Hale v. Finch
1 Wash. Terr. 566 (1878)
Rule of Law:
A contractual clause explicitly stating "this sale is upon this express condition" will be interpreted as a condition, not a covenant, unless qualifying language or extraordinary circumstances like fraud or duress are present and pleaded.
Facts:
- The sellers (plaintiffs in error) sold the steamer New World to the buyer (defendant in error) via a bill of sale.
- The bill of sale contained a clause stating: "And it is understood and agreed, that this sale is upon this express condition, that said steamboat or vessel is not within 10 years from the first day of May, 1867, to be run upon any of the routes of travel on the rivers, bays, or waters of the state of California or the Columbia river or its tributaries, and that during the same period last aforesaid, the machinery of the said steamboat shall not be run or employed in running any steamboat or vessel or craft upon any of the routes of travel, on the rivers, bays or waters of the state of California, or the Columbia river and its tributaries."
- The sellers assumed this clause constituted a covenant, meaning a promise whose breach would lead to damages.
- The sellers alleged that the buyer breached the clause concerning the operation of the steamboat.
Procedural Posture:
- Plaintiffs in error (sellers) sued defendant in error (buyer) in the District Court of the second district, alleging breach of a clause in a bill of sale and seeking damages.
- A trial was held in the District Court of the second district, where issues were made and evidence presented.
- At the conclusion of the plaintiffs' evidence, the defendant moved the District Court to instruct the jury to find for the defendant.
- The District Court of the second district granted the motion and instructed the jury to find for the defendant (essentially a directed verdict).
- Plaintiffs in error (appellants) excepted to this instruction and brought a writ to an appellate court to correct the supposed error committed by the District Court.
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Issue:
Does a contractual provision in a bill of sale stating "this sale is upon this express condition" create a condition subsequent, limiting the grantor's remedy to forfeiture, or a covenant, allowing for an action for damages for its breach?
Opinions:
Majority - Greene, Associate Justice
No, the clause stating "this sale is upon this express condition" creates a condition, not a covenant, thus limiting the remedy to forfeiture. The court held that the language used by the parties, "this sale is upon this express condition," is clear and unambiguous and plainly indicates their intent to create a condition. The court emphasized that such explicit words are controlling unless extraordinary circumstances like mistake, inadvertence, duress, or imbecility are pleaded and proven, which were not present in this case. Therefore, the sellers' remedy is against the vessel itself for a forfeiture, and not for personal damages against the buyer, affirming the lower court's instruction to the jury.
Analysis:
This case highlights the critical distinction between conditions and covenants in contract law, particularly concerning the available remedies for breach. It underscores the judiciary's adherence to the plain meaning of contractual language, especially when terms like "express condition" are explicitly used. The ruling serves as a cautionary tale for contract drafters, emphasizing the importance of precise wording to achieve desired legal consequences and remedies. Future cases will likely rely on this precedent to interpret similarly worded clauses, reinforcing the principle that parties are bound by the clear terms they adopt in their agreements.
