In 2009, the Tenth District Court of Appeals in Franklin County, Ohio determined that it was possible to waive real estate contract contingencies by the conduct of the party to whom it would benefit. The case is s Corey v. Big Run Industrial Park, L.L.C., 2009-Ohio-5129. The Court provided extensive analysis in determining whether a contract provision is a promise or a condition. Quoting from the decision:
{¶19}… “After a failure of an express condition * * * the party for whose benefit the condition exists normally has the power to elect to cancel his performance or to proceed with performance. * * * An election may be, and often is, manifested by conduct.
Thus, an election to waive a condition exists if the promisor continues his own
performance (if the performance was dependent upon the condition) or by
acceptance and retention of a defective performance.” Calamari &
Perillo, The Law of Contracts (1st ed.1970) 273. This is true even in the
absence of additional consideration. “An election by conduct requires no
consideration.” Id. at 274.
. . .
{¶22} Another way to describe the difference between a promise and a
condition precedent is that “[t]he purpose of a promise is to create a
duty in the promisor. The purpose of constituting some fact as a condition is
always the postponement or discharge of an instant duty. * * * The
non-occurrence of a condition will prevent the existence of a duty in the other
party.” Id., quoting Corbin on Contracts, Section 30.12. It is clear that the purpose of the tax abatement provision here was to allow appellants to elect not to perform their duty to
close. The fact that, to satisfy the provision, appellee had to do an act -
deliver the specified ordinance – does not mean that it was a promise. “A
condition can be an act to be done by one of the parties to the contract.”
Id. at ¶19. “Virtually any act or event may constitute a condition. The event may be an act to be performed or forborne by one of the parties to the contract, an act to be performed or
forborne by a third party, or some fact or event over which neither party, or
any other party, has any control.” Id., quoting Murray on Contracts, Section 99C. For all of these reasons, we conclude that the tax abatement contingency was a condition precedent operable only until the parties elected to perform.
{¶23} Ohio courts have applied this concept to find waiver by a party who proceeds to perform a contract despite the non-fulfillment by the other party of a condition precedent. See, e.g., Creith Lumber, Inc. v. Cummins (1955), 163 Ohio.St. 264 (closing on home construction contract and acceptance of home constituted waiver of condition precedent of passing of final inspection); Erectors, Inc. v. Dellagnese Constr Co. (Aug.
13, 1986), 9th Dist. No. 12461 (substantial performance of contract constituted
waiver of any conditions precedent); C.E. Morris Co. v. Concrete Constr Co., Inc. (Jan. 15, 1985), 10th Dist. No. 83AP-659 (evidence that plaintiff performed under the contract demonstrates plaintiff’s waiver of condition precedent); Cornett,
supra (plaintiffs’ decisive acts of making required payments under contract
constituted waiver of condition precedent); City of St. Marys, Ohio v. Auglaize Cty. Bd. of Commrs., 3d Dist. No. 2-05-17, 2006-Ohio-1773, ¶31 (performance of contract waived any conditions precedent).
When in doubt, contact a knowledgable real estate attorney before you do anything which may be construed as a waiver of contract contingencies.
