Cantrell-Waind & Associates, Inc. v. Guillaume Motorsports, Inc.

Arkansas Court of Appeals · 1998 · Contracts

Contractscondition precedentgood faith and fair dealingprevention doctrinehindrancereal estate commissionsummary judgmentimplied obligation

Facts

A lease with option to purchase provided that Guillaume Motorsports would pay Cantrell-Waind a $15,200 commission upon closing of the sale, but only if the closing occurred within two years of the lease's execution, i.e., before August 1, 1996. The buyers exercised the option in April 1996, and appellant presented evidence that loan approval and other requirements for closing were complete by July 19, 1996, and that the buyers wanted to close before August 1. Appellant also presented evidence that Williams told others he would be out of the country and unavailable to close until after August 1, although he later admitted he remained in Bentonville from July 22 through 25 and did not leave the country. The closing occurred on August 14, 1996, and the commission was not paid.

Issue

When a contract makes payment of a commission contingent on closing by a stated date, may the party owing the commission deliberately hinder or prevent the closing from occurring before that date and then rely on the nonoccurrence of the condition precedent to avoid liability? Also, did the summary-judgment record present genuine issues of material fact on that question?

Rule

A contractual term making liability depend on an event is a condition precedent, but a party has an implied obligation not to do anything that would prevent, hinder, or delay performance. If a promisor prevents or hinders the occurrence of a condition precedent, and the condition would have occurred except for that conduct, the nonoccurrence of the condition is excused through the duty of good faith and fair dealing, and the promisor cannot rely on the failed condition to avoid liability.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Tulsa, Orion Loft Developers signed an agreement promising to pay broker Nina Patel a $40,000 commission only if a condominium sale closed by September 30. The buyer had financing approved and the title work completed by September 20, but Orion's president falsely told the closing agent he would be in Europe through October 3 and refused to authorize any substitute signer; the sale closed on October 4.

If Nina sues for the commission, which is the strongest argument under the governing rule?

Explanation. The closing-by-September-30 term is a condition precedent to Orion's liability. But every contract includes a duty of good faith and fair dealing, which means Orion may not deliberately prevent, hinder, or delay the occurrence of that condition. If timely closing would have occurred except for Orion's false claim of unavailability and refusal to authorize a substitute signer, the nonoccurrence of the condition is excused and Orion cannot invoke it to avoid liability.