we turn our attention in this new unit to the important topic of contractual conditions you might think of conditions as being if then switches that determine whether liability does or does not exist or whether obligations do or do not exist conditions are treated somewhat differently than other terms in a contract and in this lesson in particular we will address express conditions and how those conditions could be waived now condition is defined in section 224 of the restatement second of contracts and frankly pretty much other k any other case you may find it as an event not certain to occur which must occur unless its non-occurrence is excused before performance under a contract becomes due now that may seem a little bit of a convoluted way to describe conditions but generally you can think of a condition as something that cannot be definite a condition must be something that could come out one way or it could come out another way and the condition is then what triggers certain performance obligations or liability under a contract now an event can be made into a condition says restatement section 226 either by an agreement of the parties and we call that by the way an express condition because the parties have expressly agreed to that term or by a term supplied by the court now that latter reference is to any implied condition in other words the parties did not expressly agree to a condition but based on other parts of the contract that they did agree to we can see that certain events must operate as conditions so keep that in the back of your mind as we go through unit 19. our first case on point for dealing with express conditions that in one that introduces us to the topic is north houston international llc versus payne weber real estate investments inc the particular condition involved in this case revolved around providing some documents from tenants in a commercial building these documents are known in commercial real estate as estoppel certificates this particular agreement said that the lender and that's payne weber shall not be obligated to close or fund the mortgage loan unless and until payne weber has received the following and then among many listed items there was item h which provided at payne weber's request borrower that's north houston shall deliver prior to the closing and from time to time thereafter estoppel certificates in form and substance satisfactory to payne weber from all tenants under then existing commercial leases covering any portion of the property which payne weber in its discretion designates now if you are not familiar with the stopple certificates in the real estate business basically you should know these are documents that a tenant in a particular building can be required to sign from time to time and it contains a representation that as of a particular date the tenant has no claims against the landlord and no disputes with the landlord other than whatever ones are specifically listed by the tenant on the certificate these estoppel certificates are important when a real estate purchase is contemplated because that way the buyer knows what sort of liability it might be taking on when it takes on the other building tenants the estoppel certificates prevent the tenants and so in legal terms they are estopped from bringing up any unlisted issue with the new landlord that might have been brought up against the old landlord that's basically what a estoppel certificates do the requirement in this particular loan agreement was that payne weber does not have to fund the loan there's our condition until it gets the estoppel certificates well guess what since we're reading a case you might know payne weber did not get these and therefore payneweber did not fund the loan here's why scott lightman a payne weber employee testified in his affidavit that to the best of his knowledge north houston did not provide an estoppel certificate for the u.s customs service now this particular government tenant of the building was a really large one it was paying over 461 thousand dollars annually on nearly 32 000 square feet of office space north houston argued in its response to that that the u.s customs service could not have supplied the information in its statement of lease because of governmental regulations now that is to say federal government tenants are not allowed by their own regulations to issue full estopple certificates because the government has rules saying no when we are the tenant you cannot require us to sign a document that would cut off earlier rights and that is something that is special as to a federal government tenant in this case and it was certainly true here the question is what do we do about that under the contract if it's impossible to get an estoppel certificate from the u.s customs service shouldn't that be excused that's what north houston argues north houston contended that the two informal letters that it did get from the u.s customs service were substitutes for estoppel certificates yes technically they were not estoppel certificates but the letters showed that the leases were approved and these should satisfy as conditions precedent or at least at least raise a fact question regarding north houston's compliance in other words we did the best that we can as the tenant the court as you see at the bottom of your screen disagreed the letter was not an estoppel certificate and the requirement in the loan agreement that had an express condition that must be complied with strictly for a closing obligation to arise so we might ask ourselves how can that be right given that it was impossible for north houston to provide an estoppel certificate and that gets us into the nature of express conditions because conditions unless an exception applies must be strictly complied with so consider this review question that's in your book should north houston have been excused from performing the conditions precedent in the funding agreement based on legal impossibility the answer to that question is no because that is not the way conditions work if we think about what lessons this case holds for parties who may be agreeing to documents in a real estate transaction the moral of the story is to be very careful about the structuring of conditions in north houston's case it could not get estoppel certificates from a particular tenant and that's going to be any federal government tenant at a minimum thus the loan agreement should have been structured in such a way that it did not give payne weber an out from funding the loan based on government tenants not providing estoppel certificates so if you work in real estate you'd better know who your tenants are and know what your legal abilities are before agreeing to do something as a condition in a critical contract so we've seen now that express conditions are strictly construed but next up is the classic case of clark versus west and i have to tell you this case is a favorite among law professors clark was a legal treatise author in the early part of the 20th century and the late 19th century there was a contract between clark and publisher john b west where clark was going to write and prepare for publication a series of law books these books actually were written it was a three-volume work known as clark and marshall on corporations and that is when the party's disagreement arose it arose over a term that is now up on your screen clark had some known problems with alcohol that prevented him when he was not properly managing the situation from sometimes doing the work he was obliged to do west knew about this and so here's what the contract said the first party that's clark the plaintiff agrees to totally abstain from use of intoxicating liquors during the continuance of this contract and that the payment to him in accordance with the terms of this contract of any money