such security, therefore, must necessarily be a condition precedent.—Judgment was accordingly given for the defendant, because the part to be performed by the plaintiff was clearly a condition precedent."

[1] Vide Duke of St. Alban's v. Shore, C. B. T. 29 Geo. 3, H. Bl. 270, 279, 280, where a rule laid down in Boone v. Eyre, viz. that where a covenant goes to the whole of the consideration on both sides, it is a condition precedent, was adopted and confirmed^[2].

[2] See Glazebrook v. Woodrow, 8 T. R. 366, acc.: where this case of Kingston v. Preston, is referred to by Grose and Le Blanc, Justices, as a leading authority on the construction of covenants as dependant or independant. The converse of this proposition was also maintained in Campbell v. Jones, 6 T. R. 570, where the covenant sued upon was to pay £500, and the covenant which the defendant relied upon was a covenant that be, the plaintiff, would instruct the defendant in bleaching, and permit him to bleach in the same manner, during the continuance of his (plaintiff's) patent.—Defendant demurred to the declaration, because it did not state that plaintiff had so instructed him; but the Court thought it not a condition precedent.

[3] Acc. per Cur. in Hotham v. E. India Company, 1 T. R. 638. It was there held that a ship owner might recover in covenant against the freighters for short tonnage, notwithstanding a covenant that no such claim should be allowed, unless it should be found upon a survey taken at the end of the voyage, by persons appointed between the parties; of which last covenant no mention was made in the declaration: the Court, considering it in the nature of a defeasance, or condition subsequent, to be shewn by the defendants as matter of defence, if they meant to rely on it. See also Morton v. Lamb, 7 T. R. 125, as to the necessity of averring readiness at least in the declaration, to do the plaintiff's part, (where something is to be done by both parties to a contract at the same time), in order to entitle him to recover against the defendant for not performing his part. But this need not amount to an actual tender to do an act, which the party was not bound to perform, to entitle him to claim performance from the other party. Rawson v. Johnson, 1 East, 203, where the action was for nondelivery of malt at a certain price, on request; and it was held, that an averment that the plaintiff made the request, and was ready and willing to receive and pay for the malt, but that the defendant refused to deliver it, was sufficient, without stating an actual tender of the money.

Present: WILKINS, C.J., ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL, & IRELAND, JJ.

[510] Stephen H. Oleskey (Lisa J. Pirozzolo with him) for the plaintiff.

Saul A. Schapiro (Nina F. Lempert with him) for Boston Redevelopment Authority.

Rory FitzPatrick (Irene C. Freidel & Merita Hopkins with him) for the city of Boston.

FRIED, J.

A jury found the defendants, the city of Boston (city) and the Boston Redevelopment Authority (BRA), liable for monetary damages for having breached a contract with the plaintiff, Lafayette Place Associates (LPA), for the sale of certain land (Hayward Parcel), and the BRA liable for the tort of intentional interference with LPA's contractual relation with another entity, Campeau Massachusetts, Inc. (Campeau). The trial judge entered judgment against the city, and granted judgment notwithstanding the verdict in favor of the BRA, on the ground that it was not amenable to suit for an intentional tort. We conclude that there was a valid contract between the city and LPA but that the city did not breach it. We also affirm the judgment entered in favor of the BRA, and the dismissal of LPA's claims under G. L. c. 93A.

I

This dispute arises out of efforts going back to the administration of Boston Mayor Kevin White in the late 1970's to rehabilitate the "Combat Zone," a dilapidated area adjacent to a shopping area on Washington Street. A grand scheme was devised by LPA's entrepreneurs for the construction of a department store, a retail mall, and a hotel in the area. In 1978, an agreement (Tripartite Agreement) was signed between LPA, the city, and the BRA for the development of the area in two phases. Phase I was to encompass a shopping mall and a hotel and was eventually built.^[2] It is not a subject of these suits. Phase II was to include one or more office buildings, further retail space, and a department store. It was to be built on four parcels of land to be assembled into a single parcel, called the Hayward Parcel, at the time partially occupied by a city parking structure, the Hayward Place parking garage. Whether Phase II would ever be undertaken was made contingent in the Tripartite Agreement on [511] the city's decision to remove the parking structure. If it did, the city would still be allowed to build an underground parking garage on the site with LPA being granted air rights to build over it.

The agreement as to the development of the Hayward Parcel was principally set out in Section 6.02 of the Tripartite Agreement. Section 6.02 is expressed in terms of the grant of an option to LPA to purchase the Hayward Parcel. The option is contingent on notice by the city that it plans to discontinue the Hayward Place garage. By agreement, LPA could thereupon notify the city within the option period if it "desires to purchase the rights hereby made available to it [and] the City shall sell the same...." The Tripartite Agreement and accompanying maps identify the boundaries of the Hayward Parcel, but indicate several alternatives concerning the rights to be conveyed. In the Tripartite Agreement, the city is stated to have in hand appraisals of the fair market value of two of the four component parcels of the Hayward Parcel, and agrees "forthwith" to obtain appraisals of the two remaining parcels.^[3] The price to be paid was to be one-half of the appraised fair market value as of 1978, plus one-half of the increase in value attributable to "the construction of the Public Improvements and the Project."^[4] In other words, the formula accounted for the possibility that between 1978 and the future sale of the Hayward Parcel, the value of the parcel could change as a result of the construction of Phase I on adjacent land. The Tripartite Agreement further provided that "[t]he existence and amount of increase in fair market values attributable to the construction of the Public Improvements and the Project shall be determined by independent appraisal." Section 13.01 of the Tripartite Agreement also provides, after giving a standard definition of fair market value, that such value shall be determined by a procedure, akin to arbitration, by which by giving written notice either party may designate a first appraiser, the other party may designate a second appraiser, and a third appraiser may be appointed by the first and second, by the Chief Judge of the United States District Court [512] for the District of Massachusetts, or by the president of the Boston Bar Association.^[5]

The Tripartite Agreement also provides,

"[t]he Developer may exercise the right and option set forth in this Section 6.02 by giving notice of its desire to purchase such rights to the City at any time within the Option Period. After the receipt of and following such notice from the Developer, the parties shall in good faith negotiate and enter into an agreement calling for the purchase and sale of the rights in question. Such agreement shall be in the customary form of agreements for the purchase and sale of real estate in the greater Boston area except that the agreement shall reflect such reservation and shall contain other appropriate provisions with respect to the integration of construction and other matters relevant to coordinated use of the rights conveyed and the rights retained by the City."

On February 26, 1982, the parties agreed, in what is known as the Second Supplemental Agreement, to certain changes to the Tripartite Agreement concerning the construction and operation of a parking garage by the city under the Hayward Parcel. In addition, the parties amended Section 6.02 by adding the following:

"[I]f the Developer shall exercise the right and option set forth in this Section 6.02, there shall automatically be created an agreement by the Developer to buy and by the City to sell the ... Parcels .... [A]ppropriate details of the purchase and sale shall be worked out by the parties so as to conform to their intent under this Section 6.02., but if they shall be unable to do so then the matter shall be resolved by arbitration in accordance with the arbitration procedure set forth in ARTICLE EIGHT of the Deed and Agreement, dated as of September 11, 1979, between the City and the Developer."

Article 8 of the deed sets out a binding arbitration procedure for [513] the resolution of disputes.^[6] On December 16, 1983, the city gave notice to LPA that it intended to discontinue the Hayward Place garage and build a parking garage beneath the Hayward Parcel, thereby commencing LPA's option period. In that notice, the city listed five contingencies to closing the sale of the Hayward Parcel, including that "the parties are able to agree, via appraisals, on the increased value of parcels D-1, D-2 and D-3, as the result of the construction of the Lafayette Place Project."

On July 2, 1986, as all parties agree, LPA exercised its option to purchase the Hayward Parcel. On October 27, 1987, the parties extended the date on which closing might take place by providing, in what is known as the Third Supplemental Agreement, that:

"Section 6.02 of the Tripartite Agreement is amended by deleting the proviso in the fourth full paragraph thereof... and substituting in its place the following: `provided that, unless the City and the Developer shall agree to a further extension, the Developer shall lose its rights hereunder to proceed with an acquisition if a closing has not occurred by January 1, 1989, unless the City and/or the Authority shall fail to work in good faith with the Developer through the design review process to conclude a closing.'"

By virtue of the Third Supplemental Agreement, LPA had until January 1, 1989, a date which all parties refer to as the "drop dead date," to "proceed with an acquisition."

LPA never demanded and the city never tendered a deed within the required time period or at any other time. The basis of its contract action against the city is that the city in bad faith failed to carry out those of its obligations under the Tripartite Agreement necessary to allow LPA to proceed to demand a closing, and indeed that it engaged in bad faith actions designed to impede LPA in effecting a timely closing. The reason for these obstructionist tactics by the city, as LPA sought to show by testimony and documents, was that the new administration [514] of Mayor Raymond Flynn believed that the price established by the Section 6.02 formula, which was based on 1978 values, was grossly unfair to the city in the light of a strong surge in real estate prices in the intervening years. LPA offered evidence of several instances of what it claimed were the city's obstructionist tactics. These included failing to complete the appraisals necessary to establish the price for the Hayward Parcel, initiating zoning changes that would have greatly reduced the allowable height of the office towers planned for the site, lack of cooperation about determining whether Avenue de Lafayette and New Essex Street would be closed, and threatening to put a new street through the middle of the parcel, which would have made its development economically unviable.

In November, 1987, after the conclusion of the Third Supplemental Agreement but before the final breakdown of dealings in 1989, LPA negotiated the sale of its development rights in the Hayward Parcel to Campeau. LPA was to receive $24.5 million in return for its rights under Phase I of the project. The sale was subject to approval by the BRA, and on December 4, 1987, LPA filed an application for approval. On February 1, 1988, LPA withdrew its application; the BRA had not acted on it in the interim. In March, 1988, LPA entered into a lease agreement with Campeau whereby Campeau assumed LPA's debts under Phase I and was to pay LPA approximately $21.5 million in cash and notes in return for LPA's rights to the project. Under the lease agreement, Campeau agreed to pay LPA additional consideration if the BRA approved the sale of the Hayward Parcel.

Thereafter, LPA was not directly involved in negotiations regarding the sale of the Hayward Parcel. Campeau began elaborate plans for a development called "Boston Crossing," which included construction of a department store and office tower on the Hayward Parcel, the rebuilding of the Phase I mall on its nearby parcel, and the construction of an office tower above a rebuilt Jordan Marsh. During 1988, representatives from Campeau and the BRA met repeatedly to negotiate about Campeau's plans. When it became clear that Campeau could not secure BRA approval for the Boston Crossing project by the expiration of LPA's option period, Campeau requested a further extension of the drop dead date. The BRA refused to extend the January 1, 1989, deadline. On December 19, 1988, Campeau's president sent a letter to Mayor Flynn describing the current [515] state of the project, renewing Campeau's request for an extension of the option period, and informing Mayor Flynn that "we have no recourse but to officially notify the city that we wish to complete the transaction and make payment immediately." On December 30, 1988, Stephen Coyle, director of the BRA, responded. He stated that, "once the development review process is complete, the City's parcel can be sold for its fair reuse value," and noted that "[b]y their own terms, prior agreements on Hayward Place will expire on January 1, 1989. This event does not in our judgment alter our willingness to work with you ... [i]t simply puts the question of the disposition of Hayward Place in a current context."

LPA's option period expired on January 1, 1989. In June, 1989, the BRA approved Campeau's "Boston Crossing" design, but by June, 1990, Campeau had defaulted on its payments to LPA under the lease agreement and LPA terminated its lease with Campeau. Manufacturers Hanover Trust Company, as lender, foreclosed on LPA's and Campeau's interests in the Lafayette Place Mall in February, 1991, and the project collapsed. On March 16, 1992, LPA filed suit against the city and the BRA.^[7] LPA alleged that the city had breached the Tripartite Agreement by failing to work out the necessary details to effect the transfer of the Hayward Parcel after LPA exercised its option to buy, and LPA sought specific performance, or, alternatively, damages for breach of the Tripartite Agreement. LPA also sought damages for breach of the implied covenant of good faith and fair dealing, interference with contractual relations, and violation of G. L. c. 93A.

On October 21, 1994, a jury returned a verdict against the city and the BRA. The jury found that there was a contract for the purchase of the Hayward Parcel, that both the city and the BRA breached the contract, but that the BRA was not acting as an agent of the city in connection with the contract. The jury awarded LPA $9.6 million against the city. The jury also found that the BRA intentionally interfered with contractual relations between LPA and Campeau, and awarded LPA $6.4 million in damages. The trial judge then ruled that the $6.4 million verdict [516] against the BRA was "encompassed" within the $9.6 million award against the city. On August 17, 1995, the judge granted the BRA's motion for judgment notwithstanding the verdict,^[8] ruling that the BRA is a public employer under the Massachusetts Tort Claims Act and is therefore immune from suit for intentional torts. We granted LPA's application for direct appellate review.

II

The city makes two principal arguments in this appeal: that the Tripartite Agreement was too indefinite to constitute a binding contract, and that in any event the city was not in breach. Although the city treats these as quite distinct arguments we believe that they must be considered together to come to a fair and sensible view of the arrangement between the parties and their dealings with each other pursuant to it. There were certainly contingencies left open at the time that the parties concluded the Tripartite Agreement, principally the price to be paid, the treatment of Avenue de Lafayette and New Essex Street, and whether or not the city would choose to build an underground garage on the Hayward Parcel. But these open matters did not preclude the formation of a binding agreement. The parties specified formulae and procedures that would determine a price under the several contingencies. It would be most unfortunate if parties could not make binding, reliable agreements about such complex projects, allowing them to make commitments and seek financing for their conclusion. If the degree of specificity the city claims is necessary were insisted on, no such agreements could be concluded. But it is the other side of this same coin that the procedures necessary to lend specificity to what at the outset is not entirely specific are an integral part of the agreement the parties concluded, and, if a party does not follow those procedures, it should not be able to claim that the other side is in breach of what is necessarily still an open-ended arrangement. We conclude that there was sufficient [517] evidence to find a binding agreement, as the jury indeed did find, but it is also clear, as a matter of law, that LPA failed to follow the steps required of it under the Tripartite Agreement as supplemented to put the city in breach.

A

The first question is whether there was a valid and enforceable contract between LPA and the city or whether, as the city claims, the terms of the Tripartite Agreement as amended were too indefinite to constitute a contract. The Tripartite Agreement states that "the parties shall in good faith negotiate and enter into an agreement," which the city argues indicates that no binding agreement had been concluded. The city points out that Section 6.02 leaves undetermined the contract price and exactly what is to be included in the Hayward Parcel. In some cases, the failure to reduce uncertainties to definite terms is fatal, particularly where parties have not yet formalized their negotiations or have left essential terms completely open. See Mendel Kern, Inc. v. Workshop, Inc., 400 Mass. 277, 280-281 (1987) ("an intention to do something is not necessarily a promise to do it"); Lucey v. Hero Int'l Corp., 361 Mass. 569, 574 (1972) (no option contract for purchase of land where parties merely specified boundaries to be "mutually agreed upon by both parties"); Saxon Theatre Corp. v. Sage, 347 Mass. 662, 666 (1964) (no contract for lease of property where parties merely signed letter of intent that provided no description of the land nor means of determining rent). But see Shayeb v. Holland, 321 Mass. 429, 431 (1947) (enforcing contract despite absence of price term). We adhere to the principle that "[a]n agreement to reach an agreement is a contradiction in terms and imposes no obligation on the parties thereto," Rosenfield v. United States Trust Co., 290 Mass. 210, 217 (1935), in the circumstances that justify and gave rise to it: where parties have merely reached the stage of "imperfect negotiation" prior to formalizing a contract, and have not yet reduced their agreement to terms. Id. When parties have progressed beyond that stage, however, a competing principle applies: a contract should be interpreted "so as to make it a valid and enforceable undertaking rather than one of no force and effect." Shayeb v. Holland, supra at 432. See McMahon v. Monarch Life Ins. Co., 345 Mass. 261, [518] 264 (1962).^[9] Rules of contract must not preclude parties from binding themselves in the face of uncertainty. If parties specify formulae and procedures that, although contingent on future events, provide mechanisms to narrow present uncertainties to rights and obligations, their agreement is binding. See generally Hastings Assocs. v. Local 369 Bldg. Fund, Inc., 42 Mass. App. Ct. 162, 169 (1997) (accepting contract calling for appointment of neutral third party to determine lease price under formula); Cataldo v. Zuckerman, 20 Mass. App. Ct. 731, 737 (1985) (accepting formula for determination of compensation as sufficiently specific to create contract).

The Tripartite Agreement provided a pricing formula to determine the price to be paid for the Hayward Parcel. When the parties signed the Tripartite Agreement, most of the information needed to complete that formula was available. Because the formula incorporated the fair market value of the parcel at the time of the future transaction, which, by definition, was unknown at the time of contracting, Section 13.01 detailed an appraisal procedure to be used for securing that information. By using that procedure, which called for the creation of a threemember appraisal board, the parties could have determined the price to be paid. In addition, the Second Supplemental Agreement states that "if the Developer shall exercise the right and option set forth in Section 6.02, there shall automatically be created an agreement by the Developer to buy and the City to sell" the Hayward Parcel. Moreover, it specified that "appropriate details of the purchase and sale ... shall be resolved by arbitration" in accordance with a specified procedure. Although this provision was not added until 1982, it created a means for resolving disputes that might arise in the course of effecting the ultimate sale of the Hayward Parcel. In particular, questions about the exact size of the parcel and the allocation of air rights over the relevant public streets were the kind of "details" that [519] could be worked out using this process.^[10] To borrow Justice Holmes's metaphor, the machinery was built and had merely to be set in motion. See Drummond v. Crane, 159 Mass. 577, 579 (1893) (a future writing was merely "additional wheel in the machinery" of a contract). See also Sands v. Arruda, 359 Mass. 591, 594 (1971); Coan v. Holbrook, 327 Mass. 221, 224 (1951). We therefore conclude that the Tripartite Agreement, as amended, was an enforceable contract, under which both parties had certain rights and obligations.

B

Because the Tripartite Agreement, as amended, was an enforceable contract, upon LPA's exercise of its option in 1986, there arose a bilateral contract for the purchase and sale of the Hayward Parcel. See American Oil Co. v. Cherubini, 351 Mass. 581, 585 (1967) (exercise of option creates bilateral contract for purchase and sale); C. & W. Dyeing & Cleaning Co. v. DeQuattro, 344 Mass. 739, 741 (1962) (same). See also Blum v. Kenyon, 29 Mass. App. Ct. 417, 420 (1990) (same). The question then becomes whether LPA can, as a matter of law, maintain a claim against the city for breach of that contract. "The general rule is that when performance under a contract is concurrent one party cannot put the other in default unless he is ready, able, and willing to perform and has manifested this by some offer of performance." Leigh v. Rule, 331 Mass. 664, 668 (1954). See 6 Corbin, Contracts § 1258 (1962). Any material failure by a plaintiff to put a defendant in breach bars recovery, see Kanavos v. Hancock Bank & Trust Co., 395 Mass. 199, 202-203 (1985); Pas-Teur, Inc. v. Energy Sciences, Inc., 11 Mass. App. Ct. 967, 968-969 (1981) (citing cases), unless the plaintiff is excused from tender because the other party has shown that he cannot or will not perform. Leigh v. Rule, supra. Even if a potential buyer notifies the seller of the buyer's intention to tender on a certain date and appears at the registry of deeds on that date with the required consideration, there may [520] not be the "readiness to perform" that is a necessary condition of placing the defendant in breach. See Mayer v. Boston Metro. Airport, Inc., 355 Mass. 344, 350-352, 354-355 (1969).

Applying these principles to the facts most favorable to LPA in this case, the question becomes whether LPA, as a matter of law, was ready, able, and willing to close the sale of the Hayward Parcel prior to January 1, 1989, and whether LPA indicated as much to the city.^[11] There is no evidence in the record, and LPA does not now argue, that LPA attempted to tender payment for the Hayward Parcel between July, 1986, when it exercised its option under the Tripartite Agreement, and March, 1988, when it transferred its rights to Campeau. LPA must therefore rely on the possibility that Campeau fulfilled LPA's contractual obligations by tendering payment or demanding the deed. On December 19, 1988, less than two weeks prior to the drop dead date, Campeau informed Mayor Flynn by letter that "we have no recourse but to officially notify the city that we wish to complete the transaction and make payment immediately." This is the best evidence in the record of an attempt to tender payment to force the city to close the sale of the Hayward Parcel.^[12] It is not sufficient. To place a seller in default, a buyer must manifest that he is ready, able, and willing to perform by setting a time and place for passing papers or making some other concrete offer of performance. See Leigh v. Rule, supra at 668; LeBlanc v. Molloy, 335 Mass. 636, 637-638 (1957); Mayer v. Boston Metro. Airport, Inc., supra at 354. Even attributing to [521] LPA Campeau's action in sending the letter to Mayor Flynn (an attribution the city urges us not to make), Campeau's letter does not specify when, where, or how Campeau intends to tender payment, nor does it indicate what Campeau believes the city's obligations were at that point in time.^[13] Compare Fox of Boylston St. Ltd. Partnership v. Mayor of Boston, 418 Mass. 816, 819-820 (1994) (notice letter specified closing date and location); Bucciero v. Drinkwater, 13 Mass. App. Ct. 551, 552-553 (1982) (buyer was ready, willing, and able to perform when he arrived at closing with payment). Campeau provided no suggested purchase price, nor even a suggestion as to when Campeau and the city should meet to resolve the remaining differences. Finally, this single sentence is embedded in a long letter to the mayor sent only weeks prior to the termination of the option period. It was an empty gesture that could not possibly have been acted on in the time remaining until LPA and Campeau forfeited their rights under the Tripartite Agreement.

LPA might claim that neither it nor Campeau could have tendered and thus put the city in breach, because absent a final delineation of what the parcel contained and an appraisal of what the parcel was worth there was no basis for a definitive tender. But the agreement between the parties specified mechanisms for resolving just these open questions. Indeed it is only because such mechanisms were specified that we have been willing to hold that the arrangement between the parties is definite enough to constitute a binding agreement.

Under the Section 6.02 price formula, the parties could not have completed the transaction without using the procedure set forth in Section 13.01 to determine whether any increase in the fair market value of the parcel since 1978 was attributable to the construction of Phase I. The Tripartite Agreement does not specify which party has the obligation to trigger Section 13.01's appraisal process; both parties share this responsibility. Neither party could be ready, able, and willing to close the sale until this procedure was at least initiated. Given that this information had not been obtained, and that neither LPA nor Campeau ever sought to obtain it, LPA cannot, as a matter of law, have put the city in default. See Kanavos v. Hancock Bank & Trust, supra at [522] 203 ("[i]f neither could perform, even if the [defendant] repudiated the contract, neither could recover").

Similarly, under the arbitration clause of the Second Supplemental Amendment, LPA, the city, and the BRA shared responsibility for using arbitration to resolve the remaining differences that LPA claims prevented it from closing the transaction.^[14] Neither LPA nor the city activated those procedures. LPA's complaint that the city and the BRA breached the contract by failing to determine the exact size and composition of the Hayward Parcel is undermined by LPA's failure to initiate arbitration about the undecided details or even to propose to the city that the procedures specified in the Tripartite Agreement should be used to resolve these differences. Similarly, questions about the treatment of Avenue de Lafayette and the allocation and value of air rights over it and other streets could have been answered in arbitration, but neither LPA nor Campeau ever sought such answers.

LPA's claims must thus rest on the possibility that even if its tender — particularly the December 19, 1988, letter from Campeau to Mayor Flynn — was insufficient, LPA (and Campeau) should be excused from its obligation to tender because the city's tactics and delays demonstrated that it would not perform under the contract. See Leigh v. Rule, supra at 668 ("the law does not require a party to tender performance if the other party has shown that he cannot or will not perform"). LPA claims, and the trial judge in denying the city's motion for directed verdict or judgment notwithstanding the verdict cites the fact, that the city failed to secure needed appraisals with which to determine the price for the Hayward Parcel,^[15] that the BRA had proposed zoning regulations that placed unacceptable height restrictions on the parcel, that the city's transportation department was threatening to route a street through the parcel, and that LPA, Campeau, the city, and the BRA had failed to reach agreement as to how to treat the Avenue de Lafayette. These facts, taken alone or together, do not excuse the obligation to [523] tender. There was testimony from Marco Ottieri, LPA's project manager, that throughout the mid-1980's, LPA was committed to purchasing the Hayward Parcel regardless of its ultimate configuration and of restrictions placed upon the parcel by the city, because it would "build whatever we could build there profitably." He stated that LPA would have bought the parcel regardless of height restrictions and whether or not the city kept open Avenue de Lafayette. This seriously weakens LPA's argument that the city's proposed regulation of the Hayward Parcel materially affected the transaction or amounted to a repudiation.

Unlike a situation in which a defendant clearly expresses an unwillingness to perform, thereby repudiating the contract,^[16] here LPA seeks to attribute repudiation to the city based on the mere fact that uncertainties remained that LPA shared responsibility for resolving. Compare Hastings Assocs. v. Local 369 Bldg. Fund, Inc., 42 Mass. App. Ct. 162, 177 (1997) (where defendant indicated that it would not fulfil its obligations, defendant was in default and plaintiff was not obliged to use specified procedures to determine value of business). In this circumstance, where a complex contract leaves certain key terms to be decided by formulae and procedures, and where both parties share responsibility for activating those procedures, the plaintiff cannot be ready, able, and willing to tender, nor can the plaintiff put the defendant in default, unless the plaintiff attempts to use the contractually specified mechanisms to overcome the very uncertainties they were designed for. If two parties form an agreement that incorporates procedural devices to overcome unknowns, a plaintiff must at least attempt to make use of those devices before he can claim that the unknowns prevented meeting his obligations at law. This is particularly true in a complex and heavily regulated transaction such as this one, where public entities and public and elected officials with changing policies and constituencies are involved, and the transaction spans many years. This is not to say that governments are absolved from performing contractual obligations, but where a government contract specifies procedures and methods [524] a private party must be particularly assiduous to comply with them. "Men must turn square corners when they deal with the Government." Rock Island, Ark. & La. R.R. v. United States, 254 U.S. 141, 143 (1920) (Holmes, J.). LPA knew at the time it entered into the contract with the city that political bodies have various obligations and constraints, and that closing the sale after exercising its option would require agreeing on the transaction's specifics. We therefore conclude as a matter of law that LPA was not excused from its obligation to put the city in default, and that LPA did not fulfil this obligation.

C

LPA alleges not only that the city breached the Tripartite Agreement but that it did so in bad faith. This allegation of bad faith does not change our analysis in the preceding subsection.

The last clause of the Third Supplemental Agreement states that the January 1, 1989, drop dead date shall not apply if "the City and/or the [BRA] shall fail to work in good faith with the Developer through the design review process to conclude a closing." The Third Supplemental Agreement, however, was not signed until October 29, 1987, immediately prior to LPA's transfer of its rights to Campeau.^[17] There is overwhelming evidence that the review process progressed appropriately as soon as Campeau initiated the process in the spring of 1988,^[18] [525] only months prior to the drop dead date.^[19] Campeau's letters to the BRA during 1988 consistently demonstrate that the design review process was proceeding smoothly and in a collaborative fashion.^[20] Thus, LPA cannot argue that the BRA or the city acted in bad faith with regard to the design review process during this period.^[21]

Had bad faith infected the design review process itself, the drop dead date would have been extended automatically according to the terms of the Third Supplemental Agreement. As the review process was not so infected, LPA's bad faith claim rests on the fact that the BRA refused to extend the drop dead date despite Campeau's repeated requests for such an extension. A duty of good faith and fair dealing is implicit in the performance of a party's contractual obligations, see Fortune v. National Cash Register Co., 373 Mass. 96, 102-103 (1977), and generally if parties modify an existing contract, their modification must be made in good faith: one party cannot extract the modification from the other wrongfully. See U.C.C. § 2-209, comment 2 (1989). But LPA cites no authority for the proposition that the refusal by one party to accede to a modification that would inure to the benefit of the other party is, in itself, bad faith, where the only ill motive alleged is a desire to avoid the benefit in question. Absent bad faith in the design review [526] process, the city and the BRA were under no contractual obligation to grant an extension to LPA. Even if the defendants' refusal to extend the deadline was motivated by the possibility of evading the pricing formula in the Tripartite Agreement, as LPA suggests,^[22] that refusal could not constitute bad faith, because the BRA had no contractual duty to grant the extension that LPA sought. Compare Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 472 (1991) (finding of bad faith justified where contract required defendant to approve a development plan and defendant refused to do so in order to extract monetary concessions from plaintiff). See Restatement of Contracts § 205 comment a (1979).

