“You must be satisfied or your money back” is a common advertisement. A party to a contract can require that he need not pay or otherwise carry out his undertaking unless satisfied by the obligor’s performance, or unless a third party is satisfied by the performance.
Parties may contract to perform to one side’s personal satisfaction. Andy tells Anne, a prospective client, that he will cut her hair better than her regular hairdresser, and that if she is not satisfied, she need not pay him. Andy cuts her hair, but Anne frowns and says, “I don’t like it.” Assume that Andy’s work is excellent. Whether Anne must pay depends on the standard for judging to be employed—a standard of objective or subjective satisfaction. The objective standard is that which would satisfy the reasonable purchaser. Most courts apply this standard when the contract involves the performance of a mechanical job or the sale of a machine whose performance is capable of objective measurement. So even if the obligee requires performance to his “personal satisfaction,” the courts will hold that the obligor has performed if the service performed or the goods produced are in fact satisfactory. By contrast, if the goods or services contracted for involve personal judgment and taste, the duty to pay will be discharged if the obligee states personal (subjective) dissatisfaction. No reason at all need be given, but it must be for a good-faith reason, not just to escape payment.
The duty to make a contract payment may be conditioned on the satisfaction of a third party. Building contracts frequently make the purchaser’s duty to pay conditional on the builder’s receipt of an architect’s certificate of compliance with all contractual terms; road construction contracts often require that the work be done “to the satisfaction of the County Engineer.” These conditions can be onerous. The builder has already erected the structure and cannot “return” what he has done. Nevertheless, because the purchaser wants assurance that the building (obviously a major purchase) or road meets his specifications, the courts will hold the contractor to the condition unless it is impossible to provide a certificate (e.g., architect may have died) or the architect has acted in bad faith, or the purchaser has somehow prevented the certificate from issuing. The third party’s refusal to issue a certificate needs to be reasonable.
Parties may, expressly or implicitly, condition the requirement for contractual performance on the happening or nonhappening of an event, or on timeliness. They may condition performance on satisfaction to one of the parties to the contract or to the satisfaction of a third party; in any event, dissatisfaction must be in good faith.
- What is “conditioned” by a condition in a contract?
- What conditions are based on how they are made?
- What conditions are based on their effect on the duty of performance?
- What typical situations involve performance to a party’s satisfaction?