A medical clinic contracted with a technology company for a customized records system. The agreement allocated $70,000 to standard servers and networking equipment and $30,000 to data migration, configuration, and staff training. The servers could operate with other records software, but the clinic stated that its primary objective was obtaining an operational system tailored to its workflow. After delivery, the clinic discovered that the server specifications did not conform to the contract. The parties agree that Article 2 governs the transaction because the goods component predominates. Which of the following statements most accurately describes the company's right to cure the nonconforming server specifications under UCC Article 2?

The company may cure within the time for performance, and may also cure after that time if it had reasonable grounds to believe the nonconforming tender would be acceptable, so long as it seasonably notifies the clinic and makes a conforming delivery.

The company has no right to cure once the clinic has rejected the servers, regardless of whether the time for performance has expired.

The company may cure only if the clinic first consents in writing to accept a substitute performance.

The company has no right to cure because Article 2 imposes a strict perfect-tender rule that bars any post-rejection cure.

A manufacturing plant contracted with an industrial-equipment supplier for a new backup generator, control panel, and cooling system. The written agreement allocated $180,000 to the equipment and $30,000 to delivery, installation, and calibration. The supplier regularly sells this equipment and uses its own technicians for installation. The equipment was standard inventory, although the supplier selected models suitable for the plant's power needs and available space. After installation, the plant alleged that the cooling system did not conform to the specifications. The supplier contends that common-law substantial-performance principles govern because its technicians provided skilled services. Which of the following best identifies the law governing the agreement?

Article 2 governs because the industrial equipment is the transaction's predominant purpose, while installation is incidental.

Common law governs because any agreement requiring skilled installation is treated primarily as a services contract.

Article 2 governs the equipment obligations, while common law separately governs every obligation relating to installation.

Common law governs because the plant described operational needs before the supplier selected the equipment.

Conditions and the duty of good faith — Bar Exam Outline & Rules

The Promise-or-Condition Line: What Failure Does

A performance dispute turns first on whether a contract term is a promise, a condition, or both, because that classification determines whether failure produces damages, prevents a duty from arising, or does both. A promise is an undertaking by a party to act or refrain from acting. A condition is an uncertain event, not necessarily within either party’s control, that must occur before a duty becomes due or that terminates an existing duty.

Courts determine the parties’ intended classification from the entire agreement. Words such as “if,” “only if,” “provided that,” “unless,” “until,” and “subject to” strongly suggest a condition, but labels do not control. A statement such as “Contractor promises to obtain a permit” ordinarily creates a promise. A statement that “Owner’s duty to pay is conditioned on issuance of a permit” creates a condition. The same event may be both: “Contractor promises to obtain the permit, and Owner’s duty to pay is conditioned on issuance of the permit.” Contractor’s failure is then a breach, and the nonoccurrence may also prevent Owner’s payment duty from arising.

The consequences differ sharply:

Classification	Question to ask	Consequence of failure	Near-miss
Promise	Did a party undertake to perform?	Breach supports damages; a material breach may suspend or discharge the other party’s remaining performance duty	A promise does not automatically make the other duty conditional
Condition	Was a specified event made a prerequisite or terminating event?	Nonoccurrence ordinarily prevents the conditional duty from arising or discharges it	No breach occurs merely because the event did not happen
Promissory condition	Did the term impose both an undertaking and an event prerequisite?	Breach supports damages, and nonoccurrence may also prevent or discharge the other duty	Treating it as only a promise misses the condition
Satisfaction condition	Was approval or satisfaction made the event controlling performance?	The duty depends on valid satisfaction under the applicable subjective or objective test	It is not automatically an ordinary warranty or reasonable-person term

A condition precedent must occur before a duty arises. A condition subsequent terminates a duty that already exists if the specified event occurs. A condition may also be tied to simultaneous performance, but the key question remains the same: what duty is controlled by the event?

For common-law contracts, an express condition ordinarily requires strict occurrence. Substantial performance is generally enough for an ordinary promise to perform, subject to damages for defects; substantial performance ordinarily does not satisfy an express condition. Thus, “build the house substantially according to the plans” is ordinarily promissory language, while “payment is due only upon the architect’s certificate of completion” is an express condition. The buyer’s separate rules governing tender, rejection, and revocation belong to the sibling chapter; this chapter asks what an agreed condition does to a duty.

Article 2 also gives effect to agreed conditions in contracts for goods. An agreement may make payment, approval, or another event a condition of a duty, subject to the UCC’s good-faith rules and any specific UCC provision governing the transaction. The classification still matters: a promise may support damages, while a condition may prevent the related duty from maturing. This is closed-book: be able to state the classification and each consequence without relying on supplied legal text.