Finally, the mere fact that the city did not convey the Hayward Parcel to Campeau prior to January 1, 1989, does not support a claim of bad faith. Particularly given the uncertainties that LPA added to the transaction — including the substitution of Campeau for LPA and Campeau's including in its design proposals submitted for review designs for a much larger project, the Boston Crossing project, than LPA's original project that referred only to the Hayward Parcel — LPA cannot maintain that the city acted in bad faith by not completing the transaction, unless LPA and Campeau had also done all they could to force the city to close the sale. Had LPA, or Campeau, been serious about putting the city in default, it could either have indicated more clearly that it was ready, able, and willing to close the sale by indicating its understanding of the exact composition of and price to be paid for the Hayward Parcel and setting a time and place for a transfer of the deed, thereby forcing the city to make use of the appraisal and arbitration procedures, or itself pressed the appraisal and arbitration procedures specified in the Tripartite Agreement to resolve all remaining disagreements. That it did none of these things bars [527] its claim against the city.^[23] Neither party tendered performance, and neither was in breach or default. See Flynn v. Wallace, 359 Mass. 711, 716 (1971); Hapgood v. Shaw, 105 Mass. 276, 279 (1870). See also Corbin, Contracts § 663 (1960); § 1258 (1962).

III

We turn now to LPA's claims against the BRA. The Superior Court jury found that the BRA tortiously and intentionally interfered with LPA's contractual relations with Campeau. The judge granted the BRA's motion for judgment notwithstanding the jury's verdict. The judge ruled that the Massachusetts Tort Claims Act (Act), G. L. c. 258, § 10 (c), renders the BRA, as a "public employer," immune from suit for "any claim arising out of an intentional tort, including ... interference with contractual relations." LPA argues that the BRA was not entitled to this ruling because it had raised the bar of the statute in an untimely fashion; because the BRA was an "independent body politic and corporate" and as such explicitly excluded by G. L. c. 258, § 1, from the immunity accorded by § 10 (c); and because, even if § 10 (c) did apply to the BRA, this would only remit the BRA to its situation before the enactment of c. 258, at which time the BRA was amenable to suit for intentional torts.

A

Although the BRA did not raise the bar of the statute in a motion to dismiss or at summary judgment, it did do so in its motion for a directed verdict at the close of all the evidence. The BRA renewed this argument in a motion for judgment notwithstanding the verdict. The judge ruled that this was sufficient, and that there had been a "flurry of arguments from both sides" on the issue. The only relevant authorities LPA cites for the proposition that the BRA raised this issue too late have to do with refusals to grant leave to amend pleadings because of prejudice to the nonmoving party. See Mathis v. Massachusetts Elec. Co., 409 Mass. 256, 264 (1991); Hamed v. Fadili, 408 Mass. 100, 105 (1990). These authorities recognize that this sort of matter is committed to the discretion of the judge. Assuming [528] that this should be treated as a motion to amend the pleadings, we conclude that the judge did not abuse his discretion. This is particularly so because the status of the BRA for purposes of § 10 (c) is a purely legal question not requiring recourse to the jury.

B

In Whitney v. Worcester, 373 Mass. 208, 212 (1977), and Morash & Sons v. Commonwealth, 363 Mass. 612 (1973), we warned that, if the Legislature did not act to abrogate the immunity from liability in tort accorded at common law to governmental entities, this court would do so. The Massachusetts Tort Claims Act followed in 1978, providing a scheme of tort liability for "public employers" in certain circumstances and subject to several conditions. See generally Glannon, Governmental Tort Liability under the Massachusetts Tort Claims Act of 1978, 66 Mass. L. Rev. 7, 10 (1981). Section 10 (c) excludes liability for intentional torts from the scope of c. 258 and specifically mentions the tort of interference with contractual relations. See G. L. c. 258, § 10 (c). Section 1 defines a public employer as

"the commonwealth and any county, city, town, educational collaborative, or district, including any public health district or joint district or regional health district or regional health board established pursuant to the provisions of section twenty-seven A or twenty-seven B of chapter one hundred and eleven, and any department, office, commission, committee, council, board, division, bureau, institution, agency or authority thereof ... which exercises direction and control over the public employee, but not a private contractor with any such public employer, the Massachusetts Bay Transportation Authority, the Massachusetts Port Authority, the Massachusetts Turnpike Authority, or any other independent body politic and corporate. With respect to public employees of a school committee of a city or town, the public employer for the purposes of this chapter shall be deemed to be said respective city or town."

The Superior Court judge ruled that the BRA was not an "independent body politic and corporate." Neither the statute [529] itself nor our prior decisions allow a ready answer to the controversy the parties raise about this classification. Certainly the term is not self-defining. The leading case on this matter, the learned opinion of the Appeals Court in Kargman v. Boston Water & Sewer Comm'n, 18 Mass. App. Ct. 51 (1984), see Commesso v. Hingham Hous. Auth., 399 Mass. 805, 808 (1987), traces the history of the term "body corporate and politic" from its original appearance in the Preamble to our Constitution to its present usage to designate "a legal entity [created by the Legislature] to perform specified tasks deemed to be essential public functions." Kargman, supra at 55. It is only the subset of independent bodies corporate and politic that do not enjoy immunity from intentional torts under § 10 (c). What entities, in addition to the three specifically mentioned in § 1, are to be identified as independent bodies corporate and politic we have been left to discern from a rather inadequate set of hints. The term itself is not very helpful, so that the Appeals Court in Kargman sought to extrapolate from the list of authorities specifically designated as independent in § 1 to instances not specifically named. It identified two general features of the designated entities: financial independence and political independence. The court went on to identify certain indicia of financial and political independence, id. at 56-58, and concluded that the Boston water and sewer commission was such an independent body. By defining the term independence in terms of financial and political independence, the Kargman analysis at least has the virtue of disaggregating the term into two possibly more manageable units, but the norm is still defined by reference to itself, and that is a problem.

The Superior Court judge, in a thorough and closely reasoned memorandum, applied the Kargman analysis to the situation of the BRA. He reached his conclusion that the BRA is not an independent body politic by emphasizing the factors that detract from the BRA's political independence: when initiating urban renewal projects it is subject to stringent public notice requirements and requires approval for many of its actions at the State and local level. He also found lacking indicia of financial independence, in that the BRA must account for its expenditures at the State and the local level and may receive State financial assistance for its urban renewal projects and advances to cover certain of its expenses. He concluded that "the BRA is subject to many checks on its power to initiate and carry out redevelopment [530] projects in Boston, which do not comport with political and financial independence. It is significantly less autonomous than either the MBTA, Turnpike, or Massport." LPA points out the many ways in which the BRA has financial and political independence similar to that of the three authorities named in § 1: removal of authority members only for cause; its ability to sue and be sued in its own name; its ability to hold title to property in its own name; its enjoyment of the power of eminent domain; its ability to incur indebtedness and issue bonds without pledging the credit of the State or city; and its ability to charge market rents for its properties. LPA also compares the BRA to the Boston water and sewer commission, which was held to be independent in Kargman. Moreover, LPA points out that some of the features urged by the BRA as indicia of a lack of independence, such as the oversight by the State auditor of its expenditures which the judge mentions, apply to the three named authorities as well. This battle of factors seems much closer to a standoff than either the BRA's or the judge's analysis would acknowledge.

Any analysis that relies heavily on the Kargman factors must cope with the embarrassment that just the factors that are discerned in Kargman as the indicia of independence of the three named entities are present with at least as much force in the case of Boston, other cities and towns, and the Commonwealth itself — all of which are designated at the beginning of § 1 as public employers. The BRA suggests that perhaps recourse to a possible underlying rationale for the designation of the three named entities might assist analysis: they all provide services for a fee not to the general public but to that specific segment of the public that chooses to use those services, and so it is fair that the users bear the cost in higher fees of the injuries intentionally inflicted by the authorities. This is only mildly convincing. We do not see why the costs of injuries inflicted by non-independent bodies should be borne by the injured parties alone and not by the public in general.^[24]

Though we do not decline the illumination that these proposals and analyses might offer, we probably cannot do much better in this case than to rely on analogy, that logically imperfect but inveterate tool of the law in tight corners. See generally Brewer, Exemplary Reasoning: Semantics, Pragmatics, and the [531] Rational Force of Legal Argument by Analogy, 109 Harv. L. Rev. 925 (1996); Levi, An Introduction to Legal Reasoning (1949). And here the closest analogy to the BRA are the local housing authorities, to which in Commesso we declined to assign independent status for the purposes of §§ 1 and 10 (c). See Commesso, supra at 809. As the Superior Court judge noted, it is significant that redevelopment authorities were created by the Legislature to assume the powers, such as land assembly and the carrying out of redevelopment projects, formerly held by housing authorities. See St. 1952, c. 617, § 4, amending G. L. c. 121, § 26QQ. In communities that choose not to establish redevelopment authorities, the powers assigned to redevelopment authorities remain with the housing authorities. See G. L. c. 121B, § 9. If a community chooses to establish a redevelopment authority, the governance of that authority is the same as that which applies to a housing authority, G. L. c. 121B, §§ 5-7. And, as the Superior Court judge pointed out,

"As operating agencies, housing and redevelopment authorities enjoy the same powers, including but not limited to the power to: sue and be sued; work with the federal government on urban renewal projects; receive public or private loans and grants; take property by eminent domain; clear and improve property; enter into contracts necessary to carry out housing and urban renewal projects; make relocation payments to displaced businesses or persons; borrow money upon the security of their bonds or notes; invest in securities; contract with organizations undertaking c. 121A projects; make and amend rules and regulations; and join with other operating agencies in exercising their respective powers. G. L. c. 121B, § 11."

Indeed, the two-page chart provided by LPA as an appendix to its brief here comparing the political and financial situation of various types of entities in the Commonwealth shows only one nontrivial difference^[25] between the BRA and a housing authority: the existence of statutory limits on the rent that housing authorities may charge tenants, see G. L. c. 121B, § 32, and the absence of such constraints on sales and leases of property [532] by a redevelopment authority under G. L. c. 121B, § 49. But of course this difference is merely the result of the assignment of functions to a redevelopment authority in communities that choose to establish one. If redevelopment functions remain in the housing authority, which then plays a dual role pursuant to G. L. c. 121B, § 9 (b) or (c), then the housing authority too, in respect to those functions, may charge market rents.^[26] And it would be captious to suggest that a housing authority does or does not enjoy the immunities of the Act depending on whether redevelopment functions have been left with it.

The BRA is unique among redevelopment authorities and enjoys a special statutory basis. See generally Aronson, The Boston Redevelopment Authority: A Quasi Public Authority, 43 B.U. L. Rev. 466 (1963). The most significant difference between the BRA and other redevelopment authorities is that the BRA functions as the city's planning board and enjoys the powers of the State housing board in respect to c. 121A urban renewal projects.^[27] See St. 1960, c. 652. See also Opinion of the Justices, 341 Mass. 760, 787-788 (1960). But both a city planning board and the State housing board would certainly be within the § 1 definition of public employers for the purposes of G. L. c. 258, § 10, and the addition of their powers should not make the designation of the BRA as a public employer less apt.

Finally, we resolve whatever indeterminacy this analysis may leave in favor of subjecting the BRA to the general regime of c. 258. The BRA is certainly a public body, a governmental entity of some sort performing public functions. Any doubts about the BRA's status under the difficult and uncertain designation of "independent body politic and corporate" should be resolved against such a designation, because of the desirability of making the c. 258 regime as comprehensive as possible, thus avoiding reintroducing the "crazy quilt" of immunities, Rogers v. Metropolitan Dist. Comm'n, 18 Mass. App. Ct. 337, 338-339 (1984), which the Act was meant to replace. This is particularly [533] so because any decision taking a governmental entity out of the category of "public employers" has the effect not only, as here, of making that entity liable for intentional torts, but also of removing the immunities provided by the other provisions of § 10. This may have large consequences to which none of our cases so far has attended. Of particular concern is removing a governmental body from the protection of the immunity of § 10 (b), which refers to

"any claim based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a public employer or public employee, acting within the scope of his office or employment, whether or not the discretion involved is abused."

We conclude that the BRA is a public employer not excluded from the scope of the Act.

C

We have less difficulty disposing of LPA's ingenious argument that, even if the BRA is not an independent body politic and corporate, § 10 (c) does not confer upon it immunity from liability for intentional torts. Section 10 of c. 258 provides that "[t]he provisions of sections one to eight, inclusive, shall not apply to" any of the claims listed in that section. G. L. c. 258, § 10. The list includes, among other things, claims based "on the exercise or performance or the failure to exercise or perform a discretionary function," § 10 (b); and claims arising out of intentional torts, § 10 (c). Other excluded claims relate to assessment or collection of taxes, § 10 (d); issuance, denial or revocation of permits or licenses, § 10 (e); inadequate or negligent inspections, § 10 (f); failure to provide fire protection or police services, § 10 (g)-(h); and negligent provision of medical services, § 10 (j) (2). Section 2 provides for liability of public employers for negligence, G. L. c. 258, § 2, and §§ 4-7 impose certain prerequisites for claims against public employers, including the prior presentation of such claims for administrative action, and provide for procedures for their resolution. G. L. c. 258, §§ 4-7. LPA argues that because § 10 provides that none of these provisions shall apply to intentional torts, the result is that such claims are simply remitted to the preexisting law governing liability. And because the BRA's [534] enabling statute, G. L. c. 121B, § 13, which preexisted c. 258, provided that the BRA shall be "liable ... in tort in the same manner as a private corporation," the BRA continues to be liable for the intentional tort charged here. LPA finds confirmation for this conclusion in our decision in Spring v. Geriatric Auth. of Holyoke, 394 Mass. 274 (1985), in which we stated that "[b]y excluding intentional torts from the scope of G. L. c. 258, the Legislature left open the matter of governmental liability for intentional torts. Consistent with the common law principles of governmental immunity which preceded the Massachusetts Tort Claims Act, we conclude that public employers retain their immunity from suits arising from intentional torts." Id. at 284-285. Because the preexisting law, to which we are remitted according to LPA's argument, allowed for BRA's liability for intentional torts, the BRA does not enjoy immunity for intentional torts now.

LPA's reading of the statute is not in accord with its over-all purpose of enacting a comprehensive and uniform regime of tort liability for public employers in the wake of our decisions in Whitney v. Worcester, 373 Mass. 208, 212 (1977), and Morash & Sons v. Commonwealth, 363 Mass. 612 (1973). Although we have not undertaken a review of such legislation, it is likely that the enabling statutes of many public bodies contain a variety of provisions relating to the tort liability of those bodies. It would be the upshot of LPA's argument that, whenever any of the provisions of § 10 (including, for instance, those excluding liability for discretionary functions or for failure to grant or renew a license or permit) applied, we would be remitted to the preexisting law. It is sufficient to mention that the pre-existing law to which LPA refers, G. L. c. 121B, § 13, applies to the Boston Housing Authority (BHA) as well, so that the BHA on this argument would be liable for the whole range of claims excluded by § 10.^[28] Compare Commesso v. Hingham Hous. Auth., supra at 809. Such a reading would be so manifestly against the intention of the Legislature to introduce a uniform regime of tort liability for public bodies, see Rogers v. [535] Metropolitan Dist. Comm'n, supra, that a mere drafting infelicity will not lead us to adopt it. Similarly the statement quoted from our decision in Spring will not move us in that direction. In context it was quite irrelevant to the Spring case whether § 10 (c) was described as prescribing immunity for intentional torts or as remitting the matter to the preexisting common law, which in that instance would have foreclosed tort liability altogether. See Spring, supra at 295 (Abrams, J., concurring) (Federal Tort Claims Act, 28 U.S.C. § 2680[h] [1982], on which c. 258 is patterned, provides an interpretive guide and has been construed "as immunizing public employers from suits arising out of intentional torts"). We therefore hold that the BRA is immune under G. L. c. 258, § 10 (c), from suit for intentional torts.

IV

LPA also claims that the motion judge erred in entering summary judgment against LPA on its G. L. c. 93A claims against the city and the BRA. Chapter 93A proscribes "unfair or deceptive practices in the conduct of any trade or commerce." G. L. c. 93A, § 2 (a). A party engages in trade or commerce when it acts in a "business context." "This court ... has repeatedly held that c. 93A does not apply to parties motivated by `legislative mandate, not business or personal reasons.'" Peabody N.E., Inc. v. Marshfield, 426 Mass. 436, 439-440 (1998), quoting Poznik v. Medical Professional Ins. Ass'n, 417 Mass. 48, 52 (1994). The gravamen of LPA's claim against the city and the BRA is that it was cheated out of the benefit that would have accrued to it if the agreement regarding the Hayward Parcel had been performed. This is indeed the kind of claim that is often made under c. 93A, see e.g., Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 475 (1991), but that does not mean that the city was engaged in trade or commerce when it entered into the arrangement nor when it took the actions of which LPA now complains. It is perfectly possible for a governmental entity to engage in dishonest or unscrupulous behavior as it pursues its legislatively mandated ends. The allowance of the motion of summary judgment was correct because the defendants' involvement in these transactions was wholly in pursuit of the legislatively prescribed mandate of G. L. c. 121A, § 2, that "the redevelopment of land not only in sub-standard areas but also in blighted open and decadent areas in accordance with a [536] comprehensive plan to promote the sound growth of the community is necessary." There simply cannot be any doubt that the parties' dealings took place in the context of the pursuit of the urban renewal and redevelopment goals of c. 121A and c. 121B. That is the premise of every other part of this litigation. Although we have not yet addressed the question whether a public entity is ever a proper defendant in a c. 93A action, it is quite clear that in this case at least these public entities are not.^[29]

V

Because we conclude as a matter of law that the city did not breach its contract with LPA, we reverse the judgment of the Superior Court and order entry of judgment for the city. Whatever contractual claims LPA may have against the BRA must fail for the same reason. The judgment in favor of the BRA is affirmed because we agree that it is immune from suit for an intentional tort. The judgment in favor of the city and the BRA dismissing LPA's c. 93A claims is also affirmed.

So ordered.

[1] City of Boston.

[2] The shopping mall, Lafayette Place Mall, was not a success. The bank that held the mortgage foreclosed on it on February 5, 1991. The hotel, originally known as the Lafayette Hotel, has been operating successfully as the Swissotel and separated itself from the development.

[3] The city completed an appraisal of the third parcel in 1979.

[4] This was the formula to be used if the city ultimately determined, as it in fact did, that it would retain subsurface rights to build a parking garage under the Hayward Parcel. Had the city decided not to retain subsurface rights, an alternate formula provided that the purchase price would be the full fair market value as of 1978 plus one-half of any increase in value attributable to the construction of "the Public Improvements and the Project."

[5] This appraisal process was to be used to determine the fair market value of the "project rights," which included the "Developer's present and future rights in and to the Project Area." The "project area" included parcels D-1, D-2, D-3, and D-4, which made up the Hayward Parcel.

[6] The September 11, 1979 deed, which was for the purchase of the "Lafayette Parcel" in connection with Phase I, provides that "[i]f a dispute shall arise ... and if ... such dispute is to be settled by arbitration, then either Owner may serve upon the other Owner a notice demanding that the dispute be arbitrated...." Each party is permitted to select an arbitrator, and the two chosen arbitrators then select a third.

[7] On July 18, 1990, LPA had filed suit against Campeau, alleging that Campeau had failed to use "commercially reasonable efforts" to go forward with Phase II, and therefore had violated the lease agreement between LPA and Campeau. In addition, LPA alleged that Campeau had failed to pay amounts due under the lease. The record does not reflect the disposition of this action.

[8] The judge had earlier ruled that the judgment against the BRA for breach of contract could not stand because it was inconsistent with the jury's specific finding that the BRA was not an agent of the city, and that the award of damages in tort against the BRA could not stand because they were subsumed in the contract damages awarded against the city. A claim against the defendants under G. L. c. 93A had been dismissed on motion for summary judgment prior to the commencement of the trial.

[9] As Judge Leval has said, "Notwithstanding the importance of protecting negotiating parties from involuntary judicially imposed contract, it is equally important that courts enforce and preserve agreements that were intended as binding, despite a need for further documentation or further negotiation. It is, of course, the aim of contract law to gratify, not to defeat, expectations that arise out of intended contractual agreement, despite informality or the need for further proceedings between the parties." (Footnotes omitted.) Teachers Ins. Annuity Ass'n v. Tribune Co., 670 F. Supp. 491, 497-498 (S.D.N.Y. 1987).

[10] There is little doubt that all parties understood the general boundaries of the Hayward Parcel, given that the parcel is bounded by streets and buildings in a small city block. Although the exact details of the boundaries of the parcel might have varied depending upon what building plan was ultimately approved by the city and the BRA, this was not a situation in which the parties agreed upon the purchase of a totally unspecified or undemarcated property. Compare Lucey v. Hero Int'l Corp., 361 Mass. 569, 573 (1972).

[11] The city's motion for directed verdict argued that there was no evidence to support a finding that "the plaintiff called for a closing to acquire title" to the Hayward Parcel, and that if there was a demand for closing it was insufficient. The city incorporated these defenses in its motion for judgment notwithstanding the verdict. It also argued that there was no evidence "of either the plaintiff or the city taking any steps to negotiate or enter into a purchase and sale agreement" during the option period. Moreover, the issue of LPA's failure to demand recourse to the specified arbitration procedure was raised repeatedly over the course of the litigation, including in the city's motion for special verdict, motion for directed verdict, by incorporation into its motion for judgment notwithstanding the verdict, and in the city's brief to this court. The city argued in its motion for judgment notwithstanding the verdict that LPA failed to activate the Section 13.01 appraisal procedure, and thus that the city could not be in breach.

[12] Prior to December, 1988, Campeau sent several letters to the BRA asking for an extension of the option period. In none of these letters, however, did Campeau demand tender of the deed to the Hayward Parcel or offer to tender payment.

[13] It was also unhelpful of Campeau to send this "tender" to Mayor Flynn, given that officials from both Campeau and LPA testified that they knew that the BRA, and not Mayor Flynn's office, had primary responsibility for the transaction.

[14] LPA only brought suit in 1992, long after such recourse to arbitration to fix obligations would have been pointless, and so the city is entitled simply to claim that it had never been put in breach.

[15] In the Tripartite Agreement, the city was obligated to obtain appraisals of the 1978 value of parcels D-3 and D-4. Although it secured an appraisal for parcel D-3, it did not for D-4. The city argues, however, that the appraisals for D-1, D-2, and D-3 sufficed to determine the value of D-4, which was a very small part of the over-all parcel.

[16] Compare Kanavos v. Hancock Bank & Trust Co., 395 Mass. 199, 201-202 (1985) (bank repudiated option contract to sell shares of stock by selling shares to a third party); Limpus v. Armstrong, 3 Mass. App. Ct. 19, 22 (1975) (defendants repudiated purchase and sale contract by selling property to third party).

[17] Campeau's actions in this regard must be attributed to LPA, for if they are not then the city's alternate argument that LPA abandoned the contract when it transferred its rights to Campeau would take on considerable force. LPA cannot have it both ways.

[18] Although LPA complains that the BRA's handling of the design review process prior to October, 1987, when the Third Supplemental Agreement was signed, violated the implied covenant of good faith, we reject this claim on two grounds. First, when the parties amended their agreement in 1987 and included a good faith clause, the slate was wiped clean for these purposes. Second, LPA failed to show that any delay in the design review process prior to 1988 was attributable to bad faith on the part of the city or the BRA rather than a lack of preparedness or persistence on LPA's part. LPA was engaged in discussions and negotiations with the BRA during 1984, 1985, and 1986, and may have completed the first phase of the BRA's four-stage authorization process by submitting an initial sketch of its plans for the Hayward Parcel, but LPA concedes that it did not progress beyond that very preliminary point. LPA did not press forward with its design, and it therefore cannot complain that its design was never approved.

[19] On April 25, 1988, Campeau's senior vice-president, Lenard McQuarrie, sent the BRA's director a letter indicating that Campeau had "begun to marshal" resources for the project and was about to "initiate" the review process. On May 16, 1988, McQuarrie stated that Campeau was "beginning to commit significant funds to preliminary design ... for the Hayward Place site."

[20] A June 17, 1988, letter from McQuarrie to the BRA stated that "[b]ased on the cooperation we are receiving from both yourself and your staff, we are optimistic that the project will proceed quickly through the ... Development Review process." Similarly, an October 21, 1988, letter stated that "[w]e are making excellent progress on the ... master planning of Boston Crossing and have begun the ... review process." And on December 19, 1988, Campeau's letter to Mayor Flynn stated that all parties were "making good progress towards the final approval of this project."

[21] Moreover, even if the city did act in bad faith in the design review process and thus the option period was extended beyond January 1, 1989, neither Campeau nor LPA ever attempted to enforce the agreement by seeking arbitration, tendering payment, or seeking a closing after that date. As noted above, Campeau received design authorization in June, 1989, but went bankrupt in 1990. LPA did not then renew its negotiations with the city, but instead filed suit against Campeau in July, 1990, and against the city and the BRA in March, 1992.

[22] LPA presented evidence that during the period in which LPA sought authorization of the sale to Campeau, the city's real property board publicly expressed concern that the pricing formula in the Tripartite Agreement was unfavorable to the city. On December 30, 1987, Commissioner J. Edward Roche of the city's real property department wrote Mayor Flynn expressing concern that a transfer of rights from LPA to Campeau might bring about a "windfall" to Campeau because of the pricing formula in Section 6.02. LPA also showed that the minutes of a meeting of the real property board on January 22, 1988, stated that "the Board expressed its desire ... to receive the fair market value for the Hayward Parcel (abandoning the Tripartite formula)."

[23] The jury returned a special verdict that affirmed that "L.P.A. perform[ed] its obligations under the contract." This verdict was incorrect as a matter of law, given the fact that LPA fulfilled none of the obligations set out above.

[24] In Kargman v. Boston Water & Sewer Comm'n, 18 Mass. App. Ct. 51, 56 n.5 (1984), the Appeals Court cast doubt on this criterion.

[25] LPA also notes that the BRA does not need planning board approval for projects, whereas a housing authority does. This is because the BRA has had transferred to it the functions of the city's planning board in respect to its projects.

[26] General Laws c. 121B, § 9, states that housing authorities with redevelopment authority have the powers granted regular redevelopment authorities under G. L. 121B, § 49.

[27] General Laws c. 121A, § 4, permits the housing board to make rules and regulations regarding the approval of redevelopment projects. The housing board must approve most redevelopment projects, G. L. c. 121A, § 5, and must inspect the construction of redevelopment projects to ensure that construction complies with the approved proposal. G. L. c. 121A, § 8.

[28] LPA seeks support for its argument in a 1983 amendment of G. L. c. 121B, § 13, that altered the treatment of the liability of employees of redevelopment and housing authorities. This is unpersuasive. The Legislature did not address itself directly to the operative first sentence of § 13, and we will not assume that an amendment of an independent portion of the section endorsed or reaffirmed that first sentence in the face of the strong Legislative mandate of c. 258.

[29] Cases such as Boston v. Aetna Life Ins. Co., 399 Mass. 569, 575 (1987), in which the public entity may act as a plaintiff in a c. 93A action, are not apposite. One who deals with a public entity, as for instance in providing it with goods or services, may very well be engaged in trade or commerce without the entity being so engaged as well.

[715] [716] Sheldon Weinhaus, St. Louis, MO, argued, for appellant.

Keith Rabenberg, St. Louis, MO, argued. (Clark Cole, on the brief), for appellees.

Before MORRIS SHEPPARD ARNOLD, Circuit Judge, JOHN R. GIBSON, Senior Judge, and MELLOY,^[1] District Judge.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

Donald E. Conley initiated this action in the Circuit Court of Butler County, Missouri, against his employer Pitney Bowes after he had been denied continued disability benefits for a claim arising from injuries suffered in an automobile accident. The company removed the case to the United States District Court for the Eastern District of Missouri because the suit related to benefits under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (ERISA). The district court granted the defendants's motion for summary judgment, 839 F.Supp. 1364, and this appeal followed. At issue is whether a claimant must exhaust administrative procedures when, contrary to the requirements of his plan, the letter denying his benefits does not inform him of appeal procedures.

I.

