Contracts II, Pages 889–891

Kingston v. Preston

Court of King's Bench, 1773
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Facts:

Defendant, a silk merchant, agreed to hire plaintiff for 15 months for £200 per year. Defendant also agreed to sell his stock to his nephew and plaintiff for a fair price at the end of the 15 months. Defendant also promised to allow the buyers to run the business in his house after they executed 14-year deeds of partnership with defendant. Plaintiff agreed to give defendant sufficient security to guarantee monthly payment of £250 in lieu of defendant receiving a share of the business's income each month after selling it. These payments were to continue "until the value of the stock should be reduced to £4000." After the 15 months plaintiff did not show sufficient security, so defendant did not convey the business to plaintiff. Plaintiff then sued for the business.

Issue:

Can a breach by the plaintiff be a defense for the defendant's breach?

Plaintiff's Argument:

One breach cannot be a defense for another breach.

Defendant's Argument:

The covenants were impliedly dependent on each other, so defendant did not have to convey the business until plaintiff gave him adequate security.

Rule:

There are three types of promises:

  1. Mutual and independent promises
    • Neither party's performance triggers the other's duty to perform.
    • If either party fails to perform, it is a breach.
    • The other party still must perform in the event of a breach.
  2. Dependent condition
    • One's performance triggers the other's duty to perform.
    • If the first party, the condition, fails to perform, it is not a breach. If the condition occurs, it is a breach if the other party fails to perform.
    • If the first party, the condition, fails to perform, it is not a breach if the other party also does not perform.
  3. Mutual and simultaneous conditions
    • Either party's performance triggers the other's duty to perform.
    • If neither party performs, it may not be a breach, but if one performs it is a breach if the other does not.
    • If one party fails to perform, the other is not obligated to perform.

Reasoning:

The parties' covenant was a dependent condition. As the condition precedent did not happen, it would be the greatest injustice to force defendant to give up his business for nothing.

Holding:

Plaintiff's performance was a condition precedent. Judgment for defendant.