happening of an event which is neither future nor uncertain, may seem unlikely, but in fact it is of frequent occurrence in insurance law. If the matter in question though it has happened is unknown to both parties, there can be no doubt that the matter may be made a condition of a promise which will be treated in law in the same way as if it were future and uncertain. Thus a ship already lost may be insured.1 The insurer's promise though in reality absolute if the vessel has already been lost, is treated as conditional; whereas, if the vessel has not been lost and has perhaps already, unknown to the parties completed her voyage, the insurer is in reality promising nothing, but as the bargain was made on the basis of the knowledge which the parties had at the time they made their agreement, there is no failure of consideration. If the insurer's promise were in law a nullity, because in view of the condition on which it was dependent no possible liability could arise upon it, fraud of the insured would be unnecessary to establish a defence to an action for the insurance money, or to establish a right to recover it back if already paid. Lack or failure of consideration would be sufficient without fraud. In truth, however, the promise is not legally a nullity, and the transaction can be avoided by the insured only on the ground of mutual mistake or of fraud. If the parties contemplate the possibility of the situation which has arisen, their agreement is a valid contract. Even though one party knows of the fact which is stated as a condition of the promise, the contract may still be valid and treated by the law as a conditional contract. Where the insured is aware that he has already violated a condition of an insurer's promise, as where he makes a knowingly false and material representation, and the truth of the representation is a condition of the policy, there is no failure of consideration, and the premium can be retained though the breach of condition excuses the insurer from liability.2 If, however, the parties mistakenly assumed the existence of a fact upon which the promise of the insurer was in terms con 1 Sutherland v. Pratt, 11 M. & W. 312; Insurance Co. v. Folsom, 18 Wall. 237, 21 L. Ed. 827; Arnould, Marine Ins., § 13. 2 Parsons v. Lane, 97 Minn. 98, 106 N. W. 485; and see infra, §§ 754 et seq. ditioned, or if though the insured was aware of the facts yet his conduct was not intentionally fraudulent, there is failure of consideration; the premium has not been earned and if paid may be recovered. In exact pleading also whether the defendant should deny the existence of a contract, or admit the contract and deny the breach of it, will depend on whether the law accepts the point of view of the parties and treats a matter unknown to the parties though it has already happened as capable of being a condition.* § 664. Purpose of conditions. It is more advantageous for a promisee to have an absolute promise than a conditional one. The terms of the promise apart from any conditions qualifying it are for the promisee's benefit. The conditions are inserted for the promisor's protection. If the promisor desires to receive some performance from the promisee in return for his own, he may attempt to secure his object either by requiring a counter promise of such performance, or by qualifying his own promise by making it conditional on the desired performance being previously or concurrently given by the promisee. The fullest protection for the promisor will be obtained if he unites these two methods, requiring a counter promise and also making his own promise conditional on the performance of that counter promise. § 665. Distinction between promises and conditions. The distinction between a promise or covenant on the one hand, and a condition on the other, both in their legal effect and in their wording, is obvious and familiar. Breach of promise subjects the promisor to liability in damages, but does not necessarily excuse performance on the other side. Breach of condition prevents the party failing to perform from acquiring a right, or deprives him of one, but subjects him to no 'Parsons v. Lane, 97 Minn. 98, 106 N. W. 485; and see infra, §§ 754 et seq. In Harran v. Klaus, 79 Wis. 383, 48 N. W. 479, the defendant promised to buy certain notes from the plaintiff if the plaintiff had paid $75 for them as he asserted. The court called the transaction a "conditional" agreement and discusses the matter in a way equally applicable to a promise dependent on a fortuitous and uncertain event. See supra, § 119. liability. Words appropriate to promise and to condition make this distinction, which is clear in the legal effect produced, also clear as a matter of English construction. The minds of parties who enter into contracts, however, is more often addressed to what one party or the other is to do than to the consequences of the failure of doing it. When a contract reads "It is agreed,' or "it is provided," or "it is stipulated," or "it is understood" that A shall do a certain act, or simply that the act shall be done it is not perfectly clear whether A promises to do the act in question, or whether he will acquire a right against the other party only by doing that act. Argument is possible that the words mean both these things. As matter of construction, it seems better to favor bilateral contracts than unilateral, and in bilateral contracts better, where the meaning of the agreement is doubtful, to construe words as involving a promise by the party who is expected to do the act in question than as words of condition. Such a construction protects both parties to the transaction, and also does not involve the consequences that a slight failure to perform wholly destroys all