ERISA does not explicitly require exhaustion of administrative or plan remedies. The doctrine is, in this context, a creature either of contract or judicial invention. We have required exhaustion in ERISA cases only when it was required by the particular plan involved. See Anderson v. Alpha Portland Industries, Inc., 727 F.2d 177, 180 (8th Cir.1984), aff'd, 752 F.2d 1293 (8th Cir. en banc 1985); cf. Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2nd Cir.1993) ("exhaustion in the context of ERISA requires only those administrative appeals provided for in the relevant plan or policy."). We have declined to apply a broader, judicially-crafted exhaustion requirement in ERISA actions. See Anderson v. Alpha Portland Industries, Inc., 752 F.2d 1293 (8th Cir. en banc 1985) (exhaustion not required for retirees absent explicit plan language extending plan requirements to them). The appellant concedes that the plan which is [717] the subject of the suit before us does contain, in fact, such a requirement.

The language of the plan requiring exhaustion is complimented, in this case, by language that requires that any notice of denial of benefits be accompanied by explicit instructions informing the plan participant of the procedures for appeal. Section 7.8(a) of the plan document requires that the plan administrator provide to "any person whose claim for benefits has been denied ... a written notification of the denial. The written notification shall include ... an explanation of the claim appeal procedure." This plan language comports with the requirements of 29 C.F.R. § 2560.503-1(f)(4), which dictates that the "[c]ontent of notice ... to every claimant who is denied a claim for benefits ... set[] forth ... [a]ppropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review."

The present case, therefore, may be distilled to one of contract. Two terms of an ERISA plan are the focus of this dispute, namely, an exhaustion clause and a clause requiring notice of appeal procedures. In deciding whether Mr. Conley's action can survive a motion for summary judgment, "we must begin by examining the language of the plan document. Each provision should be read consistently with the others and the terms must be construed to render none of them nugatory." Jacobs v. Pickands Mather & Co., 933 F.2d 652, 657 (8th Cir.1991).

II.

A.

The terms that are at the center of this dispute are promises that were exchanged as part of a complex agreement. While pension and benefit plans are typically characterized as being unilateral contracts (agreements where an offer is accepted by a performance), the promises in the plan before us are more properly characterized as a bilateral contract (an agreement where promises of future performance are exchanged). See Arthur Linton Corbin, Corbin On Contracts § 21 (one vol. ed. 1952). Accordingly, the part of the plan under consideration is subject to the federal common law of contracts. See Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 1557, 95 L.Ed.2d 39 (1987).

One well-established rule of contract construction is that "[i]n bilateral contracts for an agreed exchange of performances, ... where one party's performance is to be rendered prior in time to that of the other, it is a constructive condition precedent to the latter's duty." Lawrence P. Simpson, Handbook of the Law of Contracts § 152 (1965). See also Restatement (Second) of Contracts § 237 (1981) ("[I]t is a condition of each party's remaining duties to render performances to be exchanged under an exchange of promises that there be no material failure by the other party to render any such performance due at an earlier time."); E. Allan Farnsworth, Contracts § 8.2(B) (2d ed. 1990); John D. Calamari and Joseph M. Perillo, The Law of Contracts § 11-8 (1987); Corbin On Contracts § 657. Such a "performance is as much a condition precedent to the other's duty as though expressly made so." Simpson, § 152; See also, Loud v. Pomona Land & Water Co., 153 U.S. 564, 577, 14 S.Ct. 928, 932, 38 L.Ed. 822 (1894) (agreement to convey land "after the making of the payment and full performance" rendered such payment and performance a condition precedent to the duty to convey. (emphasis in original)). Furthermore, "[w]here the consideration given by each party to a contract consists in whole or in part of promises, all the performances to be rendered by each party taken collectively are treated as performances to be exchanged under an exchange of promises, unless a contrary intention is clearly manifested." Restatement (Second) of Contracts § 232.

Application of these principles to the case at hand is straightforward. Because appellees were obligated to inform appellant of the appeal procedure at the time they denied him benefits, appellees performance had necessarily to precede exhaustion by the plaintiff. A defense under the exhaustion clause, therefore, may not be asserted absent performance of the notice clause, since they [718] are presumed to be the subject of promises made in exchange for each other.

B.

The defendants-appellants maintain that failure to impose the exhaustion requirement would be contrary to the public policy behind such a requirement. We disagree. Exhaustion is a very important concept in our jurisprudence, with deep roots in the principles of federalism and comity. See, e.g., Rose v. Lundy, 455 U.S. 509, 518, 102 S.Ct. 1198, 1203, 71 L.Ed.2d 379 (1982). Among its several purposes in ERISA plans are:

(1) To reduce the number of frivolous law suits;

(2) To promote the consistent treatment of claimants;

(3) To provide a non-adversarial method of claims settlement;

(4) To minimize the cost of claims settlement for all concerned;

(5) To enhance the ability of trustees of benefit plans to expertly and efficiently manage their funds by preventing premature judicial intervention in their decision-making processes;

(6) To enhance the ability of trustees of benefit plans to correct their errors, [or convince a disappointed claimant that he is incorrect];

(7) To enhance the ability of trustees to interpret plan provisions; and

(8) To help assemble a factual record which will assist a court in reviewing the fiduciaries actions.

Costantino v. TRW, Inc., 13 F.3d 969, 975 (6th Cir.1994). We recognize that judicially-created exhaustion requirements also may further these goals. We believe, however, that the freedom of contract between autonomous parties is a more important principle than even the very important judicially-created doctrine of exhaustion. Furthermore, where exhaustion is a bargained-for term of a contract, freedom of contract is not necessarily inconsistent with the principles underlying exhaustion requirements.

Requiring plan administrators to provide notice of appeals procedure as required by contract and the Secretary's regulations is not inconsistent with the goals that exhaustion typically furthers. Indeed, such a requirement serves much the same purpose as the exhaustion clause, namely, to avert resort to federal litigation where an administrative procedure is available. In fact, inclusion of such a term serves to avoid not only frivolous suits, but mistakenly filed suits as well. To advance the purposes of the Act, the Secretary's regulations, the contract, and the principles underlying the exhaustion and notice terms, we must construe and enforce the whole contract, including the notice of appeals procedure requirement.

III.

In their motion for summary judgment and their supporting memorandum, the defendants-appellees rely expressly and exclusively upon Mr. Conley's failure to exhaust the plan's procedures. They do not allege that Mr. Conley had actual knowledge of the plan's procedures, thereby making any breach of the plan's notice requirements immaterial. The district court appears to have felt that the plaintiff-appellant's possession of the summary plan description gave him constructive knowledge of the appeals procedures. The terms of the plan and the requirements of the regulation, however, confer upon a claimant a right to more than just a copy of the summary plan description. He had a contractual right to information on the appeals procedure included with his notice of denial of benefits. On summary judgment, the movant is not entitled to the benefit of a legal rule that the summary plan description gave claimant constructive knowledge of the appeals procedures.

On appeal, the defendants-appellees further assert that Mr. Conley did not deny having actual knowledge of the plan's procedures. This argument, however, puts the cart before the horse. The defendants-appellees never alleged, either in their answer, their motion for summary judgment, or their memorandum in support of their motion, that Mr. Conley or his attorney had actual knowledge of the plan's appeals process. We do not think that Mr. Conley could be expected [719] to deny something of which he had not been accused.

IV.

Mr. Conley has also made claims under ERISA § 510 for wrongful discharge, and under ERISA § 409 for breach of fiduciary duty. He challenges the entry of summary judgment on these claims because, unlike claims for benefits, they are not within the purview of the plan's administrators and therefore not subject to the plan's exhaustion requirement. The defendant-appellees response to this argument is that it was waived because it was not presented to the district court for consideration upon the defendants-appellees motion for summary judgment.

The district court entered summary judgment on these claims without having been asked to. The motion for summary judgment does not refer specifically to the § 510 and § 409 counts. Therefore, the plaintiff was never placed on notice that he needed to argue that no exhaustion requirement existed for these two counts. Since he could not have known that the motion for summary judgment included the § 510 and § 409 counts, these claims must also be reinstated.

V.

For the foregoing reasons, we reverse the judgment of the district court, and remand for proceedings consistent with this opinion.

JOHN R. GIBSON, Senior Circuit Judge, dissenting.

I respectfully dissent.

I would affirm the judgment of the district court for the reasons articulated in its decision.

Conley's testimony is very clear that after he received the letter denying benefits he turned it over to his lawyer. He felt that he should be getting a pension, disability or something, so retained the lawyer to look after his interests. He let the lawyer handle it and do the work. In addition to the letter, he gave a copy of the benefit plans book to the lawyer. The booklet set forth in clear detail the claim appeal procedure.

The court today elevates form over substance and ignores the factual situation before the district court and on which it ruled. This is not a case where an employee failed to file an application for review because he was not told of the procedures, but rather one where the employee relied on his lawyer, who dropped the ball.

[1] The Honorable Michael J. Melloy, Chief United States District Judge for the Northern District of Iowa, sitting by designation.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Alexander Stewart against Herbert A. Newbury and others, doing business under the firm name and style of the Newbury Manufacturing Company. From a judgment of the Appellate Division (163 App. Div. 868,147 N. Y. Supp. 1144) affirming a judgment for plaintiff, defendants appeal. Reversed, and new trial ordered.

[220 N.Y. 380]Philip A. Rorty, of Goshen, for appellants.

Percy V. D. Gott, of Goshen, for respondent.

CRANE, J.

The defendants are partners in the pipe fitting business under the name of Newbury Manufacturing Company. The plaintiff is a contractor and builder residing at Tuxedo, N. Y.

The parties had the following correspondence about the erection for the defendants of a concrete mill building at Monroe, N. Y.:

[220 N.Y. 381]‘Alexander Stewart,

‘Contractor and Builder,

‘Tuxedo, N. Y., July 18, 1911.

‘Newbury Mfg. Company, Monroe, N. Y.-Gentlemen: With reference to the proposed work on the new foundry building I had hoped to be able to get up and see you this afternoon, but find that impossible and am, in consequence, sending you these prices, which I trust you will find satisfactory.

‘I will agree to do all excavation work required at sixty-five ($.65) cents per cubic yard.

‘I will put in the concrete work, furnishing labor and forms only, at two and 05-100 ($2.05) dollars per cubic yard.

‘I will furnish labor to put in reenforcing at four ($4.00) dollars per ton.

‘I will furnish labor only to set all window and door frames, window sash and doors, including the setting of hardware for one hundred twelve ($112) dollars. As alternative I would be willing to do any or all of the above work for cost plus 10 per cent., furnishing you with first class mechanics and giving the work considerable of my personal time.

‘Hoping to hear favorably from you in this regard, I am,

‘Respectfully yours,

‘[Signed] Alexander Stewart.’

‘The Newbury Mfg. Co.,

‘Steam Fittings, Grey Iron Castings,

‘Skylight Opening Apparatus,

‘Monroe, N. Y.

‘Telephone Connection.

‘Monroe, N. Y., July 22, 1911.

‘Alexander Stewart, Tuxedo Park, N. Y.-Dear Sir: Confirming the telephone conversation of this morning we accept your bid of July the 18th to do [220 N.Y. 382]the concrete work on our new building. We trust that you will be able to get at this the early part of next week.

‘Yours truly,

The Newbury Mfg. Co.,

‘H. A. Newbury.’

Nothing was said in writing about the time or manner of payment. The plaintiff, however, claims that after sending his letter, and before receiving that of the defendant, he had a telephone communication with Mr. Newbury and said: ‘I will expect my payments in the usual manner,’ and Newbury said, ‘All right, we have got the money to pay for the building.’ This conversation over the telephone was denied by the defendants. The custom, the plaintiff testified, was to pay 85 per cent. every 30 days or at the end of each month, 15 per cent. being retained till the work was completed.

In July the plaintiff commenced work and continued until September 29th, at which time he had progressed with the construction as far as the first floor. He then sent a bill for the work done up to that date for $896.35. The defendants refused to pay the bill and work was discontinued. The plaintiff claims that the defendants refused to permit him to perform the rest of his contract, they insisting that the work already done was not in accordance with the specifications. The defendants claimed upon the trial that the plaintiff voluntarily abandoned the work after their refusal to pay his bill.

On October 5, 1911, the defendants wrote the plaintiff a letter containing the following:

‘Notwithstanding you promised to let us know on Monday whether you would complete the job or throw up the contract, you have not up to this time advised us of your intention. * * * Under the circumstances, we are compelled to accept your action as being an abandonment of your contract and of [220 N.Y. 383]every effort upon your part to complete your work on our building. As you know, the bill which you sent us and which we declined to pay is not correct, either in items or amount, nor is there anything due you under our contract as we understand it until you have completed your work on our building.’

[985] To this letter the plaintiff replied the following day. In it he makes no reference to the telephone communication agreeing, as he testified, to make ‘the usual payments,’ but does say this:

‘There is nothing in our agreement which says that I shall wait until the job is completed before any payment is due, nor can this be reasonably implied. * * * As to having given you positive date as to when I should let you know what I proposed doing, I did not do so; on the contrary, I told you that I would not tell you positively what I would do until I had visited the job, and I promised that I would do this at my earliest convenience and up to the present time I have been unable to get up there.’

The defendant Herbert Newbury testified that the plaintiff ‘ran away and left the whole thing.’ And the defendant F. A. Newbury testified that he was told by Mr. Stewart's man that Stewart was going to abandon the job; that he thereupon telephoned Mr. Stewart, who replied that he would let him know about it the next day, but did not.

In this action, which is brought to recover the amount of the bill presented, as the agreed price and $95.68 damages for breach of contract, the plaintiff had a verdict for the amount stated in the bill, but not for the other damages claimed, and the judgment entered thereon has been affirmed by the Appellate Division.

The appeal to us is upon exceptions to the judge's charge. The court charged the jury as follows:

‘Plaintiff says that he was excused from completely performing the contract by the defendants' unreasonable failure to pay him for the work he had done during the months [220 N.Y. 384]of August and September. * * * Was it understood that the payments were to be made monthly? If it was not so understood, the defendants only obligation was to make payments at reasonable periods, in view of the character of the work, the amount of work being done, and the value of it. In other words, if there was no agreement between the parties respecting the payments, the defendants' obligation was to make payments at reasonable times. * * * But whether there was such an agreement or not, you may consider whether it was reasonable or unreasonable for him to exact a payment at that time and in that amount.’

The court further said, in reply to a request to charge:

‘I will say in that connection, if there was no agreement respecting the time of payment, and if there was no custom that was understood by both parties, and with respect to which they made the contract, then the plaintiff was entitled to payments at reasonable times.’

The defendants' counsel thereupon made the following request, which was refused:

‘I ask your honor to instruct the jury that, if the circumstances existed as your honor stated in your last instruction, then the plaintiff was not entitled to any payment until the contract was completed.’

The jury was plainly told that if there were no agreement as to payments, yet the plaintiff would be entitled to part payment at reasonable times as the work progressed, and if such payments were refused he could abandon the work and recover the amount due for the work performed.

[1] This is not the law. Counsel for the plaintiff omits to call our attention to any authority sustaining such a proposition and our search reveals none. In fact, the law is very well settled to the contrary. This was an entire contract. Ming v. Corbin, 142 N. Y. 334, 340, 341,37 N. E. 105. Where a contract is made to perform work and no agreement is made as to payment, the work must be substantially[220 N.Y. 385]performed before payment can be demanded. Gurski v. Doscher, 112 App. Div. 345,98 N. Y. Supp. 588; affirmed 190 N. Y. 536, 83 N. E. 1125;Cunningham v. Jones, 20 N. Y. 486;People ex rel. Cossey v. Grout, 179 N. Y. 417, 426,72 N. E. 464,1 Ann. Cas. 39;Delehanty v. Dunn, 151 App. Div. 695,136 N. Y. Supp. 193;Smith v. Brady, 17 N. Y. 173, 187, 188,72 Am. Dec. 442;Catlin v. Tobias, 26 N. Y. 217, 84 Am. Dec. 183;Cronin v. Tebo, 71 Hun, 59, 61, 24 N. Y. Supp. 644, affirmed 144 N. Y. 660, 39 N. E. 344; Coburn v. Hartford, 38 Conn. 290; Poland v. Thomaston Co., 100 Me. 133, 60 Atl. 795;Thompson v. Phelan, 22 N. H. 339;Friedman v. Schleuter, 105 Ark. 580, 151 S. W. 696.

[2] This case was also submitted to the jury upon the ground that there may have been a breach of contract by the defendants in their refusal to permit the plaintiff to continue with his work, claiming that he had departed from the specifications, and there was some evidence justifying this view of the case; but it is impossible to say upon which of these two theories the jury arrived at its conclusion. The above errors, therefore, cannot be considered as harmless and immaterial. Stokes v. Barber Asphalt Paving Co., 207 N. Y. 252, 257,100 N. E. 597;Condran v. Park & Tilford, 213 N. Y. 341, 107 N. E. 565;Clarke v. Schmidt, 210 N. Y. 211, 215,104 N. E. 613. As the verdict was for the amount of the bill presented and did not include the damages for a breach of contract, which would be the loss of profits, it may well be presumed that the jury adopted the first ground of recovery charged by the court as above quoted and decided that the plaintiff was justified in abandoning work for nonpayment of the installment.

The judgment should be reversed, and a new trial ordered; costs to abide the event.

HISCOCK, C. J., and COLLIN, CARDOZO, POUND, and ANDREWS, JJ., concur. CUDDEBACK, J., absent.

Judgment reversed, etc.

3 Best & S. 826
122 Eng. Rep. 310 (Q.B. 1863)
TAYLOR
v.
CALDWELL
Queen’s Bench
May 6, 1863

The declaration alleged that by an agreement, bearing date the 27th May, 1861, the defendants agreed to let, and the plaintiffs agreed to take, on the terms therein stated, The Surrey Gardens and Music Hall, Newington, Surrey, for the following days, that is to say, Monday the 17th June, 1861, Monday the 15th July, 1861, Monday the 5th August, 1861, and Monday the 19th August, 1861, for the purpose of giving a series of four grand concerts and day and night fetes, at the Gardens and Hall on those days respectively, at the rent or sum of 100l. for each of those days. It then averred the fulfilment of conditions etc., on the part of the plaintiffs; and breach by the defendants, that they did not nor would allow the plaintiffs to have the use of The Surrey Music Hall and Gardens according to the agreement, but wholly made default therein, etc.; whereby the plaintiffs lost divers moneys paid by them for printing advertisements of and in advertising the concerts, and also lost divers sums expended and expenses incurred by them in preparing for the concerts and otherwise in relation thereto, and on the faith of the performance by the defendants of the agreement on their part, and had been otherwise injured, etc.

Pleas. First. Traverse of the agreement.

Second. That the defendants did allow the plaintiffs to have the use of The Surrey Music Hall and Gardens according to the agreement, and did not make any default therein, etc.

Third. That the plaintiffs were not ready or willing to take The Surrey Music Hall and Gardens.

Fourth. Exoneration before breach.

Fifth. That at the time of the agreement there was a general custom of the trade and business of the plaintiffs and the defendants, with respect to which the agreement was made, known to the plaintiffs and the defendants, and with reference to which they agreed, and which was part of the agreement, that in the event of the Gardens and Music Hall being destroyed or so far damaged by accidental fire as to prevent the entertainments being given according to the intent of the agreement, between the time of making the agreement and the time appointed for the performance of the same, the agreement should be rescinded and at an end; and that the Gardens and Music Hall were destroyed and so far damaged by accidental fire as to prevent the entertainments, or any of them, being given, according to the intent of the agreement, between the time of making the agreement and the first of the times appointed for the performance of the same, and continued so destroyed and damaged until after the times appointed for the performance of the agreement had elapsed, without the default of the defendants or either of them.

Issue on all the pleas. On the trial, before Blackburn J., at the London Sittings after Michaelmas Term, 1861, it appeared that the action was brought on the following agreement:

"Royal Surrey Gardens,

"27th May, 1861.

"Agreement between Messrs. Caldwell & Bishop, of the one part, and Messrs. Taylor & Lewis of the other part, whereby the said Caldwell & Bishop agree to let, and the said Taylor & Lewis agree to take, on the terms hereinafter stated, The Surrey Gardens and Music Hall, Newington, Surrey, for the following days, viz.:

"Monday, the 17th June, 1861,

Monday the 15th July, 1861,

Monday the 5th August, 1861,

Monday the 19th August, 1861,

for the purpose of giving a series of four grand concerts and day and night fetes at the said Gardens and Hall on those days respectively at the rent or sum of £100 for each of the said days. The said Caldwell & Bishop agree to find and provide at their own sole expense, on each of the aforesaid days, for the amusement of the public and persons then in the said Gardens and Hall, an efficient and organised military and quadrille band, the united bands to consist of from thirty-five to forty members; al fresco entertainments of various descriptions; coloured minstrels, fireworks and full illuminations; a ballet or divertissement, if permitted; a wizard and Grecian statues; tight rope performances; rifle galleries; air gun shooting; Chinese and Parisian games; boats on the lake, and (weather permitting) aquatic sports, and all and every other entertainment as given nightly during the months and times above mentioned. And the said Caldwell & Bishop also agree that the before mentioned united bands shall be present and assist at each of the said concerts, from its commencement until 9 o'clock at night; that they will, one week at least previous to the above mentioned dates, underline in bold type in all their bills and advertisements that Mr. Sims Reeves and other artistes will sing at the said gardens on those dates respectively, and that the said Taylor & Lewis shall have the right of placing their boards, bills and placards in such number and manner (but subject to the approval of the said Caldwell & Bishop) in and about the entrance to the said gardens, and in the said grounds, one week at least previous to each of the above mentioned days respectively, all bills so displayed being affixed on boards. And the said Caldwell & Bishop also agree to allow dancing on the new circular platform after 9 o'clock at night, but not before. And the said Caldwell & Bishop also agree not to allow the firework display to take place till a J past 11 o'clock at night. And, lastly, the said Caldwell & Bishop agree that the said Taylor & Lewis shall be entitled to and shall be at liberty to take and receive, as and for the sole use and property of them the said Taylor & Lewis, all moneys paid for entrance to the Gardens, Galleries and Music Hall and firework galleries, and that the said Taylor & Lewis may in their own discretion secure the patronage of any charitable institution in connection with the said concerts. And the said Taylor & Lewis agree to pay the aforesaid respective sum of £100 in the evening of the said respective days by a crossed cheque, and also to find and provide, at their own sole cost, all the necessary artistes for the said concerts, including Mr. Sims Reeves, God's will permitting.(Signed)

"J. CALDWELL."

Witness "CHAS. BISHOP.

(Signed) "S. Denis."

On the 11th June the Music Hall was destroyed by an accidental fire, so that it became impossible to give the concerts. Under these circumstances a verdict was returned for the plaintiff, with leave reserved to enter a verdict for the defendants on the second and third issues.

Petersdorff Serjt., in Hilary Term, 1862, obtained a rule to enter a verdict for the defendants generally.

The rule was argued, in Hilary Term, 1863 (January 28th); before Cockburn C.J., Wightman, Crompton and Blackburn JJ.

H. Tindal Atkinson shewed cause. First. The agreement sued on does not shew a "letting" by the defendants to the plaintiffs of the Hall and Gardens, although it uses the word "let," and contains a stipulation that the plaintiffs are to be empowered to receive the money at the doors, and to have the use of the Hall, for which they are to pay £100, and pocket the surplus; for the possession is to remain in the defendants, and the whole tenor of the instrument is against the notion of a letting. Whether an instrument shall be construed as a lease or only an agreement for a lease, even though it contains words of present demise, depends on the intention of the parties to be collected from the instrument; Morgan d. Dowding v. Bissell (3 Taunt. 65). Christie v. Lewis (2 B. & B. 410) is the nearest case to the present, where it was held that, although a charter party between the owner of a ship and its freighter contains words of grant of the ship, the possession of it may not pass to the freighter, but remain in the owner, if the general provisions in the instrument qualify the words of grant.

Secondly. The destruction of the premises by fire will not exonerate the defendants from performing their part of the agreement. In Paradine v. Jane (Al. 26) it is laid down that, where the law creates a duty or charge, and the party is disabled to perform it without any default in him, and hath no remedy over, there the law will excuse him; but when the party, by his own contract, creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. And there accordingly it was held no plea to an action for rent reserved by lease that the defendant was kept out of possession by an alien enemy whereby he could not take the profits.

Pearce, in support of the rule. First. This instrument amounts to a demise. It uses the legal words for that purpose, and is treated in the declaration as a demise.

Secondly. The words "God's will permitting" override the whole agreement.

Cur. adv. vult.

The judgment of the Court was now delivered by

BLACKBURN, J. In this case the plaintiffs and defendants had, on the 27th May, 1861, entered into a contract by which the defendants agreed to let the plaintiffs have the use of The Surrey Gardens and Music Hall on four days then to come, viz., the 17th June, 15th July, 5th August and 19th August, for the purpose of giving a series of four grand concerts, and day and night fetes at the Gardens and Hall on those days respectively; and the plaintiffs agreed to take the Gardens and Hall on those days, and pay £100 for each day.

The parties inaccurately call this a "letting," and the money to be paid a "rent;" but the whole agreement is such as to shew that the defendants were to retain the possession of the Hall and Gardens so that there was to be no demise of them, and that the contract was merely to give the plaintiffs the use of them on those days. Nothing however, in our opinion, depends on this. The agreement then proceeds to set out various stipulations between the parties as to what each was to supply for these concerts and entertainments, and as to the manner in which they should be carried on. The effect of the whole is to shew that the existence of the Music Hall in the Surrey Gardens in a state fit for a concert was essential for the fulfilment of the contract,—such entertainments as the parties contemplated in their agreement could not be given without it.

After the making of the agreement, and before the first day on which a concert was to be given, the Hall was destroyed by fire. This destruction, we must take it on the evidence, was without the fault of either party, and was so complete that in consequence the concerts could not be given as intended. And the question we have to decide is whether, under these circumstances, the loss which the plaintiffs have sustained is to fall upon the defendants. The parties when framing their agreement evidently had not present to their minds the possibility of such a disaster, and have made no express stipulation with reference to it, so that the answer to the question must depend upon the general rules of law applicable to such a contract.

There seems no doubt that where there is a positive contract to do a thing, not in itself unlawful, the contractor must perform it or pay damages for not doing it, although in consequence of unforeseen accidents, the performance of his contract has become unexpectedly burthensome or even impossible. The law is so laid down in 1 Roll. Abr. 450, Condition (G), and in the note (2) to Walton v. Waterhouse (2 Wms. Saund. 421 a. 6th ed.), and is recognised as the general rule by all the Judges in the much discussed case of Hall v. Wright (E. B. & E. 746). But this rule is only applicable when the contract is positive and absolute, and not subject to any condition either express or implied: and there are authorities which, as we think, establish the principle that where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless when the time for the fulfilment of the contract arrived some particular specified thing continued to exist, so that, when entering into the contract, they must have contemplated such continuing existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.

There seems little doubt that this implication tends to further the great object of making the legal construction such as to fulfil the intention of those who entered into the contract. For in the course of affairs men in making such contracts in general would, if it were brought to their minds, say that there should be such a condition. Accordingly, in the Civil law, such an exception is implied in every obligation of the class which they call obligatio de certo corpore. The rule is laid down in the Digest, lib. xlv., tit. l, de verborum obligationibus, 1. 33. "Si Stichus certo die dari promissus, ante diem moriatur: non tenetur promissor." The principle is more fully developed in l. 23. "Si ex legati causa, aut ex stipulatii hominem certum mihi debeas: non aliter post mortem ejus tenearis mihi, quam si per te steterit, quominus vivo eo eum mihi dares: quod ita fit, si aut interpellatus non dedisti, aut occidisti eum." The examples are of contracts respecting a slave, which was the common illustration of a certain subject used by the Roman lawyers, just as we are apt to take a horse; and no doubt the propriety, one might almost say necessity, of the implied condition is more obvious when the contract relates to a living animal, whether man or brute, than when it relates to some inanimate thing (such as in the present case a theatre) the existence of which is not so obviously precarious as that of the live animal, but the principle is adopted in the Civil law as applicable to every obligation of which the subject is a certain thing. The general subject is treated of by Pothier, who in his Traite des Obligations, partie 3, chap. 6, art. 3, § 668 states the result to be that the debtor corporis certi is freed from his obligation when the thing has perished, neither by his act, nor his neglect, and before he is in default, unless by some stipulation he has taken on himself the risk of the particular misfortune which has occurred.

Although the Civil law is not of itself authority in an English Court, it affords great assistance in investigating the principles on which the law is grounded. And it seems to us that the common law authorities establish that in such a contract the same condition of the continued existence of the thing is implied by English law.

