Waiver, the order of performance, and what a defaulting party gets back

New York, the first years of the last century. A legal author contracts with a publisher to write a series of law books. He is to be paid six dollars a page. But the contract says that if he does not totally abstain from the use of intoxicating liquors during the work, he is to be paid two dollars a page instead. He writes a treatise on corporations. It is accepted, published, and sells in large numbers.
He admits that while he wrote it he did not entirely abstain. He has been paid two dollars a page. He sues for the other four, and his claim is this. The publisher knew all along that he was drinking, and expressly told him it would not insist on the abstinence clause. The publisher answers that sobriety was the consideration for the extra four dollars, and consideration cannot be waived, only bargained away for something new.
So here is the question. Was the author's sobriety the price of the extra pay, or a condition on which the extra pay depended? Think about it before I go on, because the whole case turns on which word you choose, and the two lectures before this one have given you both.
And now the question I keep asking. What exactly did these people promise each other? The author promised books, delivered on time, revised, with cases cited, and he promised to stay sober while he wrote them. The publisher promised six dollars a page, two of it in any event and four of it if. There is that word again. Today is about what happens to a condition when the party it protects lets it go.
Here is the first line for the board. A condition may be waived by the party it protects, and a waiver needs no consideration and no reliance. It is the intentional relinquishment of a known right. Once made with knowledge, it cannot be revoked to work a forfeiture. But only a condition can be waived that way. The consideration for a promise cannot be waived, only exchanged for a new bargain.
Second line. The order of performance. Where a contract for work says nothing about when payment is due, the work comes first. The worker must substantially perform before he can demand payment, and he cannot stop work because instalments he was never promised are not paid. A contract that wants progress payments has to say so.
Third line. What a party who has not performed gets back. He cannot sue on the contract, because the condition of his own performance has not been met. But a growing majority of courts let him recover in restitution the value of the benefit he conferred, not exceeding the contract rate, less the damages his default caused. The name is Britton against Turner, and it is the oldest case in this course after Kirksey.
Now the case. Clark against West, New York Court of Appeals, nineteen oh eight, Judge Werner, on questions certified by the lower court. The contract before us, he wrote, stripped of all superfluous verbiage, binds the plaintiff to total abstention from the use of intoxicating liquors during the continuance of the work which he was employed to do. Then the choice.
It is not a contract to write books in order that the plaintiff shall keep sober, but a contract containing a stipulation that he shall keep sober so that he may write satisfactory books.
When we view the contract from this standpoint it will readily be perceived that the particular stipulation is not the consideration for the contract, but simply one of its conditions which fits in with those relating to time and method of delivery of manuscript, revision of proof, citation of cases, and other details which might be waived by the defendant, if he saw fit to do so.
It is obvious, the court went on, that the parties thought that the plaintiff's normal work was worth six dollars per page. That was the sum to be paid for the work done by the plaintiff and not for total abstinence. If the plaintiff did not keep to the condition as to total abstinence, he was to lose part of that sum. The stipulation was nothing more nor less than a condition precedent.
And the consequence. If that conclusion is well founded there can be no escape from the corollary that this condition could be waived. And if it was waived the defendant is clearly not in a position to insist upon the forfeiture which his waiver was intended to annihilate. The forfeiture must stand or fall with the condition.
If the latter was waived, the former is no longer a part of the contract. Defendant still has the right to counterclaim for any damages which he may have sustained in consequence of the plaintiff's breach, but he cannot insist upon strict performance.
One caution, in the same opinion. We assume that no waiver could be implied from the defendant's mere acceptance of the books and his payment of the sum of two dollars per page without objection. It was the defendant's duty to pay that amount in any event after acceptance of the work. The plaintiff must stand upon his allegation of an express waiver and if he fails to establish that he cannot maintain his action. Waiver is real, but it must be proved.
Now the order of performance, with a builder and a foundry. Alexander Stewart of Tuxedo, New York, wrote to the Newbury Manufacturing Company in July nineteen eleven offering to do the concrete work on their new building at two dollars and five cents a cubic yard, and other work at other rates. They wrote back accepting his bid. Nothing was said in writing about the time or manner of payment.
Stewart said he had told Mr. Newbury on the telephone that he would expect his payments in the usual manner, and that the custom was eighty five per cent every thirty days. Newbury denied the conversation. Stewart worked from July to the end of September, reached the first floor, and sent a bill for eight hundred and ninety six dollars and thirty five cents. Newbury refused to pay it. Stewart stopped work. Each side said the other had quit.
The trial judge told the jury that if nothing had been agreed about payment, Stewart was still entitled to payments at reasonable times as the work progressed, and if they were refused he could abandon the work and recover for what he had done. The jury found for Stewart.
