Kingston v. Preston

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Brief Fact Summary. Kingston (Plaintiff) brought an action for breach of contract against Preston (Defendant) for failing to comply with covenants to the contract.

Synopsis of Rule of Law. The presentation of a good security by one party is a condition precedent to the other party’s obligation to perform.

Facts. An action of debt for non-performance of covenants contained in articles of an agreement between the Plaintiff and the Defendant. The articles stated that the Plaintiff covenanted with the Defendant to serve him for one year and a quarter in his trade of a silk mercer at 200 a year and in consideration of the premises the Defendant covenanted that at the end of the year and a quarter he would give up his business to the Plaintiff and give up his stock and the deeds would be executed for fourteen years. Another covenant stated that payment was to be made in installments out of the proceeds of the business by Plaintiff. Plaintiff promised to post a security bond, which guaranteed payment of the installments if the business did not generate enough proceeds before the sale. Plaintiff did not post such a bond and as a result Defendant refused to consummate the sale. Thus, Plaintiff brought suit against Defendant for breach of contract. Plaintiff alleged that Defendant’s obligation
to convey the business was independent of the Plaintiff’s obligation to post a security bond and the Defendant’s remedy was a breach of contract not to refuse to sell.

Issue. Whether the covenant that the Defendant had an obligation to convey the business and the covenant that the Plaintiff had an obligation to post a security bond were independent?

Held. No.
There are three types of covenants: (1) those that are mutual and independent where either party may recover damages from the other for the injury he received as a result of the party’s breach and it is no excuse for the Defendant to alleged breach of a covenant on behalf of Plaintiff; (2) covenants which are conditions and dependent in which performance of one depends on the performance of another, till the prior condition is performed the other party is not liable to an action on his covenant; and (3) those that are mutual conditions to be performed at the same time and if one party readily performs an the other refused to perform and the party who was ready to perform may maintain an action for the default of the other.
The promises were not independent and the giving of a security by the Plaintiff was a condition to the Defendant’s duty to convey the business. Presenting good consideration is condition precedent to Defendant’s obligation to convey the business. It would be a great injustice to compel the Defendant to turn over his business to the Plaintiff without the security for which he bargained for and to have the only remedy an action for breach.

Discussion. This case is an example of the use of constructive conditions in bilateral contracts. Constructive conditions are supplied by the court rather than agreed upon by the parties.