There is a class of contracts in which a person binds himself to do something which requires to be performed by him in person; and such promises, e.g. promises to marry, or promises to serve for a certain time, are never in practice qualified by an express exception of the death of the party; and therefore in such cases the contract is in terms broken if the promisor dies before fulfilment. Yet it was very early determined that, if the performance is personal, the executors are not liable; Hyde v. The Dean of Windsor (Cro. Eliz. 552, 553). See 2 Wms. Exors. 1560, 5th ed., where a very apt illustration is given. "Thus," says the learned author, "if an author undertakes to compose a work, and dies before completing it, his executors are discharged from this contract: for the undertaking is merely personal in its nature, and, by the intervention of the contractor's death, has become impossible to be performed."For this he cites a dictum of Lord Lyndhurst in Marshall v. Broadhurst (1 Tyr. 348, 349), and a case mentioned by Patteson J. in Wentworth v. Cock (10 A. & E. 42, 45-46). In Hall v. Wright (E. B. & E. 746, 749), Crompton J., in his judgment, puts another case. "Where a contract depends upon personal skill, and the act of God renders it impossible, as, for instance, in the case of a painter employed to paint a picture who is struck blind, it may be that the performance might be excused."

It seems that in those cases the only ground on which the parties or their executors, can be excused from the consequences of the breach of the contract is, that from the nature of the contract there is an implied condition of the continued existence of the life of the contractor, and, perhaps in the case of the painter of his eyesight. In the instances just given, the person, the continued existence of whose life is necessary to the fulfilment of the contract, is himself the contractor, but that does not seem in itself to be necessary to the application of the principle; as is illustrated by the following example. In the ordinary form of an apprentice deed the apprentice binds himself in unqualified terms to "serve until the full end and term of seven years to be fully complete and ended," during which term it is covenanted that the apprentice his master "faithfully shall serve," and the father of the apprentice in equally unqualified terms binds himself for the performance by the apprentice of all and every covenant on his part. (See the form, 2 Chitty on Pleading, 370, 7th ed. by Greening.) It is undeniable that if the apprentice dies within the seven years, the covenant of the father that he shall perform his covenant to serve for seven years is not fulfilled, yet surely it cannot be that an action would lie against the father? Yet the only reason why it would not is that he is excused because of the apprentice's death.

These are instances where the implied condition is of the life of a human being, but there are others in which the same implication is made as to the continued existence of a thing. For example, where a contract of sale is made amounting to a bargain and sale, transferring presently the property in specific chattels, which are to be delivered by the vendor at a future day; there, if the chattels, without the fault of the vendor, perish in the interval, the purchaser must pay the price and the vendor is excused from performing his contract to deliver, which has thus become impossible.

That this is the rule of the English law is established by the case of Rugg v. Minett (11 East, 210), where the article that perished before delivery was turpentine, and it was decided that the vendor was bound to refund the price of all those lots in which the property had not passed; but was entitled to retain without deduction the price of those lots in which the property had passed, though they were not delivered, and though in the conditions of sale, which are set out in the report, there was no express qualification of the promise to deliver on payment. It seems in that case rather to have been taken for granted than decided that the destruction of the thing sold before delivery excused the vendor from fulfilling his contract to deliver on payment.

This also is the rule in the Civil law, and it is worth noticing that Pothier, in his celebrated Traite du Contrat de Vente (see Part. 4, § 307, etc.; and Part. 2, ch. 1, sect. 1, art. 4, § 1), treats this as merely an example of the more general rule that every obligation de certo corpore is extinguished when the thing ceases to exist. See Blackburn on the Contract of Sale, p. 173.

The same principle seems to be involved in the decision of Sparrow v. Sowyate (W. Jones, 29), where, to an action of debt on an obligation by bail, conditioned for the payment of the debt or the render of the debtor, it was held a good plea that before any default in rendering him the principal debtor died. It is true that was the case of a bond with a condition, and a distinction is sometimes made in this respect between a condition and a contract. But this observation does not apply to Williams v. Lloyd (W. Jones, 179). In that case the count, which was in assumpsit, alleged that the plaintiff had delivered a horse to the defendant, who promised to redeliver it on request. Breach, that though requested to redeliver the horse he refused. Plea, that the horse was sick and died, and the plaintiff made the request after its death; and on demurrer it was held a good plea, as the bailee was discharged from his promise by the death of the horse without default or negligence on the part of the defendant. "Let it be admitted," say the Court, "that he promised to deliver it on request, if the horse die before, that is become impossible by the act of God, so the party shall be discharged, as much as if an obligation were made conditioned to deliver the horse on request, and he died before it." And Jones, adds the report, cited 22 Ass. 41, in which it was held that a ferryman who had promised to carry a horse safe across the ferry was held chargeable for the drowning of the animal only because he had overloaded the boat, and it was agreed, that notwithstanding the promise no action would have lain had there been no neglect or default on his part.

It may, we think, be safely asserted to be now English law, that in all contracts of loan of chattels or bailments if the performance of the promise of the borrower or bailee to return the things lent or bailed, becomes impossible because it has perished, this impossibility (if not arising from the fault of the borrower or bailee from some risk which he has taken upon himself) excuses the borrower or bailee from the performance of his promise to redeliver the chattel. The great case of Coggs v. Bernard (1 Smith's L. C. 171, 5th ed.; 2 L. Raym. 909) is now the leading case on the law of bailments, and Lord Holt, in that case, referred so much to the Civil law that it might perhaps be thought that this principle was there derived direct from the civilians, and was not generally applicable in English law except in the ease of bailments; but the case of Williams v. Lloyd (W. Jones, 179), above cited, shews that the same law had been already adopted by the English law as early as The Book of Assizes. The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.

In none of these cases is the promise in words other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall at the time when the concerts were to be given; that being essential to their performance.

We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things. Consequently the rule must be absolute to enter the verdict for the defendants.

Rule absolute.

TOMPKINS et al.

v.

DUDLEY et al.

September Term, 1862.

One who has agreed to build a house on the land of another, and has substantially performed his contract, but has not completely finished the house nor delivered it, when it is destroyed by fire, is liable to an action for money advanced upon the contract and damages for its non-performance.

APPEAL from the Supreme Court. The plaintiffs sued as trustees of a school district for money advanced by them upon a contract to build a school-house, and for damages from the non-performance of the contract. There was a verdict and judgment for the defendants, which having been affirmed at general term in the seventh district, the plaintiffs appealed to this court. The facts are sufficiently stated in the following opinion. 

Homer A. Nelson, for the appellants.

John K. Porter, for the respondents. 

DAVIES, J.

On the 31st of August, 1857, Cornelius Chambers, by a written contract, agreed to make, erect, build and furnish for the plaintiffs a school-house, according to certain plans and specifications, and to furnish the materials for the sum of $678.50. The school-house was to be completed on the 1st day of October, 1857. The defendants guaranteed the performance of the contract on the part of the builder. The building was not completed on the 1st day of October, and it was burned down on the night of the 5th of October. The judge who tried the cause found, as matter of fact, that the contract was substantially performed by Chambers, but that the building was not entirely completed according to the specifications, there remaining to be done a small amount of painting and the hanging of the window blinds, and that the same had not been formally accepted nor the key delivered on the [273] 5th of October. This action is brought to recover the money paid on account to Chambers as the building progressed, and for the damages which the plaintiffs have sustained by reason of the non-completion of the contract, the fulfillment of which was guaranteed by the defendants. It is undeniable that the school house was not completed, nor delivered and accepted by the plaintiffs at the time of its destruction. They had a right to insist upon the completion of the contract according to its terms, and the builder did not allege or pretend that he had completed it. A substantial compliance with the terms of the contract will not answer when the contractor, as in this case, admits and concedes that the work was incomplete; he was still in possession, engaged in its completion. According to the testimony, about $60 was yet to be expended on the building. Had the builder completed the building and complied with his contract at the time of the destruction of the school house? I am constrained to say he had not. He was not only to complete it in accordance with its terms, but was to deliver it over to the plaintiffs thus finished, or offer to deliver it, before his whole duty was performed. Now it is undeniable that the builder did not do this. A portion of the work was yet to be done; the builder was still in possession, and actually engaged in the work of completion at the time of its destruction. This court has declared the law in this State to be, that a contract for the building of a vessel, or other thing in esse, does not vest any property in the party for whom it is to be constructed during the progress of the work, nor until it is finished and delivered, or at least ready for delivery, and approved by such party. It is said all the authorities agree in this. (Andrews v. Durant, 1 Kern., 35, and the authorities there cited.) And it was also held that the law is the same, though it be agreed that payment shall be made to the builder during the progress of the work, and such payments are made accordingly. In Mucklow v. Mangles (1 Taunt., 218), which arose out of a contract for building a barge, the whole price was paid in advance, the vessel was built and the name of the person who contracted for it was painted on the stern, [274] yet it was held that the title remained in the builder. LAWRENCE, J., said, “No property vests till the thing is finished and delivered.” In Merritt v. Johnson (7 John., 473), where a sloop was agreed to be built and one-third of the price was to be paid when one-third of the work was done; two-thirds when two-thirds were done; and the balance when it was completed, and before it was finished it was sold on execution against the builder, after more than one-third had been done, and more than that proportion of the price had been paid, the court held that the vessel was the property of the builder and not of the person who engaged it to be constructed. The court says, in its opinion, “The sloop did not become his property (the person for whom it was built) until finished and delivered.” The Supreme Court of Massachusetts, in Adams v. Nichols (19 Pick., 275), a case quite like the present, say:

“It is not very material to consider whose property the house was before its destruction. The principal defendant had contracted to build and finish a house on the plaintiff's land. After the conflagration, he might have proceeded, under the contract, and if he had completed a house according to the terms of his agreement the plaintiff would have been bound to perform his part of the stipulations So if in any stage of its progress he had seen fit to remove any part of the materials, and substitute others, the plaintiff could not complain. They must, therefore, be deemed to be at his risk. And if he had not intended to incur this risk, he should otherwise have stipulated in his agreement. Had the article to be made been a chattel, or a coach, or a vessel, it is extremely clear that the materials in the first place, and the article itself, in every stage of its manufacture, from its inception to its completion, would have been at the risk of the builder. Now it is not easy to preceive how it can make any difference in the construction or operation of the contract, that the thing manufactured, was to be attached to the freehold.”

The builder, in the present case, by his own contract, created a liability and incurred a duty, which the defendants guaranteed [275] he should perform, and which he has not performed. In justification of such non-performance, he alleges the destruction of the building by fire and inevitable accident, without any fault on his part. The law is well settled, that this is no legal justification for the non-performance of the contract. This subject was most carefully considered and elaborately discussed in the case of Harmony v. Bingham (2 Kern., 99), and it was then held by this court, that when a party is prevented by the act of God from discharging a duty created by the law, he is excused; but when he engages unconditionally, by express contract, to do an act, performance is not excused by inevitable accident or other unforeseen contingency not within his control. EDWARDS, J., says:

“This rule has been uniformly followed, and that, too, even in cases in which its application has been considered by the court as attended with great hardships.”

RUGGLES, J., said:

 “It is a well-settled rule of law, that when a party, by his own contract, absolutely engages to do an act, it is deemed to be his own fault and folly that he did not thereby expressly provide against contingencies, and exempt himself from responsibility in certain events; and in such a case, therefore, that is, in the instance of an absolute and general contract, the performance is not excused by an inevitable accident or other contingency, although not foreseen by or within the control of the party.”

These principles have been applied by the Supreme Courts of Massachusetts, Connecticut and New Jersey, in cases almost entirely analogous to the one now under consideration. In Adams v. Nichols (supra), the action was upon a bond executed by Nichols, one of the defendants, as principal, and by Selkirk, the other defendant, as surety, conditioned that Nichols should fully perform an agreement in writing, by which he contracted to erect a dwelling house for the plaintiff, on the plaintiff's land. It was agreed that, at the time of the execution of the bond and agreement, the plaintiff advanced to Nichols the sum of $400, in pursuance of such agreement; that subsequently Nichols commenced building the house and continued to work on it until 23d of August, 1836 (the agreement [276] having been made October 5, 1835), at which time it was raised and principally covered, and materials prepared for finishing it; that on the night succeeding that day, the house was, from some cause unknown to both parties, wholly destroyed by fire, and that Nichols did not offer to rebuild the house. The trial was had before SHAW, Ch. J., who ruled that the destruction of the house did not constitute a legal defence to the action, and a verdict was taken for the plaintiff, by consent, subject to the opinion of the court. MORTON, J., in delivering the opinion of the court, says:

“The defendants do not pretend that they have executed their contract to build a house for the plaintiff, but contend that the facts disclosed furnish a legal excuse for not doing it. * * * In these and similar cases, which seem hard and oppressive, the law does no more than enforce the exact contract entered into. If there was any hardship, it arises from the indiscretion or want of foresight of the suffering party. It is not the province of the law to relieve persons from the improvidence of their own acts. * * * The original contract remaining in force, and there being no legal excuse for not executing it, the defendants are liable for the damage which the plaintiff sustained by the non-performance of it.”

In the case of School District No. 1 v. Dauchy (25 Conn., 530), the defendant, on the 7th day of December, 1853, made a contract in writing with the plaintiff to build the school house for the sum of $2,469, and to complete the same by the first Monday of May, 1854; a part of the price to be paid by instalments, as the work progressed. The defendant commenced the building of the same, and had nearly completed it, when, on the 27th of April, 1854, it was struck by lightning and consumed by the fire communicated thereby. At this time he had received $1,000 of the price, having been entitled thereto, under the contract, by the progress of the work. ELLSWORTH, J., in delivering the opinion of the court, says:

“The defendant did agree, absolutely and unqualifiedly, that the building should and would be completed and ready to be delivered to the plaintiffs, by the first Monday of May [277] at the furthest. This he has not done. The building has not been completed nor delivered, although it is true he nearly finished it, and it is found could and would have completed it, had it not been destroyed by lightning. In the contract, he made no provision for any contingency or event whatever, and the question is, can he now incorporate into his contract a provision for a contingency or a condition, or must he abide by his positive and absolute undertaking.” After an able discussion of the question, and a careful review and analysis of the cases bearing upon it, the learned judge came to the conclusion that the defence set up affords no justification for the non-performance of the contract, and that the plaintiffs were entitled to recover their damages by reason of a breach thereof.

The only additional case needful to refer to, is that of School Trustees of Trenton v. Bennett (3 Dutcher [N. J.], 514). In that case a person had contracted with the owner of a lot to build, erect and complete a building thereon, and by reason of a latent defect in the soil the building fell down before it was completed, and the Supreme Court of New Jersey held that the loss fell upon the contractor, and that when the contract was, by its terms, to build and complete a building, and find materials for a certain entire price, payable in instalments as the work progresses, the contract is entire, and if the building, either by fault of the builder or by inevitable accident, is destroyed before completion, the owner may recover back the instalments he has paid.

The court, in its opinion, says:

“No rule of law is more firmly established by a long train of decisions than this, that where a party, by his own contract, creates a duty or charge upon himself, he is bound to make it good, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract.”

And in reference to the argument of hardship, the court very justly says:

“No matter how harsh and apparently unjust in its operation the rule may occasionally be, it cannot be denied that it has its foundation in good sense and inflexible honesty. The party that agrees to do an act should do it, unless absolutely impossible. [278] He should provide against contingencies in his contract. When one of two innocent persons must sustain a loss, the law casts it upon him who has agreed to sustain it, or, rather, the law leaves it where the agreement of the parties has put it; the law will not insert for the benefit of one of the parties, by construction, an exception which the parties have not, either by design or neglect, inserted in their engagement. If a party, for a sufficient consideration, agrees to erect and complete a building upon a particular spot, and find all the materials, and do all the labor, he must erect and complete it, because he has agreed so to do.”

I arrive at the conclusion that the law is well settled that the defence interposed by the defendants constitutes no justification to Chambers, the builder, for the non-performance of his contract with the plaintiffs, and that, having guaranteed for an adequate consideration, expressed therein, its performance, they are liable to respond to the plaintiffs for the damages which they have sustained by reason of such non-performance. If these views are concurred in by my brethren, the judgment appealed from must be reversed, and a new trial should be had, with costs to abide the event.

WRIGHT, GOULD, ALLEN and SMITH, Js., concurred.

Judgment reversed, and new trial ordered.

453 F.2d 939 (1972)

AMERICAN TRADING AND PRODUCTION CORPORATION, Plaintiff-Appellant,
v.
SHELL INTERNATIONAL MARINE LTD., Defendant-Appellee.

No. 306, Docket 71-1837.
United States Court of Appeals, Second Circuit.
Argued December 13, 1971.
Decided January 5, 1972.

[940] Herbert M. Lord, New York City (Burlingham, Underwood, Wright, White & Lord, New York City, Frederick M. Sevekow, Jr., New York City, of counsel), for plaintiff-appellant.

MacDonald Deming, New York City (Haight, Gardner, Poor & Havens, Thomas R. H. Howarth, New York City, of counsel), for defendant-appellee.

Before SMITH, KAUFMAN and MULLIGAN, Circuit Judges.

MULLIGAN, Circuit Judge:

This is an appeal by American Trading and Production Corporation (hereinafter "owner") from a judgment entered on July 29th, 1971, in the United States District Court for the Southern District of New York, dismissing its claim against Shell International Marine Ltd. (hereinafter "charterer") for additional compensation in the sum of $131,978.44 for the transportation of cargo from Texas to India via the Cape of Good Hope as a result of the closing of the Suez Canal in June, 1967. The charterer had asserted a counterclaim which was withdrawn and is not in issue. The action was tried on stipulated facts and without a jury before Hon. Harold R. Tyler, Jr. who dismissed the claim on the merits in an opinion dated July 22, 1971.

We affirm.

The owner is a Maryland corporation doing business in New York and the charterer is a United Kingdom corporation. On March 23, 1967 the parties entered into a contract of voyage charter in New York City which provided that the charterer would hire the owner's tank vessel, WASHINGTON TRADER, for a voyage with a full cargo of lube oil from Beaumont/Smiths Bluff, Texas to Bombay, India. The charter party provided that the freight rate would be in accordance with the then prevailing American Tanker Rate Schedule (ATRS), $14.25 per long ton of cargo, plus seventy-five percent (75%), and in addition there was a charge of $.85 per long ton for passage through the Suez Canal. On May 15, 1967 the WASHINGTON TRADER departed from Beaumont with a cargo of 16,183.32 long tons of lube oil. The charterer paid the freight at the invoiced sum of $417,327.36 on May 26, 1967. On May 29th, 1967 the owner advised the WASHINGTON TRADER by radio to take additional bunkers at Ceuta due to possible diversion because of the Suez Canal crisis. The vessel arrived at Ceuta, Spanish Morocco on May 30, bunkered and sailed on May 31st, 1967. On June 5th the owner cabled the ship's master advising him of various reports of trouble in the Canal and suggested delay in entering it pending clarification. On that very day, the Suez Canal was closed due to the state of war which had developed in the Middle East. The owner then communicated with the charterer on June 5th through the broker who had negotiated the charter party, requesting approval for the diversion of the WASHINGTON TRADER which then had proceeded to a point about 84 miles northwest of Port Said, the entrance to the Canal. On June 6th the charterer responded that under the circumstances it was "for owner to decide whether to continue to wait or make the alternative passage via the Cape since Charter Party Obliges them to deliver cargo without qualification." In response the owner replied on the same day that in view of the closing of the Suez, the WASHINGTON TRADER would proceed to Bombay via the Cape of Good Hope and "we are reserving all rights for extra compensation." The vessel proceeded westward, back through the Straits of Gibraltar and around the Cape and eventually arrived in Bombay on July 15th (some 30 days later than initially expected), traveling a total of 18,055 miles instead of the 9,709 miles which it would have sailed had the Canal been open. The owner billed $131,978.44 as extra compensation which the charterer has refused to pay.

On appeal and below the owner argues that transit of the Suez Canal was the agreed specific means of performance [941] of the voyage charter and that the supervening destruction of this means rendered the contract legally impossible to perform and therefore discharged the owner's unperformed obligation (Restatement of Contracts § 460 (1932)). Consequently, when the WASHINGTON TRADER eventually delivered the oil after journeying around the Cape of Good Hope, a benefit was conferred upon the charterer for which it should respond in quantum meruit. The validity of this proposition depends upon a finding that the parties contemplated or agreed that the Suez passage was to be the exclusive method of performance, and indeed it was so argued on appeal. We cannot construe the agreement in such a fashion. The parties contracted for the shipment of the cargo from Texas to India at an agreed rate and the charter party makes absolutely no reference to any fixed route. It is urged that the Suez passage was a condition of performance because the ATRS rate was based on a Suez Canal passage, the invoice contained a specific Suez Canal toll charge and the vessel actually did proceed to a point 84 miles northwest of Port Said. In our view all that this establishes is that both parties contemplated that the Canal would be the probable route. It was the cheapest and shortest, and therefore it was in the interest of both that it be utilized. However, this is not at all equivalent to an agreement that it be the exclusive method of performance. The charter party does not so provide and it seems to have been well understood in the shipping industry that the Cape route is an acceptable alternative in voyages of this character.

The District of Columbia Circuit decided a closely analogous case, Transatlantic Financing Corp. v. United States, 124 U.S. App. D.C. 183, 363 F.2d 312 (1966). There the plaintiff had entered into a voyage charter with defendant in which it agreed to transport a full cargo of wheat on the CHRISTOS from a United States port to Iran. The parties clearly contemplated a Suez passage, but on November 2, 1956 the vessel reduced speed when war blocked the Suez Canal. The vessel changed its course in the Atlantic and eventually delivered its cargo in Iran after proceeding by way of the Cape of Good Hope. In an exhaustive opinion Judge Skelly Wright reviewed the English cases which had considered the same problem and concluded that "the Cape route is generally regarded as an alternative means of performance. So the implied expectation that the route would be via Suez is hardly adequate proof of an allocation to the promisee of the risk of closure. In some cases, even an express expectation may not amount to a condition of performance." Transatlantic Financing Corp. v. United States, supra, 363 F.2d at 317 (footnote omitted).

Appellant argues that Transatlantic is distinguishable since there was an agreed upon flat rate in that case unlike the instant case where the rate was based on Suez passage. This does not distinguish the case in our view. It is stipulated by the parties here that the only ATRS rate published at the time of the agreement from Beaumont to Bombay was the one utilized as a basis for the negotiated rate ultimately agreed upon. This rate was escalated by 75% to reflect whatever existing market conditions the parties contemplated. These conditions are not stipulated. Had a Cape route rate been requested, which was not the case, it is agreed that the point from which the parties would have bargained would be $17.35 per long ton of cargo as against $14.25 per long ton.

Actually, in Transatlantic it was argued that certain provisions in the P. & I. Bunker Deviation Clause referring to the direct and/or customary route required, by implication, a voyage through the Suez Canal. The court responded "actually they prove only what we are willing to accept—that the parties expected the usual and customary route would be used. The provisions in no way condition performance upon non-occurrence of this contingency." Transatlantic Financing Corp. v. United States, [942] supra, 363 F.2d at 317 n. 8. We hold that all that the ATRS rate establishes is that the parties obviously expected a Suez passage but there is no indication at all in the instrument or dehors that it was a condition of performance.

This leaves us with the question as to whether the owner was excused from performance on the theory of commercial impracticability (Restatement of Contracts § 454 (1932)). Even though the owner is not excused because of strict impossibility, it is urged that American law recognizes that performance is rendered impossible if it can only be accomplished with extreme and unreasonable difficulty, expense, injury or loss.^[1] There is no extreme or unreasonable difficulty apparent here. The alternate route taken was well recognized, and there is no claim that the vessel or the crew or the nature of the cargo made the route actually taken unreasonably difficult, dangerous or onerous. The owner's case here essentially rests upon the element of the additional expense involved—$131,978.44. This represents an increase of less than one third over the agreed upon $417,327.36. We find that this increase in expense is not sufficient to constitute commercial impracticability under either American or English authority.

Mere increase in cost alone is not a sufficient excuse for non-performance (Restatement of Contracts § 467 (1932)). It must be an "extreme and unreasonable"^[2] expense (Restatement of Contracts § 454 (1932)).^[3] While in the Transatlantic case supra, the increased cost amounted to an increase of about 14% over the contract price, the court did cite with approval^[4] the two leading English cases Ocean Tramp Tankers Corp. v. V/O Sovfracht (The Eugenia), 1964 2 Q.B. 226, 233 (C.A.1963) (which expressly overruled Societe Franco Tunisienne D'Armement v. Sidermar S.P.A. (The Messalia), 1961 2 Q.B. 278 (1960), where the court had found frustration because the Cape route was highly circuitous and involved an increase in cost of approximately 50%), and Tsakiroglou & Co. Lt. v. Noblee Thorl  G.m.b.H., 1960 2 Q.B. 318, 348, aff'd, 1962 A.C., 93 (1961) where the House of Lords found no frustration though the freight costs were exactly doubled due to the Canal closure.^[5]

Appellant further seeks to distinguish Transatlantic because in that case the [943] change in course was in the mid-Atlantic and added some 300 miles to the voyage while in this case the WASHINGTON TRADER had traversed most of the Mediterranean and thus had added some 9000 miles to the contemplated voyage. It should be noted that although both the time and the length of the altered passage here exceeded those in the Transatlantic, the additional compensation sought here is just under one third of the contract price. Aside from this however, it is a fact that the master of the WASHINGTON TRADER was alerted by radio on May 29th, 1967 of a "possible diversion because of Suez Canal crisis," but nevertheless two days later he had left Ceuta (opposite Gibraltar) and proceeded across the Mediterranean. While we may not speculate about the foreseeability of a Suez crisis at the time the contract was entered, there does not seem to be any question but that the master here had been actually put on notice before traversing the Mediterranean that diversion was possible. Had the WASHINGTON TRADER then changed course, the time and cost of the Mediterranean trip could reasonably have been avoided, thereby reducing the amount now claimed. (Restatement of Contracts § 336, Comment d to subsection (1) (1932)).

In a case closely in point, Palmco Shipping Inc. v. Continental Ore Corp. (The "Captain George K"), 1970 2 Lloyd's L. Rep. 21 (Q.B. 1969), The Eugenia, supra, was followed, and no frustration was found where the vessel had sailed to a point three miles northwest of Port Said only to find the Canal blocked. The vessel then sailed back through the Mediterranean and around the Cape of Good Hope to its point of destination, Kandla. The distances involved, 9700 miles via the initially contemplated Canal route and 18,400 miles actually covered by way of the Cape of Good Hope, coincide almost exactly with those in this case. Moreover, in The "Captain George K" there was no indication that the master had at anytime after entering the Mediterranean been advised of the possibility of the Canal's closure.

Finally, owners urge that the language of the "Liberties Clause," Para. 28(a) of Part II of the charter party^[6] provides explicit authority for [944] extra compensation in the circumstances of this case. We do not so interpret the clause. We construe it to apply only where the master, by reason of dangerous conditions, deposits the cargo at some port or haven other than the designated place of discharge. Here the cargo did reach the designated port albeit by another route, and hence the clause is not applicable. No intermediate or other disposition of the oil was appropriate under the circumstances.

Appellant relies on C. H. Leavell & Co. v. Hellenic Lines, Ltd., 13 F.M.C., 76, 1969 A.M.C. 2177 (1969) for a contrary conclusion. That case involved a determination as to whether surcharges to compensate for extra expenses incurred when the Suez Canal was closed after the commencement of a voyage, were available to a carrier. The Federal Maritime Commission authorized the assessment since the applicable tariffs were on file as provided by section 18(b) of the Shipping Act (46 U.S.C. § 817(b)) and also on the basis of Clause 5 of the bill of lading which is comparable to the Liberties Clause in issue here, except for the language which authorized the carrier to "proceed by any route. . . ." (Leavell, supra, 13 F.M.C. at 81, 1969 A.M.C. at 2182). This is the very language relied upon by the Commission in finding the surcharge appropriate (Leavell, supra, 13 F.M.C. at 89, 1969 A.M.C. at 2191) where the carrier proceeded to the initially designated port of destination via the Cape of Good Hope. Utilization of an alternate route contemplates berthing at the contracted port of destination. There is no such language in the clause at issue. Its absence fortifies the contention that the Liberties Clause was not intended to be applicable to the facts in litigation here.

Matters involving impossibility or impracticability of performance of contract are concededly vexing and difficult. One is even urged on the allocation of such risks to pray for the "wisdom of Solomon.”  6 A. Corbin, Contracts § 1333, at 372 (1962). On the basis of all of the facts, the pertinent authority and a further belief in the efficacy of prayer, we affirm.

[1] This is the formula utilized in the Restatement of Contracts § 454 (1932).

[2] The Restatement gives some examples of what is "extreme and unreasonable"— Restatement of Contracts § 460, Illus. 2 (tenfold increase in costs) and Illus. 3 (costs multiplied fifty times) (1932); compare § 467, Illus. 3. See generally G. Grismore, Principles of the Law of Contracts § 179 (rev. ed. J. E. Murray 1965).