The Missing Event: Excuse, Waiver, and Prevention

Start with a condition that did not occur. Ask these questions in order:

What duty depended on the condition? Nonoccurrence ordinarily means that duty never became due, or that an existing duty was discharged if the condition was subsequent.
Was the condition required by a stated deadline? If so, occurrence after the deadline generally does not satisfy it unless the protected party waived the deadline or the condition is otherwise excused.
Did the party seeking to rely on nonoccurrence wrongfully cause or hinder it? A party may not prevent or materially hinder occurrence of a condition and then invoke the condition’s failure. The condition is excused, and the other party may pursue the consequences of the resulting breach. The conduct must be causally connected to the failure; merely making performance more difficult is not automatically prevention.
Was the condition waived or was reliance on it barred by estoppel? If not, ask whether strict enforcement would produce a disproportionate forfeiture.
If no excuse applies, what follows? The conditional duty is not enforceable merely because the other party performed substantially or expected payment.

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Prevention is not the same as ordinary breach. If a seller promised to deliver documents and failed, that may be a breach. If the buyer’s duty was conditioned on receiving an approval that the buyer deliberately prevented the agency from issuing, the buyer cannot rely on the approval’s absence. Prevention can arise from affirmative interference or from failure to cooperate where cooperation is necessary and required by the agreement or the implied duty of good faith.

Waiver is an intentional relinquishment of a known condition, shown expressly or by conduct. A party protected by a condition may say, “I will pay even without the certificate,” or may repeatedly accept late performance while representing that the deadline will not be enforced. Waiver focuses on the waiving party’s intent; reliance is not always necessary. Estoppel additionally requires conduct that reasonably induces the other party to rely and a material change of position or other prejudice. The distinction matters when the allegedly excused party changed nothing in reliance on the statement.

A waiver is not necessarily permanent. At common law, a party may generally retract a waiver before the condition is due if the retraction is timely and does not unfairly defeat reasonable reliance. A retraction is ineffective to the extent the other party materially relied on the waiver. Under UCC § 2-209(4), an attempted modification that fails the applicable modification requirements may nevertheless operate as a waiver; under § 2-209(5), retraction is limited when the other party materially relied on the waiver. The UCC therefore makes waiver especially important in sales disputes.

Forfeiture excuse is narrower than waiver and prevention. A court may excuse the nonoccurrence of a condition when strict enforcement would cause a disproportionate forfeiture, unless occurrence of the condition was a material part of the agreed exchange. This is not a license to disregard express conditions whenever enforcement seems harsh. The stronger the evidence that the parties made exact occurrence central to their bargain, the less likely forfeiture excuse becomes. An insignificant paperwork condition that would cost a party a substantial earned payment presents a stronger case than a condition deliberately made central to the exchange.

Do not confuse an excused condition with successful performance. If the condition is excused, the underlying duty is treated as no longer blocked by that event. The party still must establish any independent promise that supports its claim. Conversely, if the condition simply failed without prevention, waiver, estoppel, or forfeiture excuse, the conditional duty remains discharged even though the other party may have acted diligently.

Approval and Honest Choice: Satisfaction and Good Faith

A condition of satisfaction makes one party’s duty depend on approval or satisfaction. The first question is the nature of the judgment entrusted to the evaluator.

If the subject is personal taste, aesthetics, or individual judgment-such as a portrait, wedding cake, or custom artistic design-the test is ordinarily subjective. The evaluator may withhold approval if genuinely dissatisfied, even though a reasonable person would approve.
If the subject is commercial value, operative fitness, or mechanical conformity-such as whether industrial equipment functions properly-the test is ordinarily objective. The question is whether a reasonable person in the evaluator’s position would be satisfied.
The contract’s language and context can alter the ordinary classification. A professional’s certification of compliance with technical specifications usually points toward an objective standard; a clause tied to a customer’s personal taste points toward subjective judgment.

Under either test, the evaluator must act in good faith. Subjective satisfaction does not permit a fabricated reason. A customer cannot reject a satisfactory custom product by claiming dissatisfaction merely to escape an unfavorable bargain or switch to a cheaper provider. Objective satisfaction does not permit an evaluator to impose personal preferences unrelated to the agreed commercial standard.

The near-miss is between subjective dissatisfaction and bad-faith dissatisfaction. The first is legally sufficient when the contract entrusts personal judgment; the second is not. Another near-miss is between a satisfaction condition and a warranty. A warranty is a promise about the goods or performance. A satisfaction clause instead makes approval the event controlling whether another duty is owed. The sibling chapters cover express and implied warranties; do not convert every approval clause into a warranty analysis.

