Cox v. SNAP, Inc.
859 F.3d 304 (2017)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the prevention doctrine, a party cannot rely on the non-occurrence of a condition precedent to excuse its own performance if that party's own wrongful conduct, including the breach of a contractual duty, caused the condition to fail.
Facts:
- On January 12, 2006, SNAP, Inc. and Curtis Cox executed a memorandum of understanding where Cox agreed to promote and market SNAP in exchange for an equity stake.
- The contract stated that on that same day, January 12, 2006, SNAP 'will issue a non-qualified stock option to Mr. Cox granting him the right to purchase 308 shares'.
- SNAP never provided Cox with separate documentation formally issuing the stock options.
- The contract granted Cox a 'put option,' giving him the right to require SNAP to repurchase his options at any time after January 1, 2011.
- On March 18, 2011, Cox sent a letter to SNAP attempting to exercise his put option.
- After discussions failed to produce a resolution, Cox sent a second demand letter on October 6, 2015.
- On October 9, 2015, SNAP's president replied to Cox, stating that '[SNAP] owes you nothing.'
Procedural Posture:
- In November 2015, Curtis Cox sued SNAP, Inc. for breach of contract in Virginia state court.
- SNAP removed the case to the U.S. District Court for the Eastern District of Virginia.
- Cox filed an amended complaint alleging breach of contract and quantum meruit.
- The parties filed cross-motions for summary judgment.
- The district court granted summary judgment in favor of Cox, awarding him $637,867.42 in damages.
- SNAP, as the appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Fourth Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a promisor's failure to perform a contractual duty excuse its liability when that failure prevented the occurrence of a condition precedent to its performance?
Opinions:
Majority - Diana Gribbon Motz
No, a promisor's failure to perform a contractual duty does not excuse its liability when that failure prevents the occurrence of a condition precedent. The prevention doctrine dictates that if a promisor prevents or hinders the fulfillment of a condition to his performance, the condition is waived or excused. In this case, even accepting SNAP's argument that the formal issuance of stock options was a condition precedent to its obligation to repurchase them, SNAP's position is self-defeating. The contract obligated SNAP to issue the options, and by failing to do so, SNAP breached its duty and caused the non-occurrence of the condition. Citing Virginia law and the Restatement (Second) of Contracts, the court held that a party who wrongfully prevents a condition from occurring cannot then use that non-occurrence as a defense to liability. This principle applies to wrongful inaction, such as failing to perform a contractual duty, not just affirmative obstruction.
Analysis:
This decision reinforces the strength and scope of the prevention doctrine in contract law, clarifying that it applies not only to active hindrance but also to wrongful inaction. By holding that a party's breach of one contractual duty (to issue options) excuses a condition precedent for another duty (to repurchase options), the court underscores the implied covenant of good faith and fair dealing. This precedent makes it difficult for a party to strategically fail to perform an initial step in a contract and then use that failure as a shield against liability for subsequent obligations. Future litigants will likely cite this case to argue that a party's failure to take contractually required affirmative steps is sufficient to trigger the prevention doctrine.
Unlock the full brief for Cox v. SNAP, Inc.