[3] Both parties take solace in the Uniform Commercial Code which in comment 4 to Section 2-615 states that the rise in cost must "alter the essential nature of the performance . . ." This is clearly not the case here. The owner relies on a further sentence in the comment which refers to a severe shortage of raw materials or of supplies due to "war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost. . . ." Since this is not a case involving the sale of goods but transportation of a cargo where there was an alternative which was a commercially reasonable substitute (see Uniform Commercial Code § 2-614 (1)) the owner's reliance is misplaced.

[4] Transatlantic Financing Corp. v. United States, supra, 363 F.2d at 319 n.14.

[5] While these are English cases and refer to the doctrine of "frustration" rather than "impossibility" as Judge Skelly Wright pointed out in Transatlantic, supra, 363 F.2d at 320 n. 16 the two are considered substantially identical, 6 A. Corbin, Contracts § 1322, at 327 n. 9 (rev. ed. 1962). While Tsakiroglou and The Eugenia are criticized in Schegal, Of Nuts, and Ships and Sealing Wax, Suez, and Frustrating Things—The Doctrine of Impossibility of Performance, 23 Rutgers L. Rev. 419, 448 (1969), apparently on the theory that the charterer is a better loss bearer, the overruled Sidermar case was previously condemned in Berman, Excuse for Nonperformance in the Light of Contract Practices in International Trade, 63 Colum. L. Rev. 1413, 1424-27 (1963).

[6] "28. Liberty Clauses. (a) In any situation whatsoever and wheresoever occurring and whether existing or anticipated before commencement of or during the voyage, which in the judgment of the Owner or Master is likely to give rise to risk of capture, seizure, detention, damage, delay or disadvantage to or loss of the Vessel or any part of her cargo, or to make it unsafe, imprudent, or unlawful for any reason to commence or proceed on or continue the voyage or to enter or discharge the cargo at the port of discharge, or to give rise to delay or difficulty in arriving, discharging at or leaving the port of discharge or the usual place of discharge in such port, the Owner may before loading or before the commencement of the voyage, require the shipper or other person entitled thereto to take delivery of the Cargo at port of shipment and upon their failure to do so, may warehouse the cargo at the risk and expense of the cargo; or the owner or Master, whether or not proceeding toward or entering or attempting to enter the port of discharge or reaching or attempting to reach the usual place of discharge therein or attempting to discharge the cargo there, may discharge the cargo into depot, lazaretto, craft or other place; or the Vessel may proceed or return, directly or indirectly, to or stop at any such port or place whatsoever as the Master or the Owner may consider safe or advisable under the circumstances, and discharge the cargo, or any part thereof, at any such port or place; or the Owner or the Master may retain the cargo on board until the return trip or until such time as the Owner or the Master thinks advisable and discharge the cargo at any place whatsoever as herein provided or the Owner or the Master may discharge and forward the cargo by any means at the risk and expense of the cargo. The Owner may, when practicable, have the Vessel call and discharge the cargo at another or substitute port declared or requested by the Charterer. The Owner or the Master is not required to give notice of discharge of the cargo, or the forwarding thereof as herein provided. When the cargo is discharged from the Vessel, as herein provided, it shall be at its own risk and expense; such discharge shall constitute complete delivery and performance under this contract and the Owner shall be freed from any further responsibility. For any service rendered to the cargo as herein provided the Owner shall be entitled to a reasonable extra compensation."

Present: TAURO, C.J., REARDON, BRAUCHER, HENNESSEY, & KAPLAN, JJ.

David C. Hawkins for the plaintiff.

Andrew T. Campoli, for the defendant, submitted a brief.

REARDON, J.

In this action of contract a verdict was returned for the defendant. The case is here on the plaintiff's exceptions.

The plaintiff Mishara Construction Company, Inc. (Mishara) was the general contractor under contract with the Pittsfield Housing Authority for the construction of Rose Manor, a housing project for the elderly. In September, 1966, the plaintiff negotiated with the defendant Transit-Mixed Concrete Corp. (Transit) for the supplying of ready-mixed concrete to be used on the project. An agreement was reached that Transit would supply all the concrete needed on the project at a price of $13.25 a cubic yard, with deliveries to be made at the times and in the amounts as ordered by Mishara. This agreement was evidenced by a [124] purchase order signed by the parties on September 21, 1966. That purchase order identified the Rose Manor project and indicated that delivery was to be made "[a]s required by Mishara Construction Company." Performance under this contract was satisfactory to both parties until April, 1967. In that month a labor dispute disrupted work on the job site. Although work resumed on June 15, 1967, a picket line was maintained on the site until the completion of the project in 1969. Throughout this period, with very few exceptions, no deliveries of concrete were made by Transit notwithstanding frequent requests by Mishara. After notifying Transit of its intention, Mishara purchased the balance of its concrete requirements elsewhere. Mishara sought in damages the additional cost of concrete incurred by virtue of the higher price of the replacement product, as well as the expenses of locating an alternate source.

The plaintiff's exceptions relate to the introduction of certain evidence and the failure of the trial judge to give certain requested instructions. Requests 2 and 3 sought instructions that the requirements that a definite quantity of goods and a definite duration of performance be specified in an enforceable contract are satisfied if the contract is one which calls for deliveries as required on a particular project. Since this is a contract for the sale of goods it is governed by the Uniform Commercial Code. G.L.c. 106. "Requirements contracts" of the kind the plaintiff contends was present here are explicitly recognized as valid by the Code in G.L.c. 106, § 2-306 (1).^[1] The Official Comment No. 2 to that section makes clear the drafters' intention that when quantity is phrased only in terms of output or requirements the contract "is not too indefinite since it is held to mean the actual good faith output or requirements" of the buyer [125] or seller. Such a view is consistent with the established law of Massachusetts. Royal Paper Box Co. v. E.R. Apt Shoe Co. 290 Mass. 207 (1935). Neofotistos v. Harvard Brewing Co. 341 Mass. 684 (1961). Nor is a supply contract tied to a particular project too indefinite with respect to duration. This is not a case in which no time for performance is set out in the contract, and in which the court by long established rule will imply a reasonable time. Cf. Cohen v. Wintman, 236 Mass. 471, 472 (1920); G.L.c. 106, § 2-309 (1). Although no specific date is named in the contract, the time is sufficiently determined by the occurrence of a specified event, i.e., the completion of the project. In Phelps v. Shawprint, Inc. 328 Mass. 352 (1952), in which payments were to continue so long as certain defendants were associated with the defendant corporation, it was said at pp. 354355: "The contract was not silent on this aspect for it carried its own measure of time.... Such a contract is not too indefinite or uncertain to be enforceable at least for partial breaches even though it is impossible to predict precisely when the contingency will occur that will bring the contract to an end." See Proctor v. Union Coal Co. 243 Mass. 428 (1923); G.L.c. 106, § 2-309, comment No. 1. Therefore both of Mishara's requests were correct as matters of law. We believe, however, that these points were adequately covered in the judge's charge albeit in less than perfect form. There was no error in the failure to give instructions in precisely the form requested. Palmer Russell Co. v. Rothenberg, 328 Mass. 477, 482-483 (1952). Campbell v. Shea, 332 Mass. 422, 425 (1955).

Request 9 was an instruction that the contract was not terminable until Mishara had received all the concrete it required for the project. Again, although this was a correct statement of the law, we believe it was not error for the judge to refuse it. As has been shown, the specification of deliveries as needed on the project was a sufficiently definite statement of the time for performance. Therefore this was not a contract which contemplated ongoing and open-ended performance which would be terminable on reasonable notice. G.L.c. 106, § 2-309, and comment [126] No. 1. Simons v. American Dry Ginger Ale Co. Inc. 335 Mass. 521 (1957). Since, however, there was no indication from the evidence or the judge's charge that this was such a contract, there was no need to charge that it was not. A request correct in law but not appropriate to the conditions of a case is properly refused. Altavilla v. Old Colony St. Ry. 222 Mass. 322 (1916). McNeil v. Middlesex & Boston St. Ry. 233 Mass. 254, 256 (1919). Since it is unlikely that the jury would on their own initiative come to the conclusion that this was a contract which could properly be terminated prior to completion of performance by either party, it would have been misleading for the judge to charge that it was not terminable by the defendant. See Dixon v. New England R.R., 179 Mass. 242, 247 (1901).

Nor was there error in the refusal to give request 13, that on the evidence the jury "must find that [the] defendant breached its contract with [the] plaintiff by failing to deliver" Mishara's concrete requirements. The principal issue in the case was the defendant's claimed excuse of impossibility of performance. The determination of that issue depended on facts and circumstances which were for the jury to decide. While we suppose one could develop a nice technical argument that impossibility does not nullify a breach but rather provides an excuse for it, to give the instruction requested would surely have misled the jury on the ultimate question of liability. Moreover, the failure to give it was of no detriment to the plaintiff of which it can complain. See Howes v. Grush, 131 Mass. 207 (1881). Dixon v. New England R.R., supra.

The remainder of the plaintiff's exceptions relate to the proffered defence of the impossibility of performance. Objection was made to the introduction of all evidence regarding the existence of a picket line at the job site and the difficulty which Transit did encounter or might have encountered in attempting to make deliveries through that picket line. Furthermore, Mishara requested an instruction that Transit "was required to comply with the contract [127] regardless of picket lines, strikes or labor difficulties."^[2] As a result Mishara would have completely withdrawn the question of impossibility resulting from the picket line from the jury. We are asked to decide as matter of law and without reference to individual facts and circumstances that "picket lines, strikes or labor difficulties" provide no excuse for nonperformance by way of impossibility. This is too sweeping a statement of the law and we decline to adopt it.

The excuse of impossibility in contracts for the sale of goods is controlled by the appropriate section of the Uniform Commercial Code, G.L.c. 106, § 2-615.^[3] That section sets up two requirements before performance may be excused. First, the performance must have become "impracticable." Second, the impracticability must have been caused "by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made." This section of the Uniform Commercial Code has not yet been interpreted by this court. Therefore it is appropriate to discuss briefly the significance of these two criteria.

With respect to the requirement that performance must have been impracticable, the official Code comment to the section stresses that the reference is to "commercial impracticability" [128] as opposed to strict impossibility. G.L.c. 106, § 2-615, comments 3-4. This is not a radical departure from the common law of contracts as interpreted by this court. Although a strict rule was originally followed denying any excuse for accident or "inevitable necessity," e.g., Adams v. Nichols, 19 Pick. 275 (1837), it has long been assumed that circumstances drastically increasing the difficulty and expense of the contemplated performance may be within the compass of "impossibility." See Rowe v. Peabody, 207 Mass 226, 233-234 (1911) (dictum); Fauci v. Denehy, 332 Mass. 691, 696-697 (1955). By adopting the term "impracticability" rather than "impossibility" the drafters of the Code appear to be in accord with Professor Williston who stated that "the essence of the modern defense of impossibility is that the promised performance was at the making of the contract, or thereafter became, impracticable owing to some extreme or unreasonable difficulty, expense, injury, or loss involved, rather than that it is scientifically or actually impossible." Williston, Contracts (Rev. ed.) § 1931 (1938). See Restatement: Contracts, § 454 (1932); Corbin, Contracts, § 1339 (1962).

The second criterion of the excuse, that the intervening circumstance be one which the parties assumed would not occur, is also familiar to the law of Massachusetts. Baetjer v. New England Alcohol Co. 319 Mass. 592, 600 (1946). Boston Plate & Window Glass Co. v. John Bowen Co. Inc. 335 Mass. 697, 699-700 (1957). The rule is essentially aimed at the distribution of certain kinds of risks in the contractual relationship. By directing the inquiry to the time when the contract was first made, we really seek to determine whether the risk of the intervening circumstance was one which the parties may be taken to have assigned between themselves. It is, of course, the very essence of contract that it is directed at the elimination of some risks for each party in exchange for others. Each receives the certainty of price, quantity, and time, and assumes the risk of changing market prices, superior opportunity, or added costs. It is implicit in the doctrine of impossibility (and the [129] companion rule of "frustration of purpose") that certain risks are so unusual and have such severe consequences that they must have been beyond the scope of the assignment of risks inherent in the contract, that is, beyond the agreement made by the parties. To require performance in that case would be to grant the promisee an advantage for which he could not be said to have bargained in making the contract. "The important question is whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably have been within the contemplation of both parties when they entered into the contract. If so, the risk should not fairly be thrown upon the promisor." Williston, Contracts (Rev. ed.) § 1931 (1938). The emphasis in contracts governed by the Uniform Commercial Code is on the commercial context in which the agreement was made. The question is, given the commercial circumstances in which the parties dealt: Was the contingency which developed one which the parties could reasonably be thought to have foreseen as a real possibility which could affect performance? Was it one of that variety of risks which the parties were tacitly assigning to the promisor by their failure to provide for it explicitly? If it was, performance will be required. If it could not be so considered, performance is excused. The contract cannot be reasonably thought to govern in these circumstances, and the parties are both thrown upon the resources of the open market without the benefit of their contract. See Boston Plate & Window Glass Co. v. John Bowen Co. Inc., supra, at 699-700.

With this backdrop, we consider Mishara's contention that a labor dispute which makes performance more difficult never constitutes an excuse for nonperformance. We think it is evident that in some situations a labor dispute would not meet the requirements for impossibility discussed above. A picket line might constitute a mere inconvenience and hardly make performance "impracticable." Likewise, in certain industries with a long record of labor difficulties, the nonoccurrence of strikes and picket [130] lines could not fairly be said to be a basic assumption of the agreement. Certainly, in general, labor disputes cannot be considered extraordinary in the course of modern commerce. See Restatement: Contracts, § 461, illustration 7 (1932). Admitting this, however, we are still far from the proposition implicit in the plaintiff's requests. Much must depend on the facts known to the parties at the time of contracting with respect to the history of and prospects for labor difficulties during the period of performance of the contract, as well as the likely severity of the effect of such disputes on the ability to perform. From these facts it is possible to draw an inference as to whether or not the parties intended performance to be carried out even in the face of the labor difficulty. Where the probability of a labor dispute appears to be practically nil, and where the occurrence of such a dispute provides unusual difficulty, the excuse of impracticability might well be applicable. Thus in discussing the defence of impossibility, then Chief Judge Cardozo noted an excuse would be provided "conceivably in some circumstances by unavoidable strikes." Canadian Industrial Alcohol Co. Ltd. v. Dunbar Molasses Co. 258 N.Y. 194, 198 (1932). The many variables which may bear on the question in individual cases were canvassed by Professor Williston in Williston, Contracts (Rev. ed.) § 1951A (1938), and he concluded that the trend of the law is toward recognizing strikes as excuses for nonperformance. We agree with the statement of the judge in Badhwar v. Colorado Fuel & Iron Corp. 138 F. Supp. 595, 607 (S.D.N.Y. 1955), affd. 245 F.2d 903 (2d Cir.1957), on the same question: "Rather than mechanically apply any fixed rule of law, where the parties themselves have not allocated responsibility, justice is better served by appraising all of the circumstances, the part the various parties played, and thereon determining liability." Since the instructions requested by the plaintiff and the exclusion of the evidence objected to would have precluded such a factual determination, the requests were more properly [131] refused,^[4] and the evidence was properly admitted.

Exceptions overruled.

[1] "Output, Requirements and Exclusive Dealings. (1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded."

[2] Requests 16 and 17 essentially asked for instructions that in the absence of clauses in the contract to the contrary, the impossibility of performance provides no excuse. This, in effect, requires a charge that no set of circumstances will ever excuse a supplier from performing. Since we conclude in the text that request 15, to the effect that picket lines and labor disputes provide no excuse, is an incorrect statement of the law, it follows a fortiori that these requests were rightly refused.

[3]"Excuse by Failure of Presupposed Conditions.

"Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance

"(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid."

[4] As has been noted, we have not had a previous occasion to address ourselves to this question in light of the Uniform Commercial Code. Therefore it is not surprising that the charge actually given by the trial judge was less than ideal on this point. But no general exception was taken to the charge given, only to the failure to give the specific instructions discussed in the opinion. Since those requests were incorrect as matter of law, there was no error in refusing them.

Commonwealth, third-party defendant.
Supreme Judicial Court of Massachusetts, Worcester.
Argued Nov. 7, 1990.
Decided Feb. 20, 1991.

[604] David A. Talman, Worcester, for plaintiff.

John J. Spignesi, Boston, for John J. Paonessa Co., Inc.

Gerald K. Kelley, Asst. Atty. Gen., for Com.

Before LIACOS, C.J., and WILKINS, ABRAMS, LYNCH and GREANEY, JJ.

LYNCH, Justice.

This appeal raises the question whether the doctrine of frustration of purpose may be a defense in a breach [409 Mass. 372] of contract action in Massachusetts, and, if so, whether it excuses the defendant John J. Paonessa Company, Inc. (Paonessa), from performance.

The claim of the plaintiff, Chase Precast Corporation (Chase), arises from the cancellation of its contracts with Paonessa to supply median barriers in a highway reconstruction project of the Commonwealth. Chase brought an action to recover its anticipated profit on the amount of median barriers called for by its supply contracts with Paonessa but not produced. Paonessa brought a cross action against the Commonwealth for indemnification in the event it should be held liable to Chase. After a jury-waived trial, a Superior Court judge ruled for Paonessa on the basis of impossibility of performance. ^[2] Chase and Paonessa cross appealed. The Appeals Court affirmed, noting that the doctrine of frustration of purpose more accurately described the basis of the trial judge's decision than [605] the doctrine of impossibility. Chase Pre cast Corp . v. John J . Paonessa Co ., 28 Mass.App.Ct. 639 , 554 N.E.2d 868 (1990) . We agree. We allowed Chase 's application for further appellate review, and we now affirm.

The pertinent facts are as follows. In 1982, the Commonwealth, through the Department of Public Works (department), entered into two contracts with Paonessa for resurfacing and improvements to two stretches of Route 128. Part of each contract called for replacing a grass median strip between the north and southbound lanes with concrete surfacing and precast concrete median barriers. Paonessa entered into two contracts with Chase under which Chase was to supply, in the aggregate, 25,800 linear feet of concrete median barriers according to the specifications of the department for highway construction. The quantity and type of barriers to be supplied were specified in two purchase orders prepared by Chase.

[409 Mass. 373] The highway reconstruction began in the spring of 1983. By late May, the department was receiving protests from angry residents who objected to use of the concrete median barriers and removal of the grass median strip. Paonessa and Chase became aware of the protest around June 1. On June 6, a group of about 100 citizens filed an action in the Superior Court to stop installation of the concrete median barriers and other aspects of the work. On June 7, anticipating modification by the department, Paonessa notified Chase by letter to stop producing concrete barriers for the projects. Chase did so upon receipt of the letter the following day. On June 17, the department and the citizens' group entered into a settlement which provided, in part, that no additional concrete median barriers would be installed. On June 23, the department deleted the permanent concrete median barriers item from its contracts with Paonessa.

Before stopping production on June 8, Chase had produced approximately one-half of the concrete median barriers called for by its contracts with Paonessa, and had delivered most of them to the construction sites. Paonessa paid Chase for all that it had produced, at the contract price. Chase suffered no out-of-pocket expense as a result of cancellation of the remaining portion of barriers.

This court has long recognized and applied the doctrine of impossibility as a defense to an action for breach of contract. See, e.g., Boston Plate & Window Glass Co. v. John Bowen Co., 335 Mass. 697, 141 N.E.2d 715 (1957); Baetjer v. New England Alcohol Co., 319 Mass. 592, 66 N.E.2d 798 (1946); Butterfield v. Byron, 153 Mass. 517, 27 N.E. 667 (1891). Under that doctrine, "where from the nature of the contract it appears that the parties must from the beginning have contemplated the continued existence of some particular specified thing as the foundation of what was to be done, then, in the absence of any warranty that the thing shall exist ... the parties shall be excused ... [when] performance becomes impossible from the accidental perishing of the thing without the fault of either party." Boston Plate & Window Glass Co., supra, 335 Mass. at 700, 141 N.E.2d 715, quoting Hawkes v. Kehoe, 193 Mass. 419, 423, 79 N.E. 766 (1907).

[409 Mass. 374] On the other hand, although we have referred to the doctrine of frustration of purpose in a few decisions, we have never clearly defined it. See Mishara Constr. Co. v. Transit-Mixed Concrete Corp., 365 Mass. 122, 128-129, 310 N.E.2d 363 (1974); Essex-Lincoln Garage, Inc. v. Boston, 342 Mass. 719, 721-722, 175 N.E.2d 466 (1961); Baetjer v. New England Alcohol Co., supra, 319 Mass. at 602, 66 N.E.2d 798. Other jurisdictions have explained the doctrine as follows: when an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the object or purpose of the contract, thus destroying the value of performance, the parties are excused from further performance. See Howard v. Nicholson, 556 S.W.2d 477, 482 (Mo.Ct.App.1977); Perry v. Champlain Oil Co., 101 N.H. 97, 134 A.2d 65 (1957); Lloyd v. Murphy, 25 Cal.2d 48, 153 P.2d 47 (1944).

In Mishara Constr. Co., supra, 365 Mass. at 129, 310 N.E.2d 363, we called frustration of purpose a "companion rule" to the doctrine of impossibility. Both doctrines [606] concern the effect of supervening circumstances upon the rights and duties of the parties. The difference lies in the effect of the supervening event. Under frustration, "[p]erformance remains possible but the expected value of performance to the party seeking to be excused has been destroyed by [the] fortuitous event...." ^[3] Lloyd v. Murphy, supra, 25 Cal.2d at 53, 153 P.2d 47 . The principal question in both kinds of cases remains "whether an unanticipated circumstance, the risk of which should not fairly be thrown on the promisor, has made performance vitally different from what was reasonably to be expected." See Lloyd, supra at 54, 153 P.2d 47 (frustration); Mishara Constr. Co ., supra, 365 Mass. at 129, 310 N.E.2d 363 (impossibility).

Since the two doctrines differ only in the effect of the fortuitous supervening event, it is appropriate to look to our [409 Mass. 375] cases dealing with impossibility for guidance in treating the issues that are the same in a frustration of purpose case. ^[4] The trial judge's findings with regard to those issues are no less pertinent to application of the frustration defense because they were considered relevant to the defense of impossibility.

Another definition of frustration of purpose is found in the Restatement (Second) of Contracts § 265 (1981):

"Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary."

This definition is nearly identical to the defense of "commercial impracticability," found in the Uniform Commercial Code, G.L. c. 106, § 2-615 (1988 ed.), ^[5] which this court, in Mishara Constr. Co., supra at 127-128, 310 N.E.2d 363, held to be consistent with the common law of contracts regarding impossibility of performance. It follows, therefore, that the Restatement's formulation of the doctrine is consistent with this court's previous treatment of impossibility of performance and frustration of purpose.

Paonessa bore no responsibility for the department's elimination of the median barriers from the projects. Therefore, whether it can rely on the defense of frustration turns on [409 Mass. 376] whether elimination of the barriers was a risk allocated by the contracts to Paonessa. Mishara Constr. Co., supra, 365 Mass. at 129, 310 N.E.2d 363, articulates the relevant test:

"The question is, given the commercial circumstances in which the parties dealt: Was the contingency which developed one which the parties could reasonably be thought to have foreseen as a real possibility which could affect performance? Was it one of that variety of risks which the parties were tacitly assigning to the promisor by their failure to provide for it explicitly? If it was, performance will be required. If it could not be so considered, performance is excused."

This is a question for the trier of fact. Id. at 127, 130, 310 N.E.2d 363.

Paonessa's contracts with the department contained a standard provision allowing the department to eliminate items or

[607] portions of work found unnecessary. ^[6] The purchase order agreements between Chase and Paonessa do not contain a similar provision. This difference in the contracts does not mandate the conclusion that Paonessa assumed the risk of reduction in the quantity of the barriers. It is implicit in the judge's findings that Chase knew the barriers were for department projects. The record supports the conclusion that Chase was aware of the department's power to decrease quantities of contract items. The judge found that Chase had been a supplier of median barriers to the department in the [409 Mass. 377] past. The provision giving the department the power to eliminate items or portions thereof was standard in its contracts. See Standard Specifications for Highways and Bridges, Commonwealth of Massachusetts Department of Public Works § 4.06 (1973). The judge found that Chase had furnished materials under and was familiar with the so-called "Unit Price Philosophy" in the construction industry, whereby contract items are paid for at the contract unit price for the quantity of work actually accepted. Finally, the judge's finding that "[a]ll parties were well aware that lost profits were not an element of damage in either of the public works projects in issue" further supports the conclusion that Chase was aware of the department's power to decrease quantities, since the term prohibiting claims for anticipated profit is part of the same sentence in the standard provision as that allowing the engineer to eliminate items or portions of work.

In Mishara Constr. Co., supra at 130, 310 N.E.2d 363, we held that, although labor disputes in general cannot be considered extraordinary, whether the parties in a particular case intended performance to be carried out, even in the face of a labor difficulty, depends on the facts known to the parties at the time of contracting with respect to the history of and prospects for labor difficulties. In this case, even if the parties were aware generally of the department's power to eliminate contract items, the judge could reasonably have concluded that they did not contemplate the cancellation for a major portion of the project of such a widely used item as concrete median barriers, and did not allocate the risk of such cancellation. ^[7]

Our opinion in Chicopee Concrete Serv., Inc. v. Hart Eng'g Co., 398 Mass. 476, 498 N.E.2d 121 (1986), does not lead to a different conclusion. Although we held there that a provision of a [409 Mass. 378] prime contract requiring city approval of subcontractors was not incorporated by reference into the subcontract, id. at 478, 498 N.E.2d 121, we nevertheless stated that, if the record had supported the conclusion that the subcontractor knew, or at least had notice of, the approval clause, the result might have been different. Id. at 478-479, 498 N.E.2d 121. ^[8]

One additional matter requires comment. Chase argues that a decision of the Superior Court in an unrelated case, D. Cicconi, Inc. v. Metropolitan Dist. Comm'n, Civ. No. 73271 (Super.Ct. Suffolk Co., July 3, 1987), either "states the law of this Commonwealth, or became the law of this case," for the following reasons:

"At the trial, the [trial] court was provided a copy of the memorandum of decision

[608] in the Suffolk Superior Court action.... Counsel for the third-party defendant ... argued only that the D. Cicconi case did not apply to this case and by clear inference conceded that the law set forth in the case was correct law.... There was no objection to the presentation of the D. Cicconi case [409 Mass. 379] to the court nor to the principles of law stated in D. Cicconi...."

Chase claims that, because the D. Cicconi, Inc., decision has become the law of this case, the judge erred when he found that case not to affect his decision.

One of the definitions of the doctrine of "the law of the case" is set out, as follows, in Dalton v. Post Publishing Co., 328 Mass. 595, 599, 105 N.E.2d 385 (1952), which Chase cites in support of its argument:

"Where a party causes the judge to understand that certain facts are admitted or that certain issues are waived or abandoned he cannot object to the judge's conducting the trial on the basis of that understanding.... A statement of the judge during the trial as to the issues being tried or as to his understanding of those issues is binding on us where nothing is said by counsel to correct such understanding ... or where the record does not disclose that the judge was in error. It becomes the law of the trial." (Citations omitted.)

That the defendant did not object to the routine practice of a party's drawing the judge's attention to a decision of another judge does not amount to a waiver of any issues by the defendant, nor to a statement by the judge as to the issues being tried.

The other principal definition of "the law of the case" states: "Where there has been no change of circumstances, a court or judge is not bound to reconsider a case, an issue, or a question or fact of law [in the same case], once decided." Peterson v. Hopson, 306 Mass. 597, 599, 29 N.E.2d 140 (1940). However applied, the law of the case doctrine does not bind an appellate court to a ruling of law made in a lower court in another case, even though that case may have been considered by the lower court judge who decided the case being appealed.

Judgment affirmed.

---------------

Notes:

^[1] John J. Paonessa. We shall refer to a single defendant.

^[2] The judge also ruled that the Department of Public Works had the right to cancel the order for median barriers under its general contracts with Paonessa, particularly under subsection 4.06 of those contracts. See note 6, infra.

^[3] Clearly frustration of purpose is a more accurate label for the defense argued in this case than impossibility of performance, since, as the Appeals Court pointed out, "[p]erformance was not literally impossible. Nothing prevented Paonessa from honoring its contract to purchase the remaining sections of median barrier, whether or not the [department] would approve their use in the road construction." 28 Mass.App.Ct. 639, 644 n. 5, 554 N.E.2d 868 (1990).