The Court of Appeals, in Stewart against Newbury, nineteen seventeen, reversed, and Judge Crane was blunt. This is not the law. Counsel for the plaintiff omits to call our attention to any authority sustaining such a proposition and our search reveals none.
Here is the rule. Where a contract is made to perform work and no agreement is made as to payment, the work must be substantially performed before payment can be demanded. Stewart's own performance was a constructive condition of Newbury's payment, and it comes first, all of it, unless the contract says otherwise. His only hope was the telephone call, an express agreement for monthly payments, and that was for a jury to believe or not. New trial.
Now the oldest case, and the most humane. New Hampshire, eighteen thirty four. A farm labourer agreed to work for a farmer for one year for one hundred and twenty dollars. He worked nine and a half months and then left, voluntarily, without cause. The farmer paid him nothing. The labourer sued, not on the contract, which he had broken, but for the reasonable value of the work he had done. The jury found that value to be ninety five dollars.
The settled rule then was that he got nothing. A party who fails to complete an entire contract for labour forfeits all of it. The New Hampshire court, in Britton against Turner, Judge Parker, saw the rule for what it did. The party who attempts performance may be placed in a much worse situation than he who wholly disregards his contract, and the other party may receive much more, by the breach of the contract, than the injury which he has sustained by such breach.
The court's own illustration was the case before it. Had the plaintiff in this case never entered upon the performance of his contract, the damage could not probably have been greater than some small expense and trouble incurred in procuring another to do the labor.
But having laboured nine and a half months, if the farmer's defence succeeded, he in fact receives nearly five sixths of the value of a whole year's labor, by reason of the breach of contract by the plaintiff. A sum utterly disproportionate to any possible damage.
So the court held that the labourer could recover in quantum meruit the value of what he had done, less whatever damage his leaving had caused the farmer.
The reasoning was that a farmer who hires by the day for a year has stipulated to receive part performance from time to time, with a knowledge that the whole may not be completed, and having received the benefit, should pay the amount of value received, just as the owner of a badly built house who moves into it must pay for what he got. The labourer had his ninety five dollars.
Britton was a minority view when it was decided, and it is the majority view now. The Restatement adopts it, with one limit many courts keep. The defaulting party recovers the benefit conferred, not more than the contract rate, less the damages he caused, and some courts still deny any recovery to a party whose breach was wilful and deliberate, as opposed to careless or forced.
Now let's change one fact. The Clark contract had said, in consideration of the author's total abstinence during the work, the publisher will pay four dollars a page in addition to the two dollars paid for the writing. Does the publisher's later assurance that it would not insist on sobriety entitle the author to the four dollars? Choose an answer before I go on.
Most people say yes, a waiver is a waiver. But Werner's whole reasoning was that sobriety was a condition and not the consideration. Change the words and it is the consideration, the price of the four dollars.
And the court said that such a situation is possible in a case where the subject of the waiver is the very consideration of a contract, but not where the waiver relates to something that can be waived. Consideration cannot be waived. It can only be replaced by a new agreement with new consideration, and that is Module Four, not today.
Change one fact again. Newbury's letter accepting Stewart's bid had said, payments monthly as the work progresses, fifteen per cent retained until completion. Choose.
Now Stewart wins, if his bill was fair. The contract fixes the order of performance itself. Newbury's refusal to pay a monthly instalment is a breach of an express term, and a material breach by one party excuses the other from continuing. Stewart could stop and sue for what was due and for his lost profit on the rest. Judge Crane's rule is a default rule, the law's answer when the parties are silent. It bends the moment they speak.
Change one fact a third time. Britton had been hired to build a fence around the farm for a fixed price, and walked off with one panel left to hang. Choose.
Same rule, easier facts. The court in Britton said in terms that the labour case and the building case were not to be distinguished in principle. The farmer has a fence he is using, worth nearly the whole price, and one panel's worth of damage.
The builder recovers the value of the benefit conferred, capped at the contract price, less the cost of the missing panel and any other loss the default caused. What he cannot do is sue on the contract for the price, because the condition of his own complete performance was not met.
Here is what people get wrong here, and why it is tempting. The first mistake is confusing waiver with estoppel. Estoppel needs reliance. Waiver needs only a known right intentionally given up, and it needs no consideration, which is why the publisher's argument failed. The second mistake is assuming progress payments. They are common, and they are never implied. Silence means the work comes first.
The third mistake is thinking a defaulting party gets nothing. Britton is the majority rule. He gets the value he conferred, less the damage he caused, and only a wilful, deliberate default puts that at risk in the courts that still care about the distinction.
Here is the rule, in one breath. A condition that is an incident of performance rather than its consideration may be waived by the party it protects without consideration or reliance, and once waived the forfeiture falls with it though damages remain. Where a contract for work is silent on payment, the work comes first, and a defaulting party cannot sue on the contract but may recover the benefit he conferred, up to the contract rate, less the damages he caused. Now, five questions.