In our previous lesson, we compared the possibilities in contract performance for applying a perfect tender standard or a substantial performance standard. In this lesson, we will explore the way in which the substantial performance test came to be really dominant in the American contract law governing most contracts. The leading case on this point, really without question, is the New York case of Jacob and Young's versus Kent from 1921. It involved the construction of a really palatial residence by Mr. George Edward Kent, which you can see in the middle photo, and included in the contract was a specification of the kind of pipe that was to be used in the residence. The contract said that all wrought iron pipe used must be well galvanized lap welded pipe of the grade known as standard pipe of Redding manufacturer. So the contract term said that the pipe needed to be the Redding brand.
And by the way, that is the correct pronunciation. It's named after the city of Redding in Pennsylvania. And then we have other specifications as to the quality. Now what was actually installed in the house, as we will see. was another brand of pipe known as Cohoes brand pipe.
Use of this different brand of pipe raised the issue as to whether the homeowner might be excused from paying the unpaid portion of the contract. Judge Cardozo, who wrote the opinion here for the New York Court of Appeals, was not really willing to let the homeowner off the hook. with the payment.
He noted that the evidence sustains a finding that the omission of the prescribed brand of pipe was neither fraudulent nor willful. Instead, It was the result of oversight and inattention of the plaintiff's subcontractor. Redding Pipe, and this part is important, is distinguished from Coho's Pipe and other brands only by the name of the manufacturer stamped upon it at intervals of between 6 and 7 feet.
Thus, from a visual perspective, the Redding Pipe and the Coho's Pipe, apart from this occasional stamp, would have looked pretty much identical. identical. The court further says, 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.
Now, How can that be, you might ask yourself, when that's not what was actually contracted for? After all, and going back to the quote, the courts never say that one who makes a contract fills the measure of his duty by less than full performance. So far, that's exactly what we saw in the Smith v. Brady case earlier.
The courts 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. Now, you saw this sort of language regarding conditions just a few lessons ago when we looked at terms where the occurrence of the condition resulted in liability being created or destroyed as a result. Here, Judge Cardozo is referring to promises in a contract as being conditions, but what he really means is that certain promises are of such importance that they are not necessarily conditions.
that breaching them frees the other party from having to fulfill its remaining obligations under the contract. In that regard, they're sort of like conditions. The breach in this case would have resulted in a fairly sizable forfeiture, you might even say a disproportionate forfeiture, of the amount that was still unpaid on Mr. Kent's house. That is exactly what the homeowner was seeking. Judge Cardozo further explains, The distinction is akin to that between dependent and independent promises, or between promises and conditions.
Some promises are so plainly independent that they can never by fair construction be conditions of one another. In other words, The obligation to do one thing, the judge says, is not necessarily going to be a condition requiring the other party to perform. Continuing on.
Others are so plainly dependent that they must always be conditions. Others, the court says, 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. Finally, we're going to look at this as a matter of justice and partly a presumable intention to tell us whether we put a promise in one class or another. Now, to put that in other language, we have to look at specific promises to see if those promises are going to be ones that will release the other side because a breach of that promise is so important and so central to the contract that we are justified in letting the other side out of its obligations. And so that's what a material breach would be.
And you might think of material breach as being the flip side of substantial performance. If a party has not substantially performed, then there has been a material breach. So what happened in this case and why? Ultimately, the court decided that the breach here of using the wrong Coho's brand of pipe, which was considered by contractors to be of exactly the same quality as Redding pipe, was not a material breach.
The court says, the simple and the uniform will call for different remedies from the multifarious and intricate. The margin of departure from 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 skyscraper. So we've got some poetic language here, as often happens when Judge Cardozo writes an opinion. Thus, a big project may have a bunch of little things that aren't quite right, and we certainly can't let the buyer completely off the hook in that case.
So the court goes on, From the conclusion that promises may not be treated as dependent to the extent of their utmost 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. We're coming around to this idea that some aspects of a promise on a large-scale project are perhaps not as important as others because to treat a small promise as being something that prevents the other side from having to perform could end up being oppressive, or as Judge Cardozo says, oppressive retribution. And the truth is, in our contract law, we don't want to encourage oppression in people's contractual dealings.
The court brings this line of thinking to the conclusion by noting, Those who think more of symmetry and logic in the development of legal rules than a practical adaptation to the attainment of a just result will be troubled by a classification where the lines of division are so wavering and blurred. The problem with the substantial performance doctrine is that sometimes we don't know just from looking at a contract what the important promises are. Continuing on, where the line is to be drawn between the important and the trivial cannot be settled by a formula. Be aware, there isn't an automatic way to decide that this certain kind of breach is a material breach and that we don't have substantial performance in the installation of the wrong kind of pipe.
We have to actually look at the facts. Nowhere will change be tolerated by the government. However, if it is so dominant or pervasive as in any real or substantial measure as to frustrate the purpose of the contract. These two Pieces of text that I've underlined on your screen really represent the test for whether substantial performance has occurred or not.
With the pipe issue, the purpose of the contract wasn't to get a particular brand of pipe. The purpose seems more... to have gotten a particular quality of pipe in the home construction. If we look at it that way, the co-host pipe, which in the contractor trade was of the same quality as Redding pipe, would be good enough.