^[4] Those issues include the foreseeability of the supervening event, allocation of the risk of occurrence of the event, and the degree of hardship to the promisor. Compare Mishara Constr. Co., supra, 365 Mass. at 128-130, 310 N.E.2d 363, and Boston Plate & Window Glass Co., supra, 335 Mass. at 700-701, 141 N.E.2d 715 with Howard, supra at 482-483, and Perry, supra, 101 N.H. at 98-100, 134 A.2d 65. See also 18 S. Williston, Contracts §§ 1935, 1954 (1978 & Supp.1990).

^[5] That section states that performance is excused when it has been made "impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made." G.L. c. 106, § 2-615.

^[6] The contracts contained the following provision:

"4.06 Increased or Decreased Contract Quantities.

"When the accepted quantities of work vary from the quantities in the bid schedule, the Contractor shall accept as payment in full, so far as contract items are concerned, payment at the original contract unit prices for the accepted quantities of work done.

"The Engineer may order omitted from the work any items or portions of work found unnecessary to the improvement and such omission shall not operate as a waiver of any condition of the Contract nor invalidate any of the provisions thereof, nor shall the Contractor have any claim for anticipated profit.

"No allowance will be made for any increased expenses, loss of expected reimbursement therefor or from any other cause."

^[7] The judge did not explicitly find that cancellation of the barriers was not contemplated and that the risk of their elimination was not allocated by the contracts. However, the judge's decision imports every finding essential to sustain it if there is evidence to support it. Mailer v. Mailer, 390 Mass. 371, 373, 455 N.E.2d 1211 (1983).

^[8] This court held in John Soley & Sons v. Jones, 208 Mass. 561, 566-567, 95 N.E. 94 (1911), that, where by its terms the prime contract could be cancelled if the defendant was not making sufficient progress on the work, and the plaintiff knew of the article of cancellation, nevertheless, even if it was mutually understood that the defendant did not intend to perform unless the prime contract remained in force, the defendant was not relieved from performance on the ground of impossibility where it failed to provide for the risk of cancellation in its contract with the plaintiff. To the extent that holding is contrary to our decision in this case, we decline to follow it, and refer to our adoption in Mishara Constr. Co., supra, 365 Mass. at 130, 310 N.E.2d 363, of the following statement: "Rather than mechanically apply any fixed rule of law, where the parties themselves have not allocated responsibility, justice is better served by appraising all of the circumstances, the part the various parties played, and thereon determining liability," quoting Badhwar v. Colorado Fuel & Iron Corp., 138 F.Supp. 595, 607 (S.D.N.Y.1955), aff'd, 245 F.2d 903 (2d Cir.1957). See West Los Angeles Inst. for Cancer Research v. Mayer, 366 F.2d 220, 225 (9th Cir.1966), cert. denied, 385 U.S. 1010, 87 S.Ct. 718, 17 L.Ed.2d 548 (1967) ("foreseeability of the frustrating event is not alone enough to bar rescission if it appears that the parties did not intend the promisor to assume the risk of its occurrence").

L.R. 2 K.B. 740
KRELL
v.
HENRY.
IN THE COURT OF APPEAL.
August 11, 1903

Contract—Impossibility of Performance—Implied Condition—Necessary Inference—Surrounding Circumstances—Substance of Contract—Coronation—Procession—Inference that Procession would pass.

By a contract in writing of June 20, 1902, the defendant agreed to hire from the plaintiff a flat in Pall Mall for June 26 and 27, on which days it had been announced that the coronation processions would take place and pass along Pall Mall. The contract contained no express reference to the coronation processions, or to any other purpose for which the flat was taken. A deposit was paid when the contract was entered into, As the processions did not take place on the days originally fixed, the defendant declined to pay the balance of the agreed rent :—

Held (affirming the decision of Darling J.), from necessary inferences drawn from surrounding circumstances, recognised by both contracting parties, that the taking place of the processions on the days originally fixed along the proclaimed route was regarded by both contracting parties as the foundation of the contract; that the words imposing on the defendant the obligation to accept and pay for the use of the flat for the days named, though general and unconditional, were not used with reference to the possibility of the particular contingency which afterwards happened, and consequently that the plaintiff was not entitled to recover the balance of the rent fixed by the contract.

Taylor v. Caldwell, (1863) 3 B. & S. 826, discussed and applied.

APPEAL from a decision of Darling J.

The plaintiff, Paul Krell, sued the defendant, C. S. Henry, for £50, being the balance of a sum of £75, for which the defendant had agreed to hire a flat at 56A, Pall Mall on the days of June 26 and 27, for the purpose of viewing the processions to be held in connection with the coronation of His Majesty. The defendant denied his liability, and counterclaimed for the return of the sum of £25, which had been paid as a deposit, on the ground that, the processions not having taken place owing to the serious illness of the King, there had been a total failure of consideration for the contract entered into by him. The facts, which were not disputed, were as follows. The plaintiff on leaving the country in March, 1902, left instruc [741] tions with his solicitor to let his suite of chambers at 56A, Pall Mall on such terms and for such period (not exceeding six months) as he thought proper. On June 17,1902, the defendant noticed an announcement in the windows of the plaintiff's flat to the effect that windows to view the coronation processions were to be let. The defendant interviewed the housekeeper on the subject, when it was pointed out to him what a good view of the processions could be obtained from the premises, and he eventually agreed with the housekeeper to take the suite for the two days in question for a sum of 751. On June 20 the defendant wrote the following letter to the plaintiff's solicitor:—

“I am in receipt of yours of the 18th instant, inclosing form of agreement for the suite of chambers on the third floor at 56A, Pall Mall, which I have agreed to take for the two days, the 26th and 27th instant, for the sum of £75. For reasons given you I cannot enter into the agreement, but as arranged over the telephone I inclose herewith cheque for £25 as deposit, and will thank you to confirm to me that I shall have the entire use of these rooms during the days (not the nights) of the 26th and 27th instant. You may rely that every care will be taken of the premises and their contents. On the 24th inst. I will pay the balance, viz., £50, to complete the £75 agreed upon."

On the same day the defendant received the following reply from the plaintiff's solicitor:—

“I am in receipt of your letter of to-day's date inclosing cheque for £25. deposit on your agreeing to take Mr. Krell's chambers on the third floor at 56A, Pall Mall for the two days, the 26th and 27th June, and I confirm the agreement that you are to have the entire use of these rooms during the days (but not the nights), the balance, £50, to, be paid to me on Tuesday next the 24th instant."

The processions not having taken place on the days originally appointed, namely, June 26 and 27, the defendant declined to pay the balance of £50 alleged to be due from him under the contract in writing of June 20 constituted by the above two letters. Hence the present action.

[742] Darling J., on August 11, 1902, held, upon the authority of Taylor v. Caldwell^[1] and The Moorcock^[2], that there was an implied condition in the contract that the procession should take place, and gave judgment for the defendant on the claim and counter-claim.

The plaintiff appealed.

Spencer Bower, K.C., and Holman Gregory, for the plaintiff. In the contract nothing is said about the coronation procession, but it is admitted that both parties expected that there would be a procession, and that the price to be paid for the rooms was fixed with reference to the expected procession. Darling J. held that both the claim and the counter-claim were governed by Taylor v. Caldwell^[1], and that there was an implied term in the contract that the procession should take place. It is submitted that the learned judge was wrong. If he was right, the result will be that in every case of, this kind an unremunerated promisor will be in effect an insurer of the hopes and expectations of the promisee.

Taylor v. Caldwell^[1] purports to be founded on two passages in the Digest. But other passages in the Digest are more directly in point, and shew that the implied condition is that there shall not lie a physical extinction of the subject-matter of the contract.

[VAUGHAN WILLIAMS L.J. The English cases have extended the doctrine of the Digest.]

The limits of the extension are—(1.) the not coming into being of a thing which was not in existence at the date of the contract; (2.) the case of a thing, e.g., a ship, or a person in a contract for personal service, being incapacitated from doing the work intended. In order that the person who has contracted to pay the price should be excused from doing so, there must be (1.) no default on his part; (2.) either the physical extinction or the not coming into existence of the subject-matter of the contract; (3.) the performance of the contract must have been thereby rendered impossible.

In the present case there has been no default on the part of [743] the defendant. But there has been no physical extinction of the subject-matter, and the performance of the contract was quite possible. Rule 1, laid down in Taylor v. Caldwell^[3], and not rule 3, is the rule that regulates this case. Rule 1 is directly in the plaintiff's favour, for here the contract was positive and absolute. In that case the music hall which was the subject of the contract had been burnt down, so that performance of the contract by either party had become impossible.

[VAUGHAN WILLIAMS L.J. referred to Wright v. Hall.^[4]]

The cases which will be relied on for the defendant are all distinguishable from the present case.

Appleby v. Meyers^[5], Boast v. Firth^[6], Baily v. De Crespigny^[7], Howell v. Coupland^[8], and Nickoll v. Ashton^[9] are all distinguishable from the present case, in which two of the necessary elements do not exist.

There are a number of authorities in favour of the plaintiff, such as Paradine v. Jane^[10] ; Barker v. Hodgson^[11] ; Marquis of Bute v. Thompson^[12] ; Hills v. Sughrue^[13] ; Brown v. Royal Insurance Co.^[14] These cases were all anterior to Taylor v. Caldwell.^[1] There are other cases subsequent to Taylor v. Caldwell^[1] , such as Kennedy v. Panama & c., Mail Co.^[15] ; In re Arthur^[16] ; The Moorcock.^[17]

The real question is, What was the position of the parties on June 20, and what was the contract then entered into between them? The right possessed by the plaintiff on that day was the right of looking out of the window of the room, with the opportunity of seeing the procession from that window; the only sale to the defendant was of such right as the plaintiff had, and that was all that the plaintiff was parting with by the contract. There was, of course, the risk that the procession, [744] the anticipation or which gave the room a marketable value, might, from some cause or other, never take place; but that risk passed to the defendant by the contract. On entering into the contract with the defendant the plaintiff put it out of his power to let the room to anyone else: he passed the right and the risk at the same time. No implied condition can be imported into the contract that the object of it shall be attained. There can be no implied condition that the defendant shall be placed in the actual position of seeing the procession. This case is closely analogous to that of London Founders' Association, Limited v. Clarke^[18] , where it was held that in a contract for the sale of shares in a company there was no implied covenant that the purchaser should be put into the status of a shareholder by registration. So in Turner v. Goldsmith^[19] , where the defendant contracted to employ the plaintiff for a fixed term as agent in a business which he, the defendant, ultimately abandoned before the expiration of the term, it was held that there was no implied condition for the continued existence of the business, and accordingly the plaintiff was held entitled to damages for breach of contract. And that was so although part of the res had perished; here no part of the res had perished. The rule is that the Court will not imply any condition in a contract except in case of absolute necessity: Hamlyn, v. Wood.^[20] No doubt under the Sale of Goods Act, 1893 (56 & 57 Vict. c. 71), s. 7, where the specific goods, the subject of the contract, perish, the contract is gone; but this is not a case of that kind. And s. 14 enacts that, unless specified, no implied warranty or condition as to the quality or fitness of the goods supplied under a contract shall be imported. Ashmore v. Cox^[21] is an authority in favour of the plaintiff, for it was there held that a buyer under a contract took the risk of the performance of the contract being rendered impossible by unforeseen circumstances.

Blakeley v. Muller^[22] is also in the plaintiff's favour to the extent of the counter-claim.

[745] [Duke, K.C. The defendant abandons his counter-claim for £25 so that the sole question is as to his liability for the £50.

Upon the main question, then, it is submitted that both the decision in Blakeley v. Muller^[23] and of Darling, J. in the present case are opposed to the principle of Taylor v.Caldwell.^[1] The contract here is absolute, and the defendant has not, as he might have done, guarded himself against the risk by suitable words.

Then, if it is said that this was a mere licence to use the room and therefore revocable as not being under seal, it has now been decided that even if such a licence is revoked an action is still maintainable for breach of contract: Kerrison v. Srnith.^[24]

In conclusion it is submitted that the Court cannot imply an express condition that the procession should pass. Nothing should be implied beyond what was necessary to give to the contract that efficacy which the parties intended at the time. There is no such necessity here; in fact, the inference is the other way, for money was paid before the days specified; which shews that the passing of the procession did not really constitute the basis of the contract, except in a popular sense. The truth is that each party had an expectation, no doubt; but the position is simply this: one says, "Will you take the room?" and the other says, "Yes." That is all. The contract did nothing more than give the defendant the opportunity of seeing whatever might be going on upon the days mentioned.

Duke, K.C., and Ricardo, for the defendant. The question is, What was the bargain? The defendant contends that it was a bargain with an implied condition that the premises taken were premises in front of which a certain act of State would take place by Royal Proclamation. A particular character was thus impressed upon the premises; and when that character ceased to be impressed upon them the contract was at an end. It is through nobody's fault, but through an unforeseen misfortune that the premises lose that character. The price agreed to be paid must he regarded: it is equivalent to [746] many thousands a year. What explanation can be given of that, except that it was agreed to be paid for the purpose of enabling the defendant to see the procession? It was the absolute assumption of both parties when entering into the contract that the procession would pass.

The principle of Taylor v. Caldwell^[1] —namely, that a contract for the sale of a particular thing must not be construed as a positive contract, but as subject to an implied condition that, when the time comes for fulfilment, the specified thing continues to exist—exactly applies. The certainty of the coronation and consequent procession taking place was the basis of this contract. Both parties bargained upon the happening of a certain event the occurrence of which gave the premises a special character with a corresponding value to the defendant; but as the condition failed the premises lost their adventitious value. There has been such a change in the character of the premises which the plaintiff agreed the defendant should occupy as to deprive them of their value. When the premises become unfit for the purpose for which they were taken the bargain is off: Taylor v. Caldwell^[25] , the principle of which case was adopted by the Court of Appeal in Nickoll v. Ashton.^[26] What was in contemplation here was not that the defendant should merely go and sit in the room, but that he should see a procession which both parties regarded as an inevitable event. There was an implied warranty or condition founded on the presumed intention of the parties, and upon reason: The Moorcock.^[27] No doubt the observations of the Court in that ca.se were addressed to a totally different subject-matter, but the principle laid down was exactly as stated in Taylor v. Caldwell ^[1]and Nickoll v. Ashton.^[28] In Hamlyn v. Wood^[29] it was held that a contract there must be a reasonable implication in order to give the transaction such efficacy as both parties intended it to have, and that without such implication the consideration would fail. In the case of a demise, collateral bargains do not arise; but here [747] there is an agreement, and what has to be done is to ascertain the meaning and intention the parties had in entering into it.

[STIRLING L.J. In Appleby v. Myers^[30] there was a contract to supply certain machinery to a building, but before the completion of the contract the building was burnt down; and it was held that both parties were excused from performance of the contract.]

In that case the contract had been partly performed; but the defendant's case is stronger than that. When, as here, the contract is wholly executory and the subject-matter fails, the contract is at an end.

[STIRLING L.J. In Baily v. De Crespigny^[31] , where the performance of a covenant woo rendered impossible by an Act of Parliament, it was held that the covenantor was discharged.

VAUGHN WILLIAMS L.J. In Howell v. Coupland^[32] the contract was held to be subject to an implied condition that the parties should-be excused if performance became impossible through the perishing of the subject-matter.]

That applies here: it is impossible for the plaintiff to give the defendant that which he bargained for, and, therefore, there is a total failure of consideration.

To sum up, the basis of the contract is that there would be a procession; that is to say it is a contract based upon a certain thing coming into existence: there is a condition precedent that there shall be a procession. But for the mutual expectation of a procession upon the days mentioned there would have been no contract whatever. The basis of the contract was also the continuance of a thing in a certain condition; for on June 20 the rooms were capable of being described as a place from which to view a procession on two particular days; whereas when those days arrived the rooms were no longer capable of being so described.

Holman Gregory replied.

Cur. adv. vult.

Aug. 11. VAUGHAN WILLIAMS L.J. read the following written judgment:—The real question in this case is the extent [748] of the application in English law of the principle of the Roman law which has been adopted and acted on in many English decisions, and notably in the case of Taylor v. Caldwell.^[1] That case at least makes it clear that

“where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless, when the time for the fulfilment of the contract arrived, some particular specified thing continued to exist, so that when entering into the contract they must have contemplated such continued existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be considered a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor."

Thus far it is clear that the principle of the Roman law has been introduced into the English law. The doubt in the present case arises as to how far this principle extends. The Roman law dealt with obligationes de certo corpore. Whatever may have been the limits of the Roman law, the case of Nickoll v. Ashton^[33] makes it plain that the English law applies the principle not only to cases where the performance of the contract becomes impossible by the cessation of existence of the thing which is the subject-matter of the contract, but also to cases where the event which renders the contract incapable of performance is the cessation or non-existence of an express condition or state of things, going to the root of the contract, and essential to its performance. It is said, on the one side, that the specified thing, state of things, or condition the continued existence of which is necessary for the fulfilment of the contract, so that the parties entering into the contract must have contemplated the continued existence of that thing, condition, or state of things as the foundation of what was to be done under the contract, is limited to things which are either the subject-matter of the contract or a condition or state of things, present or anticipated, which is expressly [749] mentioned in the contract. But, on the other side, it is said that the condition or state of things need not be expressly specified, but that it is sufficient if that condition or state of things clearly appears by extrinsic evidence to have been assumed by the parties to be the foundation or basis of the contract, and the event which causes the impossibility is of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made. In such a case the contracting parties will not be held bound by the general words which, though large enough to include, were not used with reference to a possibility of a particular event rendering performance of the contract impossible. I do not think that the principle of the civil law as introduced into the English law is limited to cases in which the event causing the impossibility of performance is the destruction or non-existence of some thing which is the subject-matter of the contract or of some condition or state of things expressly specified as a condition of it. I think that you first have to ascertain, not necessarily from the terms of the contract, but, if required, from necessary inferences, drawn from surrounding circumstances recognised by both contracting parties, what is the substance of the contract, and then to ask the question whether that substantial contract needs for its foundation the assumption of the existence of a particular state of things. If it does, this will limit the operation of the general words, and in such case, if the contract becomes impossible of performance by reason of the non-existence of the state of things assumed by both contracting parties as the foundation of the contract, there will be no breach of the contract thus limited. Now what are the facts of the present case? The contract is contained in two letters of June 20 which passed between the defendant and the plaintiff's agent, Mr. Cecil Bisgood. These letters do not mention the coronation, but speak merely of the taking of Mr. Krell's chambers, or, rather, of the use of them, in the daytime of June 26 and 27, for the sum of £75, £25. then paid, balance £50 to be paid on the 24th. But the affidavits, which by agreement between the parties are to be taken as stating the facts of the case, shew that the plaintiff exhibited on his [750] premises, third floor, 56A, Pall Mall, an announcement to the effect that windows to view the Royal coronation procession were to be let, and that the defendant was induced by that announcement to apply to the housekeeper on the premises, who said that the owner was willing to let the suite of rooms for the purpose of seeing the Royal procession for both days, but not nights, of June 26 and 27.

In my judgment the use of the rooms was let and taken for the purpose of seeing the Royal procession. It was not a demise of the rooms, or even an agreement to let and take the rooms. It is a licence to use rooms for a particular purpose and none other. And in my judgment the taking place of those processions on the days proclaimed along the proclaimed route, which passed 56A, Pall Mall, was regarded by both contracting parties as the foundation of the contract; and I think that it cannot reasonably be supposed to have been in the contemplation of the contracting parties, when the contract was made, that the coronation would not be held on the proclaimed days, or the processions not take place on those days along the proclaimed route; and I think that the words imposing on the defendant the obligation to accept and pay for the use of the rooms for the named days, although general and unconditional, were not used with reference to the possibility of the particular contingency which afterwards occurred. It was suggested in the course of the argument that if the occurrence, on the proclaimed days, of the coronation and the procession in this case were the foundation of the contract, and if the general words are thereby limited or qualified, so that in the event of the non-occurrence of the coronation and procession along the proclaimed route they would discharge both parties from further performance of the contract, it would follow that if a cabman was engaged to take some one to Epsom on Derby Day at a suitable enhanced price for such a journey, say £10, both parties to the contract would be discharged in the contingency of the race at Epsom for some reason becoming impossible; but I do not think this follows, for I do not think that in the cab case the happening of the race would be the foundation of the contract. No doubt the purpose of the engager would be to go to see the Derby, and the price would be proportionately high; but the cab had [751] no special qualifications for the purpose which led to the  selection of the cab for this particular occasion. Any other cab would have done as well. Moreover, I think that, under the cab contract, the hirer, even if the race went off, could have said, "Drive me to Epsom; I will pay you the agreed sum; you have nothing to do with the purpose for which I hired the cab," and that if the cabman refused he would have been guilty of a breach of contract, there being nothing to qualify his promise to drive the hirer to Epsom on a particular day. Whereas in the case of the coronation, there is not merely the purpose of the hirer to see the coronation procession, but it is the coronation procession and the relative position of the rooms which is the basis of the contract as much for the lessor as the hirer; and I think that if the King, before the coronation day and after the contract, had died, the hirer could not have insisted on having the rooms on the days named. It could not in the cab case be reasonably said that seeing the Derby race was the foundation of the contract, as it was of the licence in this case. Whereas in the present case, where the rooms were offered and taken, by reason of their peculiar suitability from the position of the rooms for a view of the coronation procession, surely the view of the coronation procession was the foundation of the contract, which is a very different thing from the purpose of the man who engaged the cab—namely, to see the race—being held to be the foundation of the contract. Each case must be judged by its own circumstances. In each case one must ask oneself, first, what, having regard to all the circumstances, was the foundation of the contract? Secondly, was the performance of the contract prevented? Thirdly, was the event which prevented the performance of the contract of such a character that it cannot reasonably be said to have been in the contemplation of the parties at the date of the contract? If all these questions are answered in the affirmative (as I think they should be in this case), I think both parties are discharged from further performance of the contract. I think that the coronation procession was the foundation of this contract, and that the non-happening of it prevented the performance of the contract; and, secondly, I think that the [752] non-happening of the procession, to use the words of Sir James Hannen in Baily v. De Crespigny^[34] , was an event “of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made, and that they are not to be held bound by general words which, though large enough to include, were not used with reference to the possibility of the particular contingency which afterwards happened." The test seems to be whether the event which causes the impossibility was or might have been anticipated and guarded against. It seems difficult to say, in a case where both parties anticipate the happening of an event, which anticipation is the foundation of the contract, that either party must be taken to have anticipated, and ought to have guarded against, the event which prevented the performance of the contract. In both Jackson v. Union Marine Insurance Co.^[35] and Nickoll v. Ashton^[28] the parties might have anticipated as a possibility that perils of the sea might delay the ship and frustrate the commercial venture: in the former case the carriage of the goods to effect which the charterparty was entered into; in the latter case the sale of the goods which were to be shipped on the steamship which was delayed. But the Court held in the former case that the basis of the contract was that the ship would arrive in time to carry out the contemplated commercial venture, and in the latter that the steamship would arrive in time for the loading of the goods the subject of the sale. I wish to observe that cases of this sort are very different from cases where a contract or warranty or representation is implied, such as was implied in The Moorcock^[36] , and refused to be implied in Hamlyn v.Wood,^[29] But The Moorcock^[36] is of importance in the present case as shewing that whatever is the suggested implication—be it condition, as in this case, or warranty or representation—one must, in judging whether the implication ought to be made, look. not only at the words of the contract, but also at the surrounding facts and the knowledge of the parties of those facts. There seems to rile to be ample [753] authority for this proposition. Thus in Jackson v. Union Marine Insurance Co.^[37] , in the Common Plead, the question of whether the object of the voyage had been frustrated by the delay of the ship was left as a question of fact to the jury, although there was nothing in the charterparty defining the time within which the charterers were to supply the cargo of iron rails for San Francisco, and nothing on the face of the charterparty to indicate the importance of time in the venture; and that was a case in which, as Bramwell B. points out in his judgment at p.148, Taylor v. Caldwell^[1] was a strong authority to support the conclusion arrived at in the judgment—that the ship not arriving in time for the voyage contemplated, but at such time as to frustrate the commercial venture, was not only breach of the contract but discharged the charterer, though he had such an excuse that no action would lie. And, again. in Harris v. Dreesman^[38] the vessel had to be loaded as no particular time was mentioned, within a reasonable time; and, in judging of a reasonable time, the Court approved of evidence, being given that the defendants, the charterers, to the knowledge of the plaintiffs, had no control over the colliery from which both parties knew that the coal was to come; and that, although all that was said in the charterparty was that the vessel should proceed to Spital Tongue's Spout (the spout of the Spital Tongue's Colliery), and there take on board from the freighters a full and complete cargo of coals, and five tons of coke, and although there was no evidence to prove any custom in the port as to loading vessels in turn. Again it was held in Mumford v. Gething^[39] that, in construing a written contract of service under which A. was to enter the employ of B., oral evidence is admissible to shew in what capacity A. was to, serve B. See also Price v. Mouat.^[40] The rule seems to be that which is laid down in Taylor on Evidence, vol. ii. s. 1082:

"It may be laid down as a broad and distinct rule of law that extrinsic evidence of every material fact which will enable the Court to ascertain the nature and qualities of the subject-matter of the instrument, or, in other words, to identify the [754] persons and things to which the instrument refers, must of necessity be received."

And Lord Campbell in his judgment says:

"I am of opinion that, when there is a contract for the sale of a specific subject-matter, oral evidence may be received, for the purpose of shewing what that subject-matter was, of every fact within the knowledge of the parties before and at the time of the contract."

See per Campbell C.J., Macdonald v. Longbottom.^[41] It seems to me that the language of Willes J. in Lloyd v. Guibert^[42] points in the same direction. I myself am clearly of opinion that in this case, where we have to ask ourselves whether the object of the contract was frustrated by the non-happening of the coronation and its procession on the days proclaimed, parol evidence is admissible to shew that the subject of the contract was rooms to view the coronation procession, and was so to the knowledge of both parties. When once this is established, I see no difficulty whatever in the case. It is not essential to the application of the principle of Taylor v. Caldwell^[1] that the direct subject of the contract should perish or fail to be in existence at the date of performance of the contract. It is sufficient if a state of things or condition expressed in the contract and essential to its performance perishes or fails to be in existence at that time. In the present case the condition which fails and prevents the achievement of that which was, in the contemplation of both parties, the foundation of the contract, is not expressly mentioned either as a condition of the contract or the purpose of it; but I think for the reasons which I have given that the principle of Taylor v. Caldwell^[1] ought to be applied. This disposes of the plaintiff's claim for £50 unpaid balance of the price agreed to be paid for the use of the rooms. The defendant at one time set up a cross-claim for the return of the £25 he paid at the date of the contract. As that claim is now withdrawn it is unnecessary to say anything about it. I have only to add that the facts of this case do not bring it within the principle laid down in Stubbs v. Holywell Ry. Co.^[43] ; that in the case of contracts falling directly within the rule of [755] Taylor v. Caldwell^[1] the subsequent impossibility does not affect rights already acquired, because the defendant had the whole of June 24 to pay the balance, and the public announcement that the coronation and processions would not take place on the proclaimed days was made early on the morning of the 24th, and no cause of action could accrue till the end of that day. I think this appeal ought to be dismissed.

ROMER L.J. With some doubt I have also come to the conclusion that this case is governed by the principle on which Taylor v. Caldwell^[1] was decided, and accordingly that the appeal must be dismissed. The doubt I have felt was whether the parties to the contract now before us could be said, under the circumstances, not to have had at all in their contemplation the risk that for some reason or other the coronation processions might not take place on the days fixed, or, if the processions took place, might not pass so as to be capable of being viewed from the rooms mentioned in the contract; and whether, under this contract, that risk was not undertaken by the defendant. But on the question of fact as to what was in the contemplation of the parties at the time, I do not think it right to differ from the conclusion arrived at by Vaughan Williams L.J., and (as I gather) also arrived at by my brother Stirling. This being so, I concur in the conclusions arrived at by Vaughan Williams L.J. in his judgment, and I do not desire to add anything to what he has said so fully and completely.

STIRLING L.J. said he had had an opportunity of reading the judgment delivered by Vaughan Williams L.J., with which he entirely agreed. Though the case was one of very great difficulty, he thought it came within the principle of Taylor v. Caldwell.^[1]

Appeal dismissed.

Solicitors: Cecil Bisgood; M. Grunebaum.

NOTE.—For other cases arising out of the postponement of the coronation, See the next following case; Elliott v. Crutchley, ante, p. 476, and Herne Bay Steam Boat Co. v. Hutton, ante, p. 683.

[1] 3 B. & S. 826.

[2] (1889) 14 P. D. 64.

[3] 3 B. & S. at p. 833.

[4] (1858) E. B. & E. 746.

[5] (1867) L. R. 2 C.P. 651.

