- Which of the following best states Builder's right?
Answer: Builder is entitled to the final installment less damages for the roof substitution because Builder substantially performed the contract.
Substantial performance of a constructive condition such as completion satisfies the condition even if there are minor, nonmaterial defects; the performing party may recover the contract price minus damages. The roof substitution was a breach but not material because Builder otherwise completed the house. Homeowner's moving in did not waive all defects. Choice A overstates the effect of acceptance. Choice C ignores the substantial-performance doctrine. Choice D incorrectly converts a damages remedy into a condition on payment.
- Which of the following best states Contractor's right?
Answer: Contractor is entitled to payment for the first two suites, and Owner may recover damages for failure to complete the third.
A contract is divisible when performance by each party is divided into corresponding pairs and payment is due for each unit. The per-suite payment term made this contract divisible. Contractor's abandonment affects only the third suite, so he can recover for the first two completed suites and Owner can seek damages for the third. Choice A treats the contract as entire despite the payment structure. Choice C incorrectly allows recovery for the uncompleted third suite. Choice D is wrong because divisibility can be inferred from the parties' payment terms and does not require an express condition.
- Which party prevails?
Answer: Muralist, because the CEO's dissatisfaction was not honestly held, and a satisfaction condition is excused when the obligor acts in bad faith.
When satisfaction involves personal taste or artistic judgment and the contract uses language such as 'sole discretion,' the standard is subjective good faith: the obligor must actually be dissatisfied. The evidence showed the CEO was honestly satisfied and manufactured dissatisfaction to save money. That bad faith excuses the condition. Choice A ignores the good-faith limitation on satisfaction clauses. Choice B states the subjective standard but is wrong on the facts because the dissatisfaction was not honest. Choice D applies the objective standard, which is not the standard for artistic taste under this clause.
- Which statement best describes Buyer's obligation?
Answer: Buyer's duty to pay is discharged only if Seller's breach was material; the noncompete covenant was a promise, not an express condition.
The noncompete clause is a promise, not an express condition precedent; the payment clause did not say payments were conditioned on compliance. A breach of a promise discharges the other party only if the breach is material, not automatically. If Seller's breach was material, Buyer may stop paying; if not, Buyer must continue paying and may recover damages. Choice A incorrectly treats the covenant as an express condition. Choice C overstates the effect of any breach. Choice D ignores the possibility that a material breach can discharge remaining duties.
- Should Hazel be compelled to construct?
Answer: No, because an express condition must be strictly satisfied, and the certificate Tenco delivered did not comply with the condition even if the actual insurance policy satisfied Tenco's separate coverage obligations.
The lease language is an express condition precedent: Hazel's duty to construct arises only upon Tenco's delivery of a certificate evidencing at least $1 million coverage and naming Hazel as an additional insured. Express conditions are normally enforced strictly; substantial compliance or near-performance does not satisfy them. Tenco delivered a certificate showing only $300,000 coverage and omitting Hazel, so the specified condition was not fulfilled. The fact that Tenco's actual policy contained the required terms does not help because the condition required delivery of a conforming certificate, not merely maintenance of insurance. Choice A is correct. Choice B incorrectly applies a purpose-based substantial-compliance approach to an express condition, which courts usually reject absent an exception such as forfeiture or prevention. Choice C misclassifies the requirement: the phrase "conditioned upon" makes it a condition, not a covenant, so Hazel may withhold performance rather than merely seek damages. Choice D misstates the law because nonoccurrence of an express condition is not excused merely because the benefited party suffered no prejudice; waiver would require voluntary intentional relinquishment, not mere absence of harm, and no forfeiture exception applies because Tenco has not conferred the bargained-for benefit on Hazel.