So how do we prevent the substantial performance standard from being abused? Here's what the court says on that point. There is no general license to install whatever.
in the builder's judgment may be regarded as just as good. The question is one of degree to be answered, if there is a doubt, by the triers of the facts, that is, the jury, and if inferences are certain by the judges of the law, the law is definitely treading a fine line here. Parties, we see, don't have a free license to do whatever they want and violate the contract. So the idea that we're sort of hinting at here in Jacob and Young's versus Kent is that if the contractor had willfully chosen the wrong pipe rather than it being done accidentally by a subcontractor, we would be bothered by that determination.
An innocent mix-up of the quality of pipe is not the same thing and not as big of a deal, so that will not count as a breach. In a review question following this case, I ask you to suppose that Mr. Kent was in fact the president of the Redding Pipe Company. Could that change the outcome of the case?
Why or why not? Well, if Mr. Kent was the president of a particular pipe company, perhaps it would change the result. After all, the president would want to be able to point to his own house and say, yes, my pipe is in here, and only Redding Pipe was sufficient for the construction of a majestic home like this one. Now, that wasn't what happened in the real case, mind you. The court seems to have thought that this was sort of a holdup to prevent payment.
to the contractor and that the buyer, Mr. Kent, really didn't care about the kind of pipe so long as it was of the right quality and that innocent mistake should not result in any damage. to the party. But again, all we have to do is change a few facts, and we can end up where this is a crushing blow that Cohoast was installed instead of Redding Pipe.
And so I put the meme up on the screen just to show you that, yes, contract professors can make cool memes about contract law. Well, or at least they try. So all that being said, let's compare this case to a Texas case.
O.W. Grun Roofing v. Cope. This is a 1975 case out of the San Antonio Intermediate Court of Appeals in Texas. The Grun Roofing contract required defendant to install a new roof on plaintiff's home for $648, and the contract described the color of the shingles to be used as russet glow, which is a brown varied color. Defendant, the roofing company, acknowledges that it was his obligation to install a roof of uniform color.
For this project, something then needs to be relatively uniform about the pattern, even where there is a variance in individual shingles. The ultimate effect we're looking for from a roofing perspective ought to be of a roof that is fairly uniform. So that was the contract. But in fact, a uniform color is not what happened. The roofing company said on a couple of occasions, just wait, just wait.
As the shingles get weathered, the color will become more uniform, but it never did. The Texas court ultimately had to decide, has there been substantial performance of the contract with regard to these roofing materials? It knows.
notes that roofing materials here do satisfy the quality of being a substantial roof that will protect the plaintiff against the elements, but the roofing company's performance, was it good enough? Here's the test. It's up on your screen out of the OW Grun roofing case, and this is one you could apply. in other situations, at least in building contracts, to determine whether there has been substantial performance. The contractor, one, must have in good faith intended to comply with the contract.
Just like in Jacob and Young's, we do not want bad faith intentional violation of the contract. The second part of the test. The contractor shall have substantially done so in the sense that the defects, A, are not pervasive.
They do not constitute a deviation from the general plan contemplated for the work, and see that the deviations are not so essential that the object of the parties in making the contract and its purpose cannot without difficulty be accomplished by remedying them. Now, what this opinion does is it puts a little more meat on the general standards that we saw in the Jacob and Young's case. Here's what we're looking for as to an individual contract. Did the piping matter?
Does the color of the shingles matter? And so forth. Although the roof here was substantial and would fulfill its role of giving protection against the elements, roofs on houses also fill a visual role. They kind of tie the house together.
The roof is something that everybody who goes by the house can see upon coming up to the house. The Texas court then found that the mismatched shingles were not substantial. performance based on the test that you see here on your screen.
So realize we have two different construction contracts with two different results. So that brings me to this question out of your casebook. Having looked at this Texas case and the New York case of Jacob and Young's versus Kent, both of which purport to apply the substantial performance doctrine, are they consistent with each other?
In the Texas roofing case, the contractor lost, while the contractor in the New York pipe case prevailed. The fact is, these cases are consistent with one another. They're just different facts reaching different results. In the Redding pipe case, the pipe was structurally sound, and it performed no visual role in the House that was important to the purposes of the contract. Again, if Kent had been the president of the Reading Pipe Company, maybe we would reach a different conclusion.
But for just living... in the house, he got the quality of pipe he contracted for. The Texas roofing case is quite different, however. Though the quality of the shingles was good enough, it's, you know, going to keep out the weather and do all the things that shingles should do, unlike pipes, shingles perform a visual role for a house.
As a result, the party in Jacob and Young's couldn't insist on the home being torn down and the pipes replaced. But it was very possible in the OW Grun case to scrape off the shingles that were mismatched and put on a new roof with satisfactory matching shingles. So let's go back to the opinion in the Grun roofing case.
The court ascribes its reasoning to the fact that a person has, particularly with respect to his home, the right to choose for himself and to contract for something which exactly satisfies his choice, and should not be compelled to select to accept something else. In the matter of homes and their decoration, as much as, if not more than, in many other fields, mere taste or preference or Almost approaching whimsy may be controlling with the homeowner, so that variations, which might under other circumstances be considered trifling, may be inconsistent with substantial performance on which liability to pay must be predicated. In this case, Ultimately, Grun could be liable for damages for breach of the construction contract.
So be aware that for the roofing, substantial performance did not occur. It had a visual aspect and a purpose. purpose that was not met. In the Redding Pipe case, the pipe did everything it was supposed to do, and there was no real problem with a different brand of similar quality being used. That brings us to the end of this lesson on the Substantial Performance Standard for performing contracts.
In our next lesson, we will see how the perfect tender rule is still around. and it plays a role in contracts for sale of goods under the Uniform Commercial Code.