[6] (1868) L. R.4 C. P. 1.

[7] (1869) L. R. 4 Q. B. 180.

[8] (1876) 1 Q. B. D. 258.

[9] [1901] 2 K. B. 126.

[10] (1646) Al. 26.

[11] (1814) 3 M. & S. 267; 15 R. R. 485.

[12] (1844) 13 M. & W. 487.

[13] (1846) 15 M. & W. 253.

[14] (1859) 1 E. & E. 853. 

[15] (1867) L. R. 2 Q. B. 580.

[16] (1880) 14 Ch. D. 603.

[17] 14 P. D. 64.

[18] (1888) 20 Q. B. D. 576, 579, 580,582.

[19] [1891] 1 Q. B. 544, 548, 551.

[20] [1891] 2 Q. B. 488, 491-2.

[21] [1899] 1 Q. B. 436, 441

[22] [1903] 88 L.T. 90; 67 J.P. 51: post, p. 760 (note).

[23] 88 L. T. 90; 67 J. P. 51.

[24] [1897] 2 Q. B. 445.

[25] 3 B. & S. at p. 832.

[26] [1901] 2 K. B. 126, 137.

[27] 14 P. D. 64, 68.

[28] [1901] 2 K. B.126.

[29] [1891] 2 Q. B. 488.

[30] L. R. 2 C. P. 651.

[31] L. R. 4, Q. B. 180.

[32] 1 Q. B. D. 258. 

[33] [1901] 2 K. B.126.

[34] L. R. 4 Q. B. 185.

[35] (1873) L. R. 8 C. P. 572.

[36] 14 P. D. 64.

[37] L. R. 8 C. P. 572; (1874) 10 C. P: 125; 42 L. J. (C.P.) 284.

[38] (1854) 23 L. J. (Ex.) 210.

[39] (1859) 7 C. B. (N.S.) 305.

[40] (1862) 11 C. B. (N.S.) 508.

[41] (1859) 1 E. & E. 977, at p. 983.

[42] (1865) 35 L. J. (Q.B.) 74, 75.

[43] (1867) L. R.. 2 Ex. 311.

[120] Appeal from the Circuit Court of the United States for the Southern District of New York.

Action at law by the Lorraine Manufacturing Company against Joseph Oshinsky and Samuel Valentine. Judgment (182 Fed. 407) for plaintiff, and defendants appeal. Reversed.

Adolph Cohen (Arnold Gross, of counsel), for appellants.

Dorman & Dana (William R. Dorman, of counsel), for appellee.

Before LACOMBE, WARD, and NOYES, Circuit Judges.

NOYES, Circuit Judge.

The question presented for consideration upon this writ of error is a simple one, and the facts upon which it is raised are not involved. The action is on a contract for the manufacture and sale of goods. The complaint alleges that the goods were [121] tendered in accordance with the terms of the contract, but were refused by the defendants. The defendants seeks to justify such refusal upon the ground that the goods were offered after the time specified for delivery in the contract. The contract is in the form of an acceptance of an order for "shirtings," directed by the plaintiff to the defendants, and dated February 4, 1907. The relevant portions are these:

"Below we hand you copy of your order for spring, 1908, which the mills have accepted, and which they will deliver to you * * * at the specified dates: * * * Stock: Nov. 15."

It was conceded that several pieces of goods were delivered at dates earlier than November 15th, as specified in the contract, and that the "stock"- a term meaning the balance of the goods covered by the order- was not tendered by the plaintiff to the defendants until November 16th.

The trial court properly ruled that time was of the essence of the agreement in question- an executory contract for the sale and subsequent delivery of the goods. As said by the Supreme Court in Jones v. United States, 96 U.S. 24, 24 L.Ed. 644:

"The rule in such a case is that the purchaser is not bound to accept and pay for goods, unless the same are delivered or tendered on the day specified in the contract.

But the trial court ruled that the contract did not necessarily call for delivery on November 15th; that the provision agreeing to "deliver * * * at the specified dates: * * * Stock: Nov. 15," was ambiguous with respect to time, and that the jury might find that it meant ‘on or about‘ November 15th. In our opinion, this ruling of the trial court was erroneous. We think that the language of the provision is plain, unequivocal, and free from ambiguity, and required delivery on November 15th, and not later. We fail to appreciate the contention of the plaintiff that the language may fairly be given two meanings. A provision for delivery at a specified date, followed by the specification of a date, requires delivery upon that date and none other. The preposition ‘at‘ seems quite as definite and certain as any word that could be used. Consequently, as the goods were not delivered or tendered until after November 15th, we think that the plaintiff failed to establish its cause of action, and that judgment should have been directed for the defendants.

The judgment of the Circuit Court is reversed.

PRESCOTT & CO., Limited, Respondent

v.

J. B. POWLES & CO., Appellant

No. 16099.

Nov. 22, 1920.

SALES (10,25)—CONTRACTS—ORDER FOR GOODS—ACCEPT ANCE—CONSTRUCTION. In an order for Australian onions taken by a broker, without authority to bind the absent seller, the words “acceptance Australia,” has reference to the seller’s acceptance of the order, and not to the buyer’s acceptance of the goods, especially where the goods were consigned by the seller to itself, retaining title and control.

SAME (72)—PERFORMANCE OF CONTRACT—PARTIAL DELIVERY—REFUSAL TO ACCEPT, The delivery of goods under an executory contract of sale must be of the exact quantity ordered, or the buyer may refuse to accept them.

SAME (77)—PARTIAL DELIVERY—EXCUSE FOR DEFAULT. The fact that the United States as a war measure commandeered the only available shipping space necessary for the seller of Australian onions to ship in time the full quantity of onions ordered, does not excuse the seller for his default in delivering the entire quantity, nor render the buyer liable for the part offered, where he refused to accept the same.

Appeal from a judgment of the superior court for King county, Dykeman, J., entered May 1, 1920, upon findings in favor of the plaintiff, in an action on contract, tried to the court. Reversed.

James Kiefer, for appellant.

Byers & Byers, for respondent.

TOLMAN, J.

On January 12, 1918, appellant ordered, through a merchandise broker representing the respondent in Seattle, 300 crates of Australian onions. The order reads:

‘Sold to J. B. Powles Co. How ship, Boat. When, March. 300 crts. Australian onions, $94 per ton. Cost, freight and insurance Frisco. Acceptance Australia.’

It appears to [178] have been understood that there was but one ship each month plying between the Australian port of shipment and San Francisco, and that to comply with the order and ship in March the shipment would necessarily be by the steamship Sonoma. About March 12, following, appellant notified the broker of its desire to cancel the order, and caused the broker to cable respondent to that effect; but the cable was not delivered until after the ship had sailed with the partial shipment of onions hereinafter referred to.

In due time the respondent had ready for shipment the full 300 crates of onions as ordered, but was permitted to load on the ship but 240 crates; the remainder of the space being taken at the last moment by the United States government for the purpose of shipping wheat to the United States. The 240 crates so shipped were consigned to the shipper's order, with directions to notify the buyer, and a draft with bill of lading attached was drawn on the buyer for the purchase price, with the privilege of inspection before payment. Appellant, the buyer, declined to receive the shipment or pay the draft. The goods were sold for its account, and this case was brought to recover the loss occasioned by the resale at a price less than that named in the order, plus the expenses of resale. The case was tried to the court without a jury, resulting in a judgment against appellant for the full amount claimed, from which it appeals.

A number of troublesome questions are here presented:

1. Do the words ‘Acceptance Australia’ mean that the order taken by the broker is subject to acceptance by his principal in Australia, or that the purchaser must accept the goods when delivered to the ship in the Australian port? No evidence was offered [179] at the trial as to the trade meaning of the quoted words; but a number of affidavits are included in the statement of facts, all made after the date of the trial below, and evidently used in the argument of the motion for a new trial, some to one effect, and an equal number to the other. We know of no authority which will warrant us in considering these as evidence in the case, and, if we did, they are so evenly balanced as to offset one another. Taking the order as it reads in the light of the fact that it was procured and written by a broker for an absent principal, who, on its receipt, might or might not be able or willing to fill it, we are convinced that it means that the order is taken subject to acceptance by the seller, when it should reach it in Australia.

‘The meaning of ‘acceptance’ in the discussion of executory contracts is an assent to enter into a contract according to the terms of the offer.' Williston on Sales, § 482.

Since the purchaser was present and assented to the order when it was written, no other acceptance of the offer on its part was needed; while as the seller was absent, and could not know of the order or its terms until advised, and the broker is not shown to have had authority to bind it, ‘Acceptance Australia’ must be held to mean that the seller, when advised, might accept or reject the order as conditions should warrant. We are the more convinced that this view is correct, because the seller consigned the goods to itself, and took a bill of lading in its own name, thus maintaining its title and control over the property until the purchaser should, by payment of the draft for the purchase price, come into possession of the indorsed bill of lading and thus acquire title.

2. It is contended, and generally held, that the delivery of goods under an executory contract must be of the exact quantity ordered, otherwise the buyer may [180] refuse to receive them; and it is not necessary that he base his refusal on this specific ground, but, having refused to accept the goods on other grounds, he may yet defend an action for the purchase price upon this ground. It was so held in Inman, Akers & Inman v. Elk Cotton Mills, 116 Tenn. 141, 92 S. W. 760, where the order was for 50 bales of cotton. The buyer sought to cancel the order, as in this case, and the seller refused to cancel. The buyer then refused to accept the goods, upon the ground that the delivery was not promptly made as the contract required. The seller resold for the account of the buyer, and sued for the loss sustained. It developed during the trial that the seller had tendered delivery of but 49 bales, and the buyer was permitted to amend his answer and defend upon this ground. The court said:

‘A delivery of a less number was not a compliance with this contract. So far as it affected the contract relations of the parties, a failure in the matter of one bale was as much as a failure to deliver any greater number of bales. The complainants sue to recover for the breach of an entire contract, and in order to maintain their bill they must show a compliance or a willingness to comply with it as an entirety. Failing in this latter regard, they fail altogether. Tiedeman on Sales,  101; Barker v. Reagan, 4 Heisk. 590. Their insistence that they were relieved from tendering 50 bales by reason of the repudiation of the contract by the defendant, under the facts found by the Court of Chancery Appeals, cannot avail them. If they had accepted the repudiation, or rather cancellation, of the contract contained in the telegram from the defendant, of July 7th, then this failure would not have affected, other matters out of the way, their right to recovery. This, however, they failed to do. They declined positively to accept the cancellation, and thus kept the contract alive between themselves and the defendant, and thus enabled the defendant, notwithstanding its attempted cancellation, to avail itself of [181] any previous or subsequent breach on the part of the complainant.’

See, also, Sun Publishing Co. v. Minnesota Type Foundry Co., 22 Or. 49, 29 Pac. 6; Barton v. Kane, 17 Wish. 37, 84 Am. Dec. 728; Price v. Engelke, 68 N. J. Law, 567, 53 Atl. 698; Newell v. New Holstein Canning Co., 119 Wis. 635, 97 N. W. 487.

3. Since the seller did accept the order in Australia and was bound to deliver the exact quantity ordered, may he be excused from making full delivery because our national government (rightfully as we must assume) as a war measure commandeered the only available shipping space for its necessities? Much as the writer would like to so hold, the authorities lay down the contrary rule. Had respondent been sued for damages for failure to ship the full order, this act by the government might have afforded a defense; but, having sued on the contract, it is essential to a recovery that a full performance be shown, and no excuse not provided for in the contract will justify a recovery, where the performance is partial only, save only an act of the buyer rendering performance impossible, or a waiver by it. Newell v. New Holstein Canning Co., supra; Remy v. Olds, 21 L. R. A. 645; The Harriman, 76 U.S. 161, 9 Wall. 161 and cases there cited.

We conclude that the judgment must be reversed, with directions to dismiss the action. It is so ordered.

MOUNT, MITCHELL, and MAIN, JJ., concur.

[281] Leonard Rosenstein argued the cause for appellant (Feuerstein, Sachs & Maitlin, attorneys).

Leo Kaplowitz argued the cause for respondents (Kaplowitz & Wise, attorneys).

The opinion of the Court was delivered by POLLOCK, J.

This case raises several issues under the Uniform Commercial Code ("the Code" and "UCC") concerning whether a buyer may reject a tender of goods with minor defects and whether a seller may cure the defects. We consider also the remedies available to the buyer, including cancellation of the contract. The main issue is whether plaintiffs, Mr. and Mrs. Ramirez, could reject the tender by defendant, Autosport, of a camper van with minor defects and cancel the contract for the purchase of the van.

The trial court ruled that Mr. and Mrs. Ramirez rightfully rejected the van and awarded them the fair market value of their trade-in van. The Appellate Division affirmed in a brief per curiam decision which, like the trial court opinion, was unreported. We affirm the judgment of the Appellate Division.

I

Following a mobile home show at the Meadowlands Sports Complex, Mr. and Mrs. Ramirez visited Autosport's showroom in Somerville. On July 20, 1978 the Ramirezes and Donald Graff, a [282] salesman for Autosport, agreed on the sale of a new camper and the trade-in of the van owned by Mr. and Mrs. Ramirez. Autosport and the Ramirezes signed a simple contract reflecting a $14,100 purchase price for the new van with a $4,700 trade-in allowance for the Ramirez van, which Mr. and Mrs. Ramirez left with Autosport. After further allowance for taxes, title and documentary fees, the net price was $9,902. Because Autosport needed two weeks to prepare the new van, the contract provided for delivery on or about August 3, 1978.

On that date, Mr. and Mrs. Ramirez returned with their checks to Autosport to pick up the new van. Graff was not there so Mr. White, another salesman, met them. Inspection disclosed several defects in the van. The paint was scratched, both the electric and sewer hookups were missing, and the hubcaps were not installed. White advised the Ramirezes not to accept the camper because it was not ready.

Mr. and Mrs. Ramirez wanted the van for a summer vacation and called Graff several times. Each time Graff told them it was not ready for delivery. Finally, Graff called to notify them that the camper was ready. On August 14 Mr. and Mrs. Ramirez went to Autosport to accept delivery, but workers were still touching up the outside paint. Also, the camper windows were open, and the dining area cushions were soaking wet. Mr. and Mrs. Ramirez could not use the camper in that condition, but Mr. Leis, Autosport's manager, suggested that they take the van and that Autosport would replace the cushions later. Mrs. Ramirez counteroffered to accept the van if they could withhold $2,000, but Leis agreed to no more than $250, which she refused. Leis then agreed to replace the cushions and to call them when the van was ready.

On August 15, 1978 Autosport transferred title to the van to Mr. and Mrs. Ramirez, a fact unknown to them until the summer of 1979. Between August 15 and September 1, 1978 Mrs. Ramirez called Graff several times urging him to complete the preparation of the van, but Graff constantly advised her [283] that the van was not ready. He finally informed her that they could pick it up on September 1.

When Mr. and Mrs. Ramirez went to the showroom on September 1, Graff asked them to wait. And wait they did — for one and a half hours. No one from Autosport came forward to talk with them, and the Ramirezes left in disgust.

On October 5, 1978 Mr. and Mrs. Ramirez went to Autosport with an attorney friend. Although the parties disagreed on what occurred, the general topic was whether they should proceed with the deal or Autosport should return to the Ramirezes their trade-in van. Mrs. Ramirez claimed they rejected the new van and requested the return of their trade-in. Mr. Lustig, the owner of Autosport, thought, however, that the deal could be salvaged if the parties could agree on the dollar amount of a credit for the Ramirezes. Mr. and Mrs. Ramirez never took possession of the new van and repeated their request for the return of their trade-in. Later in October, however, Autosport sold the trade-in to an innocent third party for $4,995. Autosport claimed that the Ramirez' van had a book value of $3,200 and claimed further that it spent $1,159.62 to repair their van. By subtracting the total of those two figures, $4,159.62, from the $4,995.00 sale price, Autosport claimed a $600-700 profit on the sale.

On November 20, 1978 the Ramirezes sued Autosport seeking, among other things, rescission of the contract. Autosport counterclaimed for breach of contract.

II

Our initial inquiry is whether a consumer may reject defective goods that do not conform to the contract of sale. The basic issue is whether under the UCC, adopted in New Jersey as N.J.S.A. 12A:1-101 et seq., a seller has the duty to deliver goods that conform precisely to the contract. We conclude that the seller is under such a duty to make a "perfect tender" and that a buyer has the right to reject goods that do not conform to the [284] contract. That conclusion, however, does not resolve the entire dispute between buyer and seller. A more complete answer requires a brief statement of the history of the mutual obligations of buyers and sellers of commercial goods.

In the nineteenth century, sellers were required to deliver goods that complied exactly with the sales agreement. See Filley v. Pope, 115 U.S. 213, 220, 6 S.Ct. 19, 21, 29 L.Ed. 372, 373 (1885) (buyer not obliged to accept otherwise conforming scrap iron shipped to New Orleans from Leith, rather than Glasgow, Scotland, as required by contract); Columbian Iron Works & Dry-Dock Co. v. Douglas, 84 Md. 44, 47, 34 A. 1118, 1120-1121 (1896) (buyer who agreed to purchase steel scrap from United States cruisers not obliged to take any other kind of scrap). That rule, known as the "perfect tender" rule, remained part of the law of sales well into the twentieth century. By the 1920's the doctrine was so entrenched in the law that Judge Learned Hand declared "[t]here is no room in commercial contracts for the doctrine of substantial performance." Mitsubishi Goshi Kaisha v. J. Aron & Co., Inc., 16 F.2d 185, 186 (2 Cir.1926).

The harshness of the rule led courts to seek to ameliorate its effect and to bring the law of sales in closer harmony with the law of contracts, which allows rescission only for material breaches. LeRoy Dyal Co. v. Allen, 161 F.2d 152, 155 (4 Cir.1947). See 5 Corbin, Contracts § 1104 at 464 (1951); 12 Williston, Contracts § 1455 at 14 (3 ed. 1970). Nevertheless, a variation of the perfect tender rule appeared in the Uniform Sales Act. N.J.S.A. 46:30-75 (purchasers permitted to reject goods or rescind contracts for any breach of warranty); N.J.S.A. 46:30-18 to -21 (warranties extended to include all the seller's obligations to the goods). See Honnold, "Buyer's Right of Rejection, A Study in the Impact of Codification Upon a Commercial Problem", 97 U.Pa.L.Rev. 457, 460 (1949). The chief objection to the continuation of the perfect tender rule was that buyers in a declining market would reject goods for minor nonconformities and force the loss on surprised sellers. See Hawkland, Sales and Bulk Sales Under the Uniform Commercial [285] Code, 120-122 (1958), cited in N.J.S.A. 12A:2-508, New Jersey Study Comment 3.

To the extent that a buyer can reject goods for any nonconformity, the UCC retains the perfect tender rule. Section 2-106 states that goods conform to a contract "when they are in accordance with the obligations under the contract". N.J.S.A. 12A:2-106. Section 2-601 authorizes a buyer to reject goods if they "or the tender of delivery fail in any respect to conform to the contract". N.J.S.A. 12A:2-601. The Code, however, mitigates the harshness of the perfect tender rule and balances the interests of buyer and seller. See Restatement (Second), Contracts, § 241 comment (b) (1981). The Code achieves that result through its provisions for revocation of acceptance and cure. N.J.S.A. 12A:2-608, 2-508.

Initially, the rights of the parties vary depending on whether the rejection occurs before or after acceptance of the goods. Before acceptance, the buyer may reject goods for any nonconformity. N.J.S.A. 12A:2-601. Because of the seller's right to cure, however, the buyer's rejection does not necessarily discharge the contract. N.J.S.A. 12A:2-508. Within the time set for performance in the contract, the seller's right to cure is unconditional. Id., subsec. (1); see id., Official Comment 1. Some authorities recommend granting a breaching party a right to cure in all contracts, not merely those for the sale of goods. Restatement (Second), Contracts, ch. 10, especially §§ 237 and 241. Underlying the right to cure in both kinds of contracts is the recognition that parties should be encouraged to communicate with each other and to resolve their own problems. Id., Introduction p. 193.

The rights of the parties also vary if rejection occurs after the time set for performance. After expiration of that time, the seller has a further reasonable time to cure if he believed reasonably that the goods would be acceptable with or without a money allowance. N.J.S.A. 12A:2-508(2). The determination of what constitutes a further reasonable time depends on the [286] surrounding circumstances, which include the change of position by and the amount of inconvenience to the buyer. N.J.S.A. 12A:2-508, Official Comment 3. Those circumstances also include the length of time needed by the seller to correct the nonconformity and his ability to salvage the goods by resale to others. See Restatement (Second), Contracts, § 241 comment (d). Thus, the Code balances the buyer's right to reject nonconforming goods with a "second chance" for the seller to conform the goods to the contract under certain limited circumstances. N.J.S.A. 12A:2-508, New Jersey Study Comment 1.

After acceptance, the Code strikes a different balance: the buyer may revoke acceptance only if the nonconformity substantially impairs the value of the goods to him. N.J.S.A. 12A:2-608. See Herbstman v. Eastman Kodak Co., 68 N.J. 1, 9 (1975). See generally, Priest, "Breach and Remedy for the Tender of Non-Conforming Goods under the Uniform Commercial Code: An Economic Approach," 91 Harv.L.Rev. 960, 971-973 (1978). This provision protects the seller from revocation for trivial defects. Herbstman, supra, 68 N.J. at 9. It also prevents the buyer from taking undue advantage of the seller by allowing goods to depreciate and then returning them because of asserted minor defects. See White & Summers, Uniform Commercial Code, § 8-3 at 391 (2 ed. 1980). Because this case involves rejection of goods, we need not decide whether a seller has a right to cure substantial defects that justify revocation of acceptance. See Pavesi v. Ford Motor Co., 155 N.J. Super. 373, 378 (App.Div. 1978) (right to cure after acceptance limited to trivial defects) and White & Summers, supra, § 8-4 at 319 n. 76 (open question as to the relationship between §§ 2-608 and 2-508).

Other courts agree that the buyer has a right of rejection for any nonconformity, but that the seller has a countervailing right to cure within a reasonable time. Marine Mart Inc. v. Pearce, 252 Ark. 601, 480 S.W.2d 133, 137 (1972). See Intermeat, Inc. v. American Poultry, Inc., 575 F.2d 1017, 1024 (2 Cir.1978); Moulton Cavity & Mold., Inc. v. Lyn-Flex Industries, 396 A.2d 1024, [287] 1027 n. 6 (Me. 1979); Uchitel v. F.R. Tripler & Co., 107 Misc.2d 310, 316, 434 N.Y.S.2d 77, 81 (App.Term 1980); Rutland Music Services, Inc. v. Ford Motor Co., 422 A.2d 248, 249 (Vt. 1980). But see McKenzie v. Alla-Ohio Coals, Inc., 29 U.C.C.Rep. 852, 856-857 (D.D.C. 1979).

One New Jersey case, Gindy Mfg. Corp. v. Cardinale Trucking Corp., suggests that, because some defects can be cured, they do not justify rejection. 111 N.J. Super. 383, 387 n. 1 (Law Div. 1970). Accord, Adams v. Tremontin, 42 N.J. Super. 313, 325 (App.Div. 1956) (Uniform Sales Act). But see Sudol v. Rudy Papa Motors, 175 N.J. Super. 238, 240-241 (D.Ct. 1980) (§ 2-601 contains perfect tender rule). Nonetheless, we conclude that the perfect tender rule is preserved to the extent of permitting a buyer to reject goods for any defects. Because of the seller's right to cure, rejection does not terminate the contract. Accordingly, we disapprove the suggestion in Gindy that curable defects do not justify rejection.

A further problem, however, is identifying the remedy available to a buyer who rejects goods with insubstantial defects that the seller fails to cure within a reasonable time. The Code provides expressly that when "the buyer rightfully rejects, then with respect to the goods involved, the buyer may cancel." N.J.S.A. 12A:2-711. "Cancellation" occurs when either party puts an end to the contract for breach by the other. N.J.S.A. 12A:2-106(4). Nonetheless, some confusion exists whether the equitable remedy of rescission survives under the Code. Compare Ventura v. Ford Motor Corp., 173 N.J. Super. 501, 503 (Ch.Div. 1980), aff'd 180 N.J. Super. 45 (App.Div. 1981) (rescission under UCC) and Pavesi v. Ford Motor Corp., supra, 155 N.J. Super. at 377 (equitable remedies still available since not specifically superceded, § 1-103) with Edelstein v. Toyota Motors Dist., 176 N.J. Super. 57, 63-64 (App.Div. 1980) (under UCC rescission is revocation of acceptance) and Sudol v. Rudy Papa Motors, supra, 175 N.J. Super. at 241-242 (under UCC, rescission no longer exists as such).

[288] The Code eschews the word "rescission" and substitutes the terms "cancellation", "revocation of acceptance", and "rightful rejection". N.J.S.A. 12A:2-106(4); 2-608; and 2-711 & Official Comment 1. Although neither "rejection" nor "revocation of acceptance" is defined in the Code, rejection includes both the buyer's refusal to accept or keep delivered goods and his notification to the seller that he will not keep them. White & Summers, supra, § 8-1 at 293. Revocation of acceptance is like rejection, but occurs after the buyer has accepted the goods. Nonetheless, revocation of acceptance is intended to provide the same relief as rescission of a contract of sale of goods. N.J.S.A. 12A:2-608 Official Comment 1; N.J. Study Comment 2. In brief, revocation is tantamount to rescission. See Herbstman v. Eastman Kodak Co., supra, 68 N.J. at 9; accord, Peckham v. Larsen Chevrolet-Buick-Oldsmobile, Inc., 99 Idaho 675, 677, 587 P.2d 816, 818 (1978) (rescission and revocation of acceptance amount to the same thing). Similarly, subject to the seller's right to cure, a buyer who rightfully rejects goods, like one who revokes his acceptance, may cancel the contract. N.J.S.A. 12A:2-711 & Official Comment 1. We need not resolve the extent to which rescission for reasons other than rejection or revocation of acceptance, e.g. fraud and mistake, survives as a remedy outside the Code. Compare N.J.S.A. 12A:1-103 and White & Summers, supra, § 8-1, p. 295, with N.J.S.A. 12A:2-721. Accordingly, we approve Edelstein and Sudol, which recognize that explicit Code remedies replace rescission, and disapprove Ventura and Pavesi to the extent they suggest the UCC expressly recognizes rescission as a remedy.

Although the complaint requested rescission of the contract, plaintiffs actually sought not only the end of their contractual obligations, but also restoration to their pre-contractual position. That request incorporated the equitable doctrine of restitution, the purpose of which is to restore plaintiff to as good a position as he occupied before the contract. Corbin, supra, § 1102 at 455. In UCC parlance, plaintiffs' request was for the cancellation [289] of the contract and recovery of the price paid. N.J.S.A. 12A:2-106(4), 2-711.

General contract law permits rescission only for material breaches, and the Code restates "materiality" in terms of "substantial impairment". See Herbstman v. Eastman Kodak Co., supra, 68 N.J. at 9; id. at 15 (Conford, J., concurring). The Code permits a buyer who rightfully rejects goods to cancel a contract of sale. N.J.S.A. 12A:2-711. Because a buyer may reject goods with insubstantial defects, he also may cancel the contract if those defects remain uncured. Otherwise, a seller's failure to cure minor defects would compel a buyer to accept imperfect goods and collect for any loss caused by the nonconformity. N.J.S.A. 12A:2-714.

Although the Code permits cancellation by rejection for minor defects, it permits revocation of acceptance only for substantial impairments. That distinction is consistent with other Code provisions that depend on whether the buyer has accepted the goods. Acceptance creates liability in the buyer for the price, N.J.S.A. 12A:2-709(1), and precludes rejection. N.J.S.A. 12A:2-607(2); N.J.S.A. 12A:2-606, New Jersey Study Comment 1. Also, once a buyer accepts goods, he has the burden to prove any defect. N.J.S.A. 12A:2-607(4); White & Summers, supra, § 8-2 at 297. By contrast, where goods are rejected for not conforming to the contract, the burden is on the seller to prove that the nonconformity was corrected. Miron v. Yonkers Raceway, Inc., 400 F.2d 112, 119 (2 Cir.1968).

Underlying the Code provisions is the recognition of the revolutionary change in business practices in this century. The purchase of goods is no longer a simple transaction in which a buyer purchases individually-made goods from a seller in a face-to-face transaction. Our economy depends on a complex system for the manufacture, distribution, and sale of goods, a system in which manufacturers and consumers rarely meet. Faceless manufacturers mass-produce goods for unknown consumers who purchase those goods from merchants exercising [290] little or no control over the quality of their production. In an age of assembly lines, we are accustomed to cars with scratches, television sets without knobs and other products with all kinds of defects. Buyers no longer expect a "perfect tender". If a merchant sells defective goods, the reasonable expectation of the parties is that the buyer will return those goods and that the seller will repair or replace them.