The implied obligation of good faith and fair dealing applies to performance and enforcement of contracts. At common law, it requires honest conduct and bars a party from acting in a way that deliberately deprives the other party of the contract’s agreed benefit. It commonly does the work in three situations:

A party cannot sabotage or hinder a condition and then claim that the condition failed.
A party exercising contractual discretion must use that discretion honestly and consistently with the purpose for which it was granted.
A party cannot make a knowingly false claim of dissatisfaction or use an express contractual mechanism as a pretext to escape the bargain.

Article 2 states the rule in UCC § 1-304: every contract or duty within the UCC imposes an obligation of good faith in its performance and enforcement. UCC § 1-201(b)(20) defines good faith as honesty in fact and observance of reasonable commercial standards of fair dealing. For merchants, UCC § 2-103(1)(b) makes the commercial-standard component particularly important.

Good faith does not generally require a party to sacrifice its own economic interests, volunteer better terms, or refuse to exercise an express contractual right. A party may choose a permitted option because the market changed or because the bargain became less profitable. The line is crossed when the party lies, acts for a purpose inconsistent with the option, deliberately frustrates the condition, or otherwise evades the bargain’s substance.

Good faith also does not authorize a court to rewrite an express term. It cannot transform an express right into a duty to choose the other party’s preferred result, contradict a clearly allocated risk, or supply a term that the parties deliberately omitted. Under UCC § 1-302(b), parties may not disclaim the obligation of good faith, although they may define reasonable standards for performance when the standards are not manifestly unreasonable.

Keep these pairs separate:

Good faith versus prevention: prevention is the specific consequence when a party wrongfully causes the condition’s nonoccurrence; good faith is the broader standard that often makes the conduct wrongful.
Good faith versus reasonableness: subjective satisfaction requires honest dissatisfaction; objective satisfaction asks what a reasonable evaluator would conclude. Good faith is required under both.
Good faith versus an express option: exercising an option is permissible when done honestly within its stated scope; using it as a lie or pretext is not.
Good faith versus formation: the UCC rule stated in § 1-304 concerns performance and enforcement, not a general duty to negotiate or form a contract.

Common recurring errors include:

Treating “only if the certificate issues” as an ordinary promise and awarding damages without asking whether the payment duty ever arose.
Applying substantial performance to an express condition, such as a required approval or certificate.
Letting a party rely on a condition it deliberately prevented, as when a buyer tells the approving agency to stop processing the application.
Applying the reasonable-person satisfaction test to a personal artistic choice, or accepting personal dissatisfaction when the facts show a dishonest pretext.
Treating good faith as a duty to maximize the other party’s benefit instead of a limit on dishonesty, sabotage, and evasive use of contractual rights.

The Six-Choice Pressure Test: Two Rules Must Survive

A museum contracts with Kira, a portrait artist, to paint its director for $40,000. The agreement states that the museum’s duty to pay arises “only if the finished portrait is satisfactory to the museum’s director.”

The director must provide two reference photographs by May 1. The museum’s board later decides it wants to cancel after finding a cheaper artist. The director deliberately withholds the photographs, then announces that Kira’s portrait is unsatisfactory because it does not resemble the director in the withheld photographs. Kira used the available photographs and delivered the portrait on time. Which two statements are most accurate?

Practice

Select the two answers that are most accurate.

	(A) The condition is governed by a reasonable-person standard because satisfaction clauses always require objective approval.	(B) The museum may rely on the condition because Kira delivered the portrait without receiving the withheld photographs.	(C) The museum cannot rely on the condition because its deliberate withholding of the photographs wrongfully caused the asserted nonoccurrence.	(D) Kira’s substantial performance automatically satisfies the express condition.	(E) The director’s dissatisfaction is ineffective because it is a bad-faith pretext, even though the clause ordinarily uses a subjective satisfaction standard.	(F) The museum owes damages for breach of a promise, but nonoccurrence of a condition can never be excused.
Your answers

Three Short Runs: Separate the Near Misses

Practice

A contractor promises to install custom cabinets by June 1, and the contract states that the owner’s duty to pay the final installment arises only if a building inspector issues a certificate of completion. The inspector does not issue the certificate, and no party interferes with the inspection. What is the best analysis?

A buyer may cancel a contract if a government permit is not obtained by July 1. After deciding that the purchase price is too high, the buyer tells the agency not to process the permit and then invokes the cancellation clause. Which result is best?

A contract makes payment for a custom sculpture contingent on the client’s satisfaction. The client privately decides to avoid payment and falsely says the sculpture is unacceptable, although the client believes it meets the agreed artistic brief. Which statement is best?

High-Yield Points - ⚡ Biggest Takeaways

Classify the term first: a promise supports damages; a condition controls whether another duty arises. A party cannot rely on a condition it wrongfully prevented, waived, or made unfair to enforce. Satisfaction is subjective for personal taste but objective for commercial utility, and both tests require good faith.