rights under the contract. The law recognizes the propriety of this rule of construction.5 The illustrations given above are enough to indicate that it is not always easy to distinguish whether a promise or a condition is intended, and the desire of courts to give substantial justice in the particular cases before them has sometimes introduced difficulty where as matter of language none would exist. Especially words appropriate for condition have not been given their natural meaning where the consequence would lead to injustice, and a violation of the probable intent of the parties. The difference between conditions and promises is so radical in its consequences that there is no excuse for a nomenclature which fails to recognize the distinction. In the Lucy v. Davis, 163 Cal. 611, 126 Pac. 490; San Diego Const. Co. v. Mannix, 175 Cal. 548, 166 Pac. 325; Graves v. Deterling, 120 N. Y. 447, 455, 24 N. E. 655. See also Carper v. United Fuel Gas Co., 78 W. Va. 433, 89 S. E. 12, L. R. A. 1917 A. 171. 6 See for example: Boone v. Eyre, 1 H. Bl. 273 n.; Terry v. Duntze, 2 H. English books there has sprung up an astonishing usage of the word “condition" in the law of sales as meaning a certain kind of promise and this usage has to some extent been followed in the United States. It cannot be too strongly deprecated." § 666. What it is which conditions qualify. In the law of property a condition relates generally to the vesting or divesting of title, but may relate to the vesting or divesting of other rights than the right of ownership. In the law of contracts, conditions may relate to the formation of contracts or to liability under them. It is a source of confusion of thought that the word condition is frequently used without exact recognition of what the supposed condition qualifies. Generally in contracts when reference is made to conditions, what is meant is conditions qualifying liability under a contract or promise, not conditions qualifying the existence of a contract or promise. In connection with the formation of contracts, the effect of conditions, imposed by the terms of the offer or by rules of law, on the existence of contracts was considered. In connection with fraud and other circumstances rendering contracts voidable, certain rules of law divesting or destroying existing contracts will be considered, though by a term of a contract also, its existence may be destroyed; but under the head of conditional contracts it is generally understood that the conditions referred to qualify not the existence of the contract, but the liability under it. A condition may qualify the liability of one party to the contract or of both parties. The fact that no liability on either side can arise until the happening of a condition does not, however, make the validity of the contract depend upon its happening. Whether there is a contract depends upon the right of the In Chalmers Sale of Goods Act (5th Ed.) 174, the author says: “In conveyancing, a distinction was drawn between conditions and covenants, which in contracts has now become obliterated." Such a statement goes far beyond the facts. See, e. g., Sanitary District v. Chicago &c. Trust Co., 278 Ill. 529, 116 N. E. 161, for the usage in construing a deed. Except so far as this nomenclature in the law of sales confuses the distinction it is generally recognized. But if it is evident in an instrument that parties used "condition" in the sense of promise, their intention will be effectuated. Green County v. Quinlan, 211 U. S. 582, 29 S. Ct. 162, 53 L. Ed. 335. parties to revoke their promises. A contract to sell goods to arrive "will impose no liability on either party unless the goods arrive," but each is irrevocably bound by a contract from the outset. § 666a. Precedent and concurrent conditions. A precedent condition in a contract is the typical kind. It must be performed or happen before liability arises on the promise which the condition qualifies. One may also speak of a condition precedent to the existence of a contract. Acceptance is such a condition, but when the question under consideration is the construction of a contract or the duties arising under it, the term means a prerequisite to liability. Liability may arise immediately on the happening of a condition precedent, as in case of a contract to pay if certain work is done; or it may not arise until a later day-as a promise to pay on July 1st, if something has been done or has happened in the previous January. If nomenclature were perfectly consistent, a concurrent condition would be a condition which must happen concurrently with liability, but that is not the meaning of the term. A condition which must so happen is included under the name condition precedent. A covenant to pay A if he jumps six feet, will give rise to liability concurrently with the successful completion of his jump. That there is genuine concurrency in such a case may be seen from supposing such a promise made as an offer. Only on the supposition that the jump and the promise were exchanged at the instant of the jump would the requirements of consideration be satisfied, and the promise by its terms is performable immediately. There must be the same concurrency where the promise is made by covenant and where consequently, the existence of the contract does not depend on the performance of the condition. But as in logic the jump seems prior to the liability, the condition is called a condition precedent. The concurrency indicated by the phrase concurrent condition or conditions, is concurrency in time of the performance of two mutual promisors, or of a promisor and promisee; not a concurrency of the performance of one with the liability of the other. If See infra, § 667. 8 Williston, Sales, § 188. |