Recognizing this commercial reality, the Code permits a seller to cure imperfect tenders. Should the seller fail to cure the defects, whether substantial or not, the balance shifts again in favor of the buyer, who has the right to cancel or seek damages. N.J.S.A. 12A:2-711. In general, economic considerations would induce sellers to cure minor defects. See generally Priest, supra, 91 Harv.L.Rev. 973-974. Assuming the seller does not cure, however, the buyer should be permitted to exercise his remedies under N.J.S.A. 12A:2-711. The Code remedies for consumers are to be liberally construed, and the buyer should have the option of cancelling if the seller does not provide conforming goods. See N.J.S.A. 12A:1-106.

To summarize, the UCC preserves the perfect tender rule to the extent of permitting a buyer to reject goods for any nonconformity. Nonetheless, that rejection does not automatically terminate the contract. A seller may still effect a cure and preclude unfair rejection and cancellation by the buyer. N.J.S.A. 12A:2-508, Official Comment 2; N.J.S.A. 12A:2-711, Official Comment 1.

III

The trial court found that Mr. and Mrs. Ramirez had rejected the van within a reasonable time under N.J.S.A. 12A:2-602. The court found that on August 3, 1978 Autosport's salesman advised the Ramirezes not to accept the van and that on August 14, they rejected delivery and Autosport agreed to replace the cushions. Those findings are supported by substantial credible evidence, and we sustain them. See Rova Farms [291] Resort v. Investors Ins. Co., 65 N.J. 474, 483-484 (1974). Although the trial court did not find whether Autosport cured the defects within a reasonable time, we find that Autosport did not effect a cure. Clearly the van was not ready for delivery during August, 1978 when Mr. and Mrs. Ramirez rejected it, and Autosport had the burden of proving that it had corrected the defects. Although the Ramirezes gave Autosport ample time to correct the defects, Autosport did not demonstrate that the van conformed to the contract on September 1. In fact, on that date, when Mr. and Mrs. Ramirez returned at Autosport's invitation, all they received was discourtesy.

On the assumption that substantial impairment is necessary only when a purchaser seeks to revoke acceptance under N.J.S.A. 12A:2-608, the trial court correctly refrained from deciding whether the defects substantially impaired the van. The court properly concluded that plaintiffs were entitled to "rescind" — i.e., to "cancel" — the contract.

Because Autosport had sold the trade-in to an innocent third party, the trial court determined that the Ramirezes were entitled not to the return of the trade-in, but to its fair market value, which the court set at the contract price of $4,700. A buyer who rightfully rejects goods and cancels the contract may, among other possible remedies, recover so much of the purchase price as has been paid. N.J.S.A. 12A:2-711. The Code, however, does not define "pay" and does not require payment to be made in cash.

A common method of partial payment for vans, cars, boats and other items of personal property is by a "trade-in". When concerned with used vans and the like, the trade-in market is an acceptable, and perhaps the most appropriate, market in which to measure damages. It is the market in which the parties dealt; by their voluntary act they have established the value of the traded-in article. See Frantz Equipment Co. v. Anderson, 37 N.J. 420, 431-432 (1962) (in computing purchaser's damages for alleged breach of uniform conditional sales law, trade-in value [292] of tractor was appropriate measure); accord, California Airmotive Corp. v. Jones, 415 F.2d 554, 556 (6 Cir.1969). In other circumstances, a measure of damages other than the trade-in value might be appropriate. See Chemical Bank v. Miller Yacht Sales, 173 N.J. Super. 90, 103 (App.Div. 1980) (in determining value of security interest in boat, court rejected both book value and contract trade-in value and adopted resale value as appropriate measure of damages).

The ultimate issue is determining the fair market value of the trade-in. This Court has defined fair market value as "the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." In re Estate of Romnes, 79 N.J. 139, 144 (1978). Although the value of the trade-in van as set forth in the sales contract was not the only possible standard, it is an appropriate measure of fair market value.

For the preceding reasons, we affirm the judgment of the Appellate Division.

For affirmance — Chief Justice WILENTZ and Justices PASHMAN, CLIFFORD, SCHREIBER, HANDLER, POLLOCK and O'HERN — 7.

For reversal — None.

[701] In Error to the Circuit Court of the United States for the District of Colorado. Reversed.

Statement by SANBORN, Circuit Judge:

This was an action by the plaintiff in error to recover the contract price of certain stationery and advertising matter furnished the defendant. It was tried on the merits, and at the close of the evidence the court instructed the jury to return a verdict for the defendant, and this instruction is assigned as error. The plaintiff was a corporation of Wisconsin, engaged in lithographing and printing, and its principal place of business was at Milwaukee, in that state. The defendant was a corporation of Colorado, engaged in the business of milling, and its principal place of business was at Denver, in that state. In June, 1889, the plaintiff agreed to make new designs of certain buildings of defendant, with sketches of its trade-marks; to execute engravings thereof in a strictly first-class style; to embody these on the stationery described below; to submit to defendant for approval proofs thereof; to submit designs and proofs of hangers, on fine chromo plate, for advertising defendant's business, by the following fall; to engrave a strictly first-class vignette of one of defendant's plants; to submit a sketch and proof thereof to defendant; to furnish defendant with 10,000 business cards and 5,000 checks in August, 1889; to furnish, in the course of the year, letter heads, noteheads, billheads, statements, bills, envelopes, and cards to the defendant to the number of 331,100, and 5,000 hangers; and to furnish the vignette and 5,000 hangers more after the approval of the proofs thereof by the defendant. The defendant agreed to take and pay for this stationery, this vignette, and these hangers at certain agreed prices, which amounted in the aggregate to about $6,000. The plaintiff furnished the 10,000 cards and 5,000 checks required under the contract in August, 1889, and the defendant received and paid for them. The plaintiff introduced testimony to the effect that it strictly complied with and fully performed these contracts in every respect, except that it shipped the articles contracted for (which were not delivered in August) by rail from Milwaukee to the defendant, at Denver, in December, 1889, in five boxes, four of which did not arrive at Denver until 9:42 A.M., January 1, 1890, and the fifth did not arrive there until January 4, 1890; that before January 8, 1890, all of these articles were tendered to the defendant, and it refused to examine or receive them; that the sketches and proofs of the designs, trade-marks, and hangers had been submitted to and approved by the defendant during the summer and fall of 1889, before these articles were manufactured, and that the last proof was approved November 16, 1889; that on December 16, 1889, the defendant wrote the plaintiff to forward by express 2,000 statements and 3,000 envelopes ‘as per [702] proofs submitted;‘ that the state of the art and process of lithographing is such that, after the general idea of a piece of work is conceived, it is customary to make first a pencil design, and, when this is found satisfactory, to prepare a colored sketch where colored work is required; that after the sketch is colored it is lithographed, that is, transferred to a stone; that each color requires a separate stone; and in these hangers there were nine colors; that it requires from two to three months to reproduce on stone a colored sketch like that used for the hangers; that the artists' work and the reproduction on stone were the most expensive parts of this work contracted for; and that the expense of the materials and printing was but a small part of the entire expense of the work.

F. W. v. Cotzhausen, for plaintiff in error.

V. D. Markham, for defendant in error.

Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge.

SANBORN, Circuit Judge, (after stating the facts.)

The ground on which it is sought to sustain the instruction of the court below to return a verdict for the defendant in this case is that the plaintiff failed to tender or deliver the articles contracted for to the defendant, at Denver, until six or eight days after the expiration of the year, that the plaintiff did not therefore furnish them ‘in the course of the year,‘ and that this failure justified the defendant in repudiating the contract, and refusing to pay any part of the contract price.

It is a general principle governing the construction of contracts that stipulations as to the time of their performance are not necessarily of their essence, unless it clearly appears in the given case from the express stipulations of the contract or the nature of its subject-matter that the parties intended performance within the time fixed in the contract to be a condition precedent to its enforcement, and, where the intention of the parties does not so appear, performance shortly after the time limited on the part of either party will not justify a refusal to perform by the party aggrieved, but his only remedy will be an action or counterclaim for the damages he has sustained from the breach of the stipulations. In the application of this principle to the cases as they have arisen, in the promulgation of the rules naturally deduced from it, and in the assignment of the various cases to the respective classes in which the stipulation as to time of performance is, or is not, deemed of the essence of the contract, the controlling consideration has been, and ought to be, to so decide and classify the cases that unjust penalties may not be inflicted, nor unreasonable damages recovered. Thus, in the ordinary contract of merchants for the sale and delivery, or the manufacture and sale, of marketable commodities within a time certain, it has been held that performance within the time is a condition precedent to the enforcement of the contract, and that a failure in this regard would justify the aggrieved party in refusing performance at a later day. Norrington v. Wright, 115 U.S. 188-203, 6 Sup.Ct.Rep. 12. This application of the general principle commends itself as just and reasonable, [703] on account of the frequent and rapid interchange and use of such commodities made necessary by the demands of commerce, and because such goods, if not received in time by the vendee, may usually be sold to others by the vendor at small loss, and thus he may himself measure the damages he ought to suffer from his delay by the difference in the market value of his goods. On the other hand, it has been held that an express stipulation in a contract for the construction of a house, that it should be completed on a day certain, and that, in case of failure to complete it within the time limited, the builder would forfeit $1,000, would not justify the owner of the land on which the house was constructed in refusing to accept it for a breach of this stipulation when the house was completed shortly after the time fixed, nor even in retaining the penalty stipulated in the contract, but that he must perform his part of the contract, and that he could retain from or recover of the builder the damages he sustained by the delay and those only. Tayloe v. Sandiford, 7 Wheat. 13, 17. This application of the general rule is equally just and reasonable. The lumber and material bestowed on a house by a builder become of little comparative value to him, while they are ordinarily of much greater value to the owner of the land on which it stands, and to permit the latter to escape payment because his house is completed a few days later than the contract requires would result in great injustice to the contractor, while the rule adopted fully protects the owner, and does no injustice to any one. The cases just referred to illustrate two well-settled rules of law which have been deduced from this general principle, and in accordance with which this case must be determined. They are:

In contracts of merchants for the sale and delivery or for the manufacture and sale of marketable commodities a statement descriptive of the subject-matter, or some material incident, such as the time of shipment, is a condition precedent, upon the failure or nonperformance of which the party aggrieved may repudiate the whole contract. Norrington v. Wright, 115 U.S. 188, 203, 6 Sup.Ct.Rep. 12; Rolling Mill v. Rhodes, 121 U.S. 255, 261, 7 Sup.Ct.Rep. 882. But in contracts for work or skill, and the materials upon which it is to be bestowed, a statement fixing the time of performance of the contract is not ordinarily of its essence, and a failure to perform within the time stipulated, followed by substantial performance after a short delay, will not justify the aggrieved party in repudiating the entire contract, but will simply give him his action for damages for the breach of the stipulation. Tayloe v. Sandiford, 7 Wheat. 13, 17; Hambly v. Railroad Co., 21 Fed.Rep. 541, 544, 554, 557.

It only remains to determine whether the contracts in the case at bar are the ordinary contracts of merchants for the manufacture and sale of marketable commodities or contracts for labor, skill, and materials, and this is not a difficult task. A contract to manufacture and furnish articles for the especial, exclusive, and peculiar use of another, with special features which he requires, and which render them of value to him, but useless and unsalable to others,— articles whose chief cost and value are [704] derived from the labor and skill bestowed upon them, and not from the materials of which they are made,— is a contract for work and labor, and not a contract of sale. Engraving Co. v. Moore, 75 Wis. 170, 172, 43 N.W.Rep. 1124; Goddard v. Binney, 115 Mass. 450; Hinds v. Kellogg, (Com. Pl. N.Y.) 13 N.Y.Supp. 922; Turner v. Mason, (Mich.) 32 N.W.Rep. 846. Thus in Engraving Co. v. Moore, supra, where the lithographing company had contracted to manufacture a large quantity of engravings and lithographs for a theatrical manager, with special features, useful to him only during a certain season, and they were completed and set aside in the rooms of the lithographer, and there burned before delivery to the manager, the court held that the contract was not one for the sale of personal property, but one for work, skill, and materials, because it was not the materials, but the lithographer's work of skill, that gave the value to the finished advertisements, and was the actual subject-matter of the contract, and because that work and skill, while it added the chief value to the finished articles for the especial use of the defendant, made both the articles and the materials worthless for all other purposes.

The contracts in the case we are considering were not for the blank paper on which they were finally impressed; that was of small value in proportion to the value of the finished articles; they were not for the sale of anything then in existence; they were for the artistic skill and labor of the employes of the defendant in preparing the sketches and designs, transferring them upon stone, and finally impressing them upon the paper the defendant was to furnish; and they authorized the plaintiff, without other orders than the contracts themselves, and the approvals of the designs and proofs there called for, to prepare and furnish all the articles named in the contracts and to collect the contract price therefor. These contracts required the names of defendant's mills and its trademarks to be so impressed upon all these articles that when they were completed they were not only unsalable to all others, but worthless to plaintiff for all purposes but waste paper. The contracts are evidence that on December 31, 1889, the articles contracted for would have been worth about $6,000 to the defendant, and if a few days later, when they were tendered, they were not worth so much, the defendant may recover the damages it suffered from the delay from December 31, 1889, to the date of the tender, in a proper action therefor, or may have the same allowed in this action under proper pleadings and proofs, and no injustice will result; while, if the defendant was permitted on account of this delay to utterly repudiate the contract, the plaintiff must practically lose the entire $6,000. The contracts contain no stipulation from which it can be fairly inferred that the parties intended the time of performance to be even material; indeed, they strongly indicate the contrary. They provide that a certain portion of the articles shall be furnished in two months that the remainder of the stationery and 5,000 hangers shall be furnished in the course of the year, and that 5,000 hangers more and the vignette shall be furnished within a reasonable time after the proofs are approved by the defendant; there is no stipulation for the payment [705] of any damages or the avoidance of the contracts on account of a failure to perform within any of the times stipulated in the contracts, and the parties themselves proceeded so leisurely thereunder that the first and only admitted request by the defendant for the delivery of any of the articles not delivered in August was on December 16, 1889. In Tayloe v. Sandiford, supra, the court refused to permit the owner to retain the $1,000 which the house builder had expressly agreed to pay if he failed to complete the house within the time fixed in the contract. In the absence of any such stipulation, or any clearly-expressed intent that time should be material even, it would be clearly unjustified by the law and inequitable to hold that the plaintiff is compelled to forfeit his entire contract price on account of this trifling delay that may have been immaterial to the defendant, and, if not, may be fully compensated in damages.

The result is that these contracts were not for the sale and delivery, or the manufacture and delivery, of marketable commodities. They were contracts for artistic skill and labor, and the materials on which they were to be bestowed in the manufacture of articles which were not salable to any one but the defendant when completed because impressed with special features useful only to it. There was nothing in the contracts or their subject-matter indicating any intention of the parties that the stipulations as to time should be deemed of their essence; and the defendant was not justified on account of the slight delay disclosed by the record in refusing to accept the goods, or in repudiating the entire contract. This conclusion disposes of the case, and it is unnecessary to notice other errors assigned. The judgment below is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.

William D. Ribyat for plaintiff. Vincent J. Vetter for defendant.

[4] HAROLD H. HYMES, J.

The plaintiff is a franchised representative of Acousticon, a manufacturer of hearing aids. On January 15, 1966, the defendant signed a contract to purchase a Model A-660 Acousticon hearing aid from the plaintiff. The defendant specified Model A-660 because he had been tested at a hearing aid clinic and had been informed that the best hearing aid for his condition was this Acousticon model. An ear mold was fitted to the defendant and the plaintiff ordered Model A-660 from Acousticon.

On February 2, 1966, in response to a call from the plaintiff the defendant went to the plaintiff's office for his hearing aid. At that time he was informed that Model A-660 had been modified and improved, and that it was now called Model A-665. This newer model had been delivered by Acousticon for the defendant's use. The defendant denies that he understood this was a different model number. The hearing aid was fitted to the defendant. The defendant complained about the noise, but was assured by the plaintiff that he would get used to it.

The defendant tried out the new hearing aid for the next few days for a total use of 15 hours. He went back to the hearing clinic, where he was informed that the hearing aid was not the model that he had been advised to buy. On February 8, 1966, he returned to the plaintiff's office complaining that the hearing aid gave him a headache, and that it was not the model he had ordered. He returned the hearing aid to the plaintiff, for which he received a receipt. At that time the plaintiff offered to get Model A-660 for the defendant. The defendant neither consented to nor refused the offer. No mention was made by either party about canceling the contract, and the receipt given [5] by the plaintiff contained no notation or indication that the plaintiff considered the contract cancelled or rescinded.

The plaintiff immediately informed Acousticon of the defendant's complaint. By letter dated February 14, 1966, Acousticon, writing directly to the defendant, informed him that Model A-665 was an improved version of Model A-660, and that they would either replace the model that had been delivered to him or would obtain Model A-660 for him. He was asked to advise the plaintiff immediately of his decision so that they could effect a prompt exchange. After receiving this letter the defendant decided that he did not want any hearing aid from the plaintiff, and he refused to accept the tender of a replacement, whether it be Model A-665 or A-660.

The plaintiff is suing for the balance due on the contract. Although he had made a down payment of $80, the defendant made no claim for repayment of his down payment until the case was ready to go to trial. The plaintiff objected to the counterclaim as being untimely. There is nothing in the pleadings to show that such a claim had been previously made by the defendant and, therefore, the court will not consider any counterclaim in this matter.

The question before the court is whether or not the plaintiff, having delivered a model which admittedly is not in exact conformity with the contract, can nevertheless recover in view of his subsequent tender of the model that did meet the terms of the contract.

The defendant contends that since there was an improper delivery of goods, the buyer has the right to reject the same under sections 2-601 and 2-602 (subd. [2], par. [c]) of the Uniform Commercial Code. He further contends that, even if the defendant had accepted delivery, he may, under section 2-608 (subd. [1], par. [b]) of the Uniform Commercial Code, revoke his acceptance of the goods because "his acceptance was reasonably induced * * * by the seller's assurances." He also relies on section 2-711, claiming that he may recover not only the down payment but also consequential damages.

The defendant, however, has neglected to take into account section 2-508 of the Uniform Commercial Code which has added a new dimension to the concept of strict performance. This section permits a seller to cure a nonconforming delivery under certain circumstances. Subdivision (1) of this section enacts into statutory law what had been New York case law. This permits a seller to cure a nonconforming delivery before the expiration of the contract time by notifying the buyer of his intention to so cure and by making a delivery within the [6] contract period. This has long been the accepted rule in New York. (Lowinson v. Newman, 201 App. Div. 266; Portfolio v. Rubin, 196 App. Div. 316.)

However, subdivision (2) of section 2-508 of the Uniform Commercial Code goes further and extends beyond the contract time the right of the seller to cure a defective performance. Under this provision, even where the contract period has expired and the buyer has rejected a nonconforming tender or has revoked an acceptance, the seller may "substitute a conforming tender" if he had "reasonable grounds to believe" that the nonconforming tender would be accepted and "if he seasonably notifies the buyer" of his intention "to substitute a conforming tender." (51 N. Y. Jur., Sales, p. 41.)

This in effect extends the contract period beyond the date set forth in the contract itself unless the buyer requires strict performance by including such a clause in the contract.

"The section [§ 2-508, subd. (2)] rejects the time-honored, and perhaps time-worn notion, that the proper way to assure effective results in commercial transactions is to require strict performance. Under the Code a buyer who insists upon such strict performance must rely on a special term in his agreement or the fact that the seller knows as a commercial matter that strict performance is required." (48 Cornell L. Q. 13; 29 Albany L. Rev. 260.)

This section seeks to avoid injustice to the seller by reason of a surprise rejection by the buyer. (Official Comment, McKinney's Cons. Laws of N. Y., Book 62½, Uniform Commercial Code, § 2-508.)

An additional burden, therefore, is placed upon the buyer by this section. "As a result a buyer may learn that even though he rejected or revoked his acceptance within the terms of Sections 2-601 and 2-711, he still may have to allow the seller additional time to meet the terms of the contract by substituting delivery of conforming goods." (3 Bender's Uniform Commercial Code Serv., Sales and Bulk Transfers, § 14-02 [1] [a] [ii].)

Has the plaintiff in this case complied with the conditions of section 2-508?

The model delivered to the defendant was a newer and improved version of the model that was actually ordered. Of course, the defendant is entitled to receive the model that he ordered even though it may be an older type. But, under the circumstances, the plaintiff had reasonable grounds to believe that the newer model would be accepted by the defendant.

The plaintiff acted within a reasonable time to notify the [7] defendant of his tender of a conforming model. (Uniform Commercial Code, § 1-204.) The defendant had not purchased another hearing aid elsewhere. His position had not been altered by reason of the original nonconforming tender.

The plaintiff made a proper subsequent conforming tender pursuant to subdivision (2) of section 2-508 of the Uniform Commercial Code.

Judgment is granted to plaintiff.

[569] For the appellants there were briefs and oral argument by Howard H. Boyle, Jr., of Milwaukee.

[570] For the respondent there was a brief and oral argument by Richard S. Hippenmeyer of Waukesha.

HALLOWS, J.

The defendants argue that the plaintiff cannot recover any amount because he has failed to substantially perform the contract. The plaintiff conceded he failed to furnish the kitchen cabinets, gutters and downspouts, sidewalk, closet clothes poles, and entrance seat amounting to $1,601.95. This amount was allowed to the defendants. The defendants claim some 20 other items of incomplete or faulty performance by the plaintiff and no substantial performance because the cost of completing the house in strict compliance with the plans and specifications would amount to 25 or 30 per cent of the contract price. The defendants especially stress the misplacing of the wall between the living room and the kitchen, which narrowed the living room in excess of one foot. The cost of tearing down this wall and rebuilding it would be approximately $4,000. The record is not clear why and when this wall was misplaced, but the wall is completely built and the house decorated and the defendants are living therein. Real-estate experts testified that the smaller width of the living room would not affect the market price of the house.

The defendants rely on Manitowoc Steam Boiler Works v. Manitowoc Glue Co. (1903), 120 Wis. 1, 97 N. W. 515, for the proposition that there can be no recovery on the contract as distinguished from quantum meruit unless there is substantial performance. This is undoubtedly the correct rule at common law. For recovery on quantum meruit, see Valentine v. Patrick Warren Construction Co. (1953), 263 Wis. 143, 56 N. W. (2d) 860. The question here is whether there has been substantial performance. The test of what amounts to substantial performance seems to be whether the performance meets the essential purpose of the contract. In the Manitowoc Case the contract called for a boiler having [571] a capacity of 150 per cent of the existing boiler. The court held there was no substantial performance because the boiler furnished had a capacity of only 82 per cent of the old boiler and only approximately one half of the boiler capacity contemplated by the contract. In Houlahan v. Clark (1901), 110 Wis. 43, 85 N. W. 676, the contract provided that the plaintiff was to drive pilings in the lake and place a boathouse thereon parallel and in line with a neighbor's dock. This was not done and the contractor so positioned the boathouse that it was practically useless to the owner. Manthey v. Stock (1907), 133 Wis. 107, 113 N. W. 443, involved a contract to paint a house and to do a good job, including the removal of the old paint where necessary. The plaintiff did not remove the old paint, and blistering and roughness of the new paint resulted. The court held that the plaintiff failed to show substantial performance. The defendants also cite Manning v. School Dist. (1905), 124 Wis. 84, 102 N. W. 356. However, this case involved a contract to install a heating and ventilating plant in the school building which would meet certain tests which the heating apparatus failed to do. The heating plant was practically a total failure to accomplish the purposes of the contract. See also Nees v. Weaver (1936), 222 Wis. 492, 269 N. W. 266 (roof on a garage).

Substantial performance as applied to construction of a house does not mean that every detail must be in strict compliance with the specifications and the plans. Something less than perfection is the test of specific performance unless all details are made the essence of the contract. This was not done here. There may be situations in which features or details of construction of special or of great personal importance, if not performed, would prevent a finding of substantial performance of the contract. In this case the plan was a stock floor plan. No detailed construction of the house was shown on the plan. There were no blueprints. [572] The specifications were standard printed forms with some modifications and additions written in by the parties. Many of the problems that arose during the construction had to be solved on the basis of practical experience. No mathematical rule relating to the percentage of the price, of cost of completion, or of completeness can be laid down to determine substantial performance of a building contract. Although the defendants received a house with which they are dissatisfied in many respects, the trial court was not in error in finding the contract was substantially performed.

The next question is, What is the amount of recovery when the plaintiff has substantially, but incompletely, performed? For substantial performance, the plaintiff should recover the contract price less the damages caused the defendant by the incomplete performance. Both parties agree Venzke v. Magdanz (1943), 243 Wis. 155, 9 N. W. (2d) 604, states the correct rule for damages due to faulty construction amounting to such incomplete performance, which is the difference between the value of the house as it stands with faulty and incomplete construction and the value of the house if it had been constructed in strict accordance with the plans and specifications. This is the diminished-value rule. The cost of replacement or repair is not the measure of such damage, but is an element to take into consideration in arriving at value under some circumstances. The cost of replacement or the cost to make whole the omissions may equal or be less than the difference in value in some cases and, likewise, the cost to rectify a defect may greatly exceed the added value to the structure as corrected. The defendants argue that under the Venzke rule their damages are $10,000. The plaintiff on review argues that the defendants' damages are only $650. Both parties agree the trial court applied the wrong rule to the facts.

The trial court applied the cost-of-repair or replacement rule as to several items, relying on Stern v. Schlafer (1943), [573] 244 Wis. 183, 11 N. W. (2d) 640, 12 N. W. (2d) 678, wherein it was stated that when there are a number of small items of defect or omission which can be remedied without the reconstruction of a substantial part of the building or a great sacrifice of work or material already wrought in the building, the reasonable cost of correcting the defect should be allowed. However, in Mohs v. Quarton (1950), 257 Wis. 544, 44 N. W. (2d) 580, the court held when the separation of defects would lead to confusion, the rule of diminished value could apply to all defects.

In this case no such confusion arises in separating the defects. The trial court disallowed certain claimed defects because they were not proven. This finding was not against the great weight and clear preponderance of the evidence and will not be disturbed on appeal. Of the remaining defects claimed by the defendants, the court allowed the cost of replacement or repair except as to the misplacement of the living-room wall. Whether a defect should fall under the cost-of-replacement rule or be considered under the diminished-value rule depends upon the nature and magnitude of the defect. This court has not allowed items of such magnitude under the cost-of-repair rule as the trial court did. Viewing the construction of the house as a whole and its cost we cannot say, however, that the trial court was in error in allowing the cost of repairing the plaster cracks in the ceilings, the cost of mud jacking, and repairing the patio floor, and the cost of reconstructing the nonweight-bearing and nonstructural patio wall. Such reconstruction did not involve an unreasonable economic waste.

The item of misplacing the living-room wall under the facts of this case was clearly under the diminished-value rule. There is no evidence that defendants requested or demanded the replacement of the wall in the place called for by the specifications during the course of construction. To tear down the wall now and rebuild it in its proper place [574] would involve a substantial destruction of the work, if not all of it, which was put into the wall and would cause additional damage to other parts of the house and require replastering and redecorating the walls and ceilings of at least two rooms. Such economic waste is unreasonable and unjustified. The rule of diminished value contemplates the wall is not going to be moved. Expert witnesses for both parties, testifying as to the value of the house, agreed that the misplacement of the wall had no effect on the market price. The trial court properly found that the defendants suffered no legal damage, although the defendants' particular desire for specified room size was not satisfied. For a discussion of these rules of damages for defective or unfinished construction and their application, see Restatement, 1 Contracts, pp. 572, 573, sec. 346 (1) (a), and illustrations.

On review, the plaintiff raises two questions: Whether he should have been allowed compensation for the disallowed extras, and whether the cost of reconstructing the patio wall was proper. The trial court was not in error in disallowing the claimed extras. None of them was agreed to in writing as provided by the contract, and the evidence is conflicting whether some were in fact extras or that the defendants waived the applicable requirements of the contract. The plaintiff had the burden of proof on these items. The second question raised by the plaintiff has already been disposed of in considering the cost-of-replacement rule.

It would unduly prolong this opinion to detail and discuss all the disputed items of defects of workmanship or omissions. We have reviewed the entire record and considered the points of law raised and believe the findings are supported by the great weight and clear preponderance of the evidence and the law properly applied to the facts.

By the Court.—Judgment affirmed.

[1] Motion for rehearing denied, with $25 costs, on October 4, 1960.