The Common Law

by Oliver Wendell Holmes

If a condition is attached to the contract's coming into being, there is as yet no contract. Either party may withdraw, at will, until the condition is determined. There is no obligation, although there may be an offer or a promise, and hence there is no relation between the parties which requires discussion here. But some conditions seemingly arising out of a contract already made are conditions of this sort. Such is always the case if the condition of a promise lies within the control of the promisor's own will. For instance, a promise to pay for clothes if made to the customer's satisfaction, has been held in Massachusetts to [316] make the promisor his own final judge. /1/ So interpreted, it appears to me to be no contract at all, until the promisor's satisfaction is expressed. His promise is only to pay if he sees fit, and such a promise cannot be made a contract because it cannot impose any obligation. /2/ If the promise were construed to mean that the clothes should be paid for provided they were such as ought to satisfy the promisor, /3/ and thus to make the jury the arbiter, there would be a contract, because the promisor gives up control over the event, but it would be subject to a condition in the sense of the present analysis.

The conditions which a contract may contain have been divided by theorists into conditions precedent and conditions subsequent. The distinction has even been pronounced of great importance. It must be admitted that, if the course of pleading be taken as a test, it is so. In some cases, the plaintiff has to state that a condition has been performed in order to put the defendant to his answer; in others, it is left to the defendant to set up that a condition has been broken.

In one sense, all conditions are subsequent; in another, all are precedent. All are subsequent to the first stage of the obligation. /4/ Take, for instance, the case of a promise to pay for work if done to the satisfaction of an architect. The condition is a clear case of what is called a condition precedent. There can be no duty to pay until the architect is satisfied. But there can be a [317] contract before that moment, because the determination whether the promisor shall pay or not is no longer within his control. Hence the condition is subsequent to the existence of the obligation.

On the other hand, every condition subsequent is precedent to the incidence of the burden of the law. If we look at the law as it would be regarded by one who had no scruples against doing anything which he could do without incurring legal consequences, it is obvious that the main consequence attached by the law to a contract is a greater or less possibility of having to pay money. The only question from the purely legal point of view is whether the promisor will be compelled to pay. And the important moment is that at which that point is settled. All conditions are precedent to that.

But all conditions are precedent, not only in this extreme sense, but also to the existence of the plaintiff's cause of action. As strong a case as can be put is that of a policy of insurance conditioned to be void if not sued upon within one year from a failure to pay as agreed. The condition does not come into play until a loss has occurred, the duty to pay has been neglected, and a cause of action has arisen. Nevertheless, it is precedent to the plaintiff's cause of action. When a man sues, the question is not whether he has had a cause of action in the past, but whether he has one then. He has not one then, unless the year is still running. If it were left for the defendant to set up the lapse of the year, that would be due to the circumstance that the order of pleading does not require a plaintiff to meet all possible defences, and to set out a case unanswerable except by denial. The point at which the law calls on the defendant for an answer varies [318] in different cases. Sometimes it would seem to be governed simply by convenience of proof, requiring the party who has the affirmative to plead and prove it. Sometimes there seems to be a reference to the usual course of events, and matters belong to the defence because they are only exceptionally true.

The most logical distinction would be between conditions which must be satisfied before a promise can be broken, and those which, like the last, discharge the liability after a breach has occurred. /1/ But this is of the slightest possible importance, and it may be doubted whether another case like the last could be found.

It is much more important to mark the distinction between a stipulation which only has the effect of confining a promise to certain cases, and a condition properly so called. Every condition, it is true, has this effect upon the promise to which it is attached, so that, whatever the rule of pleading may be, /2/ a promise is as truly kept and performed by doing nothing where the condition of the stipulated act has been broken, as it would have been by doing the act if the condition had been fulfilled. But if this were all, every clause in a contract which showed what the promisor did not promise would be a condition, and the word would be worse than useless. The characteristic feature is quite different.

A condition properly so called is an event, the happening of which authorizes the person in whose favor the condition is reserved to treat the contract as if it had not been made,—to avoid it, as is commonly said,—that is, to insist on both parties being restored to the position in [319] which they stood before the contract was made. When a condition operates as such, it lets in an outside force to destroy the existing state of things. For although its existence is due to consent of parties, its operation depends on the choice of one of them. When a condition is broken, the person entitled to insist on it may do so if he chooses; but he may, if he prefers, elect to keep the contract on foot. He gets his right to avoid it from the agreement, but the avoidance comes from him.

Hence it is important to distinguish those stipulations which have this extreme effect from those which only interpret the extent of a promise, or define the events to which it applies. And as it has just been shown that a condition need not be insisted on as such, we must further distinguish between its operation by way of avoidance, which is peculiar to it, and its incidental working by way of interpretation and definition, in common with other clauses not conditions.

This is best illustrated by taking a bilateral contract between A and B, where A's undertaking is conditional on B's doing what he promises to do, and where, after A has got a certain distance in his task, B breaks his half of the bargain. For instance, A is employed as a clerk by B, and is wrongfully dismissed in the middle of a quarter. In favor of A, the contract is conditional on B's keeping his agreement to employ him. Whether A insists on the condition or not, he is not bound to do any more. /1/ So far, the condition works simply by way of definition. It establishes that A has not promised to act in the case which has happened. But besides this, for which a condition [320] was not necessary, A may take his choice between two courses. In the first place, he may elect to avoid the contract. In that case the parties stand as if no contract had been made, and A, having done work for B which was understood not to be gratuitous, and for which no rate of compensation has been fixed, can recover what the jury think his services were reasonably worth. The contract no longer determines the quid pro quo. But as an alternative course A may stand by the contract if he prefers to do so, and sue B for breaking it. In that case he can recover as part of his damages pay at the contract rate for what he had done, as well as compensation for his loss of opportunity to finish it. But the points which are material for the present discussion are, that these two remedies are mutually exclusive, /1/ one supposing the contract to be relied on, the other that it is set aside, but that A's stopping work and doing no more after B's breach is equally consistent with either choice, and has in fact nothing to do with the matter.