Summary of Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.
Summary: Parties entered into a letter agreement setting forth certain conditions precedent to the formation and existence of a sublease between them. The agreement provided that there would be no sublease between the parties “unless and until" P delivered to D the prime landlord’s written consent to certain “tenant work" on or before a specified deadline. If the condition did not occur, the sublease would be null and void. P provided only oral notice on the specified date. Therefore substantial performance does not apply to this case.
Facts: In 1986 P moved to WFC in NYC with 3 years remaining on current lease. If P was unable to sublease current space, O&Y agreed to make the rental payments. In Dec. 1986, parties entered into a conditional letter agreement to sublease current space of P. Proposed sublease was attached to the letter agreement. The letter agreement provided that the proposed sublease would be executed only upon the satisfaction of certain conditions: P was required to obtain “the Prime Landlord’s written notice of confirmation, substantially to the effect that D is a subtenant of the premises reasonably acceptable to Landlord." Without the written notice received by or on, Dec. 30, 1986, then this letter agreement and sublease shall be deemed null and void. With satisfaction of the condition, D was required to submit to P on or before Jan 2, 1987, its plans for “tenant work" for phone linkage between their two floors. Then written consent was needed of the landlord for the tenant work on or before Jan 30, 1987, without which, both the agreement and sublease were to be null and voided. Parties extended the letter agreement’s deadlines in writing and P timely satisfied the first condition, but did not deliver the second condition. P’s attorney phoned D and informed them that the landlord’s consent had not been secured. The next day, D informed P that the agreement and sublease were invalid for failure to deliver the prime landlord’s written consent and that it would not agree to an extension of time. P eventually received landlord’s consent.
P: D waived and/or was estopped by virtue of its conduct from insisting on physical delivery of the landlord’s written consent by the deadline. Also alleges in its complaint that it had substantially performed the conditions set forth in the agreement.
D: no sublease or contractual relationship ever arose because P failed to satisfy the conditions.
Procedure: The trial court barred reference to substantial performance of the terms of the letter agreement, but then let the jury consider the theory anyway. Jury answered that yes the P did substantially perform the conditions set forth in the letter and awarded 1.2 million. D moved for judgment notwithstanding the verdict. Supreme Court granted the motion, ruling as a matter of law, the doctrine did not apply. Appellate court reversed, and reinstated the jury verdict. This court reverses.
Issue: (1) whether the doctrine of substantial performance applies to the facts of this case?
Holding: (1) No. Furthermore, the issue of substantial performance is not for the jury to decided, but rather by the “judges of the law."
Rule: A condition precedent is “an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.
Conditions can be express or implied. Express conditions are those agreed to and imposed by the parties themselves. Implied or constructive conditions are those “imposed by the law to do justice." Express conditions must be literally performed, whereas constructive conditions, which ordinarily arise from language of promise, are subject to the precept that substantial compliance is sufficient. When doubtful, and the language is not clear, a court will interpret language as a promise or constructive condition.
Rationale: Given the language of the first “condition", it is obvious that it is an actual condition give the language. This court sees no justifiable basis for applying the doctrine of substantial performance to the facts of this case. The requirements of s/p are strict. And because the critical concern of forfeiture or unjust enrichment (O&Y agreed to indemnify P for damages resulting from failure to sublease) is simply not present in this case, we are not presented with an occasion to consider whether s/p is applicable. Furthermore, there is no reason to relieve them of their bargaining. If they are dissatisfied with the consequences of their agreement, “the time to say so was at the bargaining table."