in excess of two dollars per page that was his base rate is dependent on the faithful performance of this as well as the other conditions of the contract so clark is going to get paid two dollars per page no matter what but we have this extra condition that could provide him additional money look at it in the next paragraph defendant west agrees to pay clark two dollars per page if said first party that's clark abstains from the use of intoxicating liquor and otherwise fulfills his agreements as here and before set forth then he shall be paid an additional four dollars per page so the contract says that if clark lays off the alcohol he will get a total of six dollars per page if he does not he will get only two dollars per page and that is what was expressly spelled out in the contract as we saw in the north houston case this is condition language much like we had regarding the estoppel certificate understand that clark has at the time of this litigation successfully completed writing his treatise but west has put on evidence showing that clark did drink alcohol sometimes during the writing process our question then is can west pay the lower amount given the fact that express conditions and this certainly appears to be one require strict compliance well here's what the court did it noted that the compensation specified in the contract the totality of it was to be six dollars per page it then struggles with the question of whether the six dollars was consideration or is the four dollar component of it merely a condition it is certainly worded in the contract that the four dollars out of the six the two thirds of the total payment is stated as a condition but the situation is different if the four dollars is actually part of the consideration that is what induced clark into entering into the contract why is that because conditions can be waived while consideration cannot be waived the court looks behind the agreement to see what its purpose was and in the court's words on your screen the obvious import of the contract construed in light of the purpose for which it was made is not a contract to write books in order that the plaintiff shall keep sober in other words west isn't really bargaining here for clark to not drink alcohol the concern is quote that he shall keep sober so that he may write satisfactory books the term is a condition and it's one that's particularly designed to keep clark on the straight and narrow path the court thus ends up holding that the particular stipulation here is not clark's consideration for the contract but simply one of its conditions so that argument by clark fails even though clark as we'll see is ultimately going to win the case that ends up leading to the first part of the result we have here that the restriction on clark of not drinking alcohol is not consideration like he argued but that it is a condition the reason it's important that we're dealing with a condition here is that it raises the next issue which is that of waiver west had said that clark's promise was consideration therefore the terms could not be waived the court rejected that argument by west and held that quote a condition which the defendant could have insisted upon as he has apparently done in regard to some others and one which he could waive just as he might have waived those relating to the amount of the advance payments or the number of pages to be written each month this we think is the fair interpretation of the contract and it follows that the stipulation as to plaintiff's total abstinence from alcohol was nothing more or less than a condition precedent so because it's a condition the court then goes on to note the corollary that a condition can be waived it can be excused if you will by the conduct of the parties and if it is waived then defendant west cannot insist upon the forfeiture of the additional four dollars per page moral of the story here if conditions are not enforced in a timely manner they are waived or relinquished so what ended up happening here was once west got its hand got his hands on the manuscript for the book he said aha now i'll pull out the provision about alcohol and use that against clark it was too late uh if he was going to try to enforce or hold clark to the condition he needed to do so at an earlier moment certainly once west knew that clark was imbibing alcohol again so that raises a question where i want to make sure you understand what west's argument was in this case does west concede that the disputed term here is a condition answer absolutely not west was arguing that the disputed term was consideration the exchange of four dollars per page for not drinking alcohol the court rejected west's argument the bargain in this case the consideration was production of the book and the alcohol provision was merely a condition now what difference does that make well as i mentioned a moment ago conditions can be waived while consideration may not be west is sort of making an alaska packers type argument saying well we can't change up the deal by changing one side's consideration unless clark does something else here like he was obligated to do like abstaining from alcohol without a modification well he didn't do that and the agreement has to stand and so wes should only owe clark two dollars per page waiver of the condition however would not be a modification of the contract so that is the important distinction between conditions and the way they're phrased and something that was inherently consideration in another review question i note the rule that we saw in north houston was that contractual conditions must usually be complied with strictly so how exactly did clark win his case and this is what i want you to understand even though he violated the condition by imbibing in alcoholic beverages clearly causing a failure of the condition the outcome ends up revolving around waiver so we need to make sure that we know what waiver is and how it occurred or at least allegedly occurred in clark versus west so let's go back to the opinion a waiver has been defined the court says to be the intentional relinquishment of a known right that is the established definition the right has to be given up intentionally and it can only be given up when it is fully known causing quote an election to dispense with something of value or forego some advantage which the party waiving it might at its option have demanded or insisted upon west could have insisted upon compliance with the alcohol condition early on rather than suggesting to clark that he would not do so now in the remand of this case it will be it will remain to be determined whether clark had alleged facts which if proven would be to establish would be sufficient to establish the claim of waiver realize then that conditions can be waived because think about where this waiver argument is coming from if west had said oh wait clark i see you with that drink in your hand you know what that means for our contract i'm only going to pay you two dollars per page what would professor clark have likely done he would have said forget that i'm not finishing the treatise at all so west didn't do that he just sat on the condition and refused to enforce it until he had the manuscript safely in his hand or at least that's what clark's argument was so if west was leading clark down the primrose path of saying oh you're good we like the work you're doing yeah yeah we're gonna pay you six dollars per page that would constitute a waiver of the condition so that brings us to the end of our first lesson on conditions introducing both express conditions and how they can be waived coming up in our next lesson will be another important exception to the strict enforcement of expressed conditions and that is known as disproportionate forfeiture and we will also take a look at implied conditions