WAS A VALID CONTRACT FORMED?
Betty's (B's) rights against Art (A) depend on whether a valid contract was formed between them, and whether it was breached and by whom. A and B clearly agreed on the subject matter (drilling a well) and price ($10 a foot) and time for performance (June 1 completion). These terms suffice to form a contract.
The contract did not have to be in writing. A writing to evidence a contract is required by the statute of frauds when land is transferred, but not for services to be performed, as here.
Betty would not have rights against A if the contract called only for drilling for water, but the subject matter here is clearly a completed well, not the mere act of drilling: B's interest (known to A) was in the water, and she asked him about drilling "to supply drinking water," and further asked for a guaranteed completion date. Thus A may be liable, if his performance was not excused.
IMPOSSIBILITY
A's performance under the contract might be excused by impossibility. Under the doctrine of impossibility of performance, however, performance is excused only if performance would not be possible by anyone: an objective standard applies. While A's drilling accident was "unavoidable," other drillers with different or better equipment, or drilling another place, would still be able to perform (as shown by Carlos' performance). Art himself may have been able to perform in time after the accident, according to his statement that he couldn't promise performance by July 1. Thus A's performance cannot be excused by impossibility.
COMMERCIAL IMPRACTICABILITY
The doctrine of commercial impracticability would similarly be of no avail to A to excuse performance. First, the doctrine is available in commercial settings: A had never drilled a well before, and B wanted the water for drinking (although also for her farm). The impracticability doctrine also requires that performance would be so economically burdensome that it would be wasteful for the obligations to be performed. Here Art was willing to continue performance without any "additional further payment," and water was eventually found at 300 feet on only a second drilling, so the doctrine would not excuse A's performance.
ANTICIPATORY REPUDIATION
If A breached the contract by anticipatory repudiation, B could legitimately go to Carlos for completion. If A completely, unequivocally repudiated the contract, B's further obligations under the contract would be excused.
But A did not so repudiate: he merely said he could not promise the contract's completion by July 1. This expression of doubt could not alter his obligation to perform by July 1, and he was not insisting that B modify their contract, since Betty refused to let him start another well. B had to wait until July 1 to see if he breached. Because A was willing to continue his performance, B was still bound by the contract: her performance was not excused.
B'S REFUSAL
A covenant "implied in fact" in all contracts is the cooperation of the obligee in receiving an obligor's performance. A's further performance was excused when this condition arose by B's refusal to let Art start another well: breach of this covenant sets up a condition, which, unsatisfied, excuses his further performance. But B's refusal constitutes breach of the contract on her part, so that B should be unable to collect damages from A if his anticipatory repudiation is not found.
BREACH
IF ART BREACHED
If Art did breach the contract by anticipatory repudiation because he said he couldn't guarantee completion by July 1, B would be entitled to damages based on gaining the benefit of her bargain.
She bargained for a well drilled at $10 a foot, and 300 feet of drilling were required. Thus she paid a total of $8,000 to A and Carlos, and would have paid $3,000 if nothing had gone awry. If Art breached, her action in going to Carlos may be proved to be reasonable to gain her bargain and she could collect $5,000 from A.
QUASI-CONTRACT
Finally, if Art's conduct was not an anticipatory breach and B breached the contract, Art should have a good claim under the contract for his work at $10 a foot, or for restitution for the reasonable value of his services (in quasi-contract) at $12 a foot.
Professor's Notes:
RIGHTS
It is fairly clear from the facts given that an effective contract has been formed so as to bind the parties. Betty asked Art to drill a well; Art laid out price and the maximum depth to which he could drill. Then Betty asked for a guaranteed completion date and Art agreed, asking for an advance. Betty paid the advance - thus manifesting her intent to be bound by all of the terms of the parties. Sufficient consideration is present since both parties incurred a legal detriment.
CONTRACT TERMS
The real issue in this case involves the terms of performance and attempt at performing by Art. By the terms of the agreement, upon receipt of his advance, Art was to commence drilling a well for Betty up to a depth of 600 feet. He was to complete performance by June
1. Any balance was payable on completion.
IMPOSSIBILITY
Art began performance and at 200 feet of depth he hit rock and his drill bit broke. The facts state that the accident was unavoidable. This raises the doctrine of impossibility. A performance under a contract is excused if the performance becomes objectively impossible, if no one in the world could complete the performance. From the facts given, it appears that drilling a well at this exact site is objectively impossible since the broken drill was unavoidable. Betty may claim that this does not render the performance impossible since Art could move and drill on a different site. The problem, though, is that Art cannot complete a new drill hole until July 1, a month after the deadline in the old contract.
Art will argue that the broken drill is a temporary impossibility and thus he should be allowed to continue his work. The modern trend among courts (and under the U.C.C., although that doesn't govern here) is to allow a reasonable time to "cure " performance if the time element in the contract is not crucial to the parties. Either under this doctrine or the doctrine of temporary impossibility, absent a showing of time being a crucial element of the contract, Art would be given an opportunity to reasonably complete his performance.
MATERIAL ALTERATION?
It must, of course, be determined whether or not time is truly of the essence to Betty. If time was of the essence so as to constitute a material alteration of the contractual agreement, then Betty may rescind the contract based on impossibility of performance, or she may attempt to rescind based on a mutual mistake of fact as to the ability to complete performance at the chosen site, and the court may try to unwind the transaction as far as possible, probably refunding to Betty $1500 as the difference in the agreed value of A's services and what Betty paid.
Betty may also try to show that Art had assumed the risk of not being able to complete performance at a given site. This would be especially helpful to Betty if she can show that Art picked the site to drill. (If Betty picked the site, she may have assumed the risk of impossibility ). If the court finds that Art assumed the risk, which is common in building contracts, then it must once again determine if this breach of the time element is a material one or not. This is based on a consideration of the time element and whether failure to meet this element will impair Art's ability to substantially perform.
The original agreement guarantees a June 1 completion, but the well is only for drinking (as per the January conversation, which is admissible here since there is no written agreement by which to trigger the parole evidence rule). There are no facts that support the need for a June 1 completion.
TIME OF THE ESSENCE
Courts have held "time is of the essence " clauses inoperative where the clause was not supported by the facts. It is likely that the courts would not stringently enforce this June 1 completion date.
If it is determined that there has been no material breach, either by the doctrine of temporary impossibility, or the finding of non-material breach due to non-importance of the date, then Art has a right to go and complete performance. It is an implied-in-fact condition, however, that he have access to the land on which he is to drill. Betty has refused to let Art begin performance again. Her prevention of satisfaction of the implied-in-fact condition will excuse Art from any further performance. It will effectively put Betty in breach.
EXCUSE
This is the likely outcome of a court's resolution of the dispute. Art's performance will be excused due to Betty's prevention of Art's performing - drilling the new well. This is a prevention of an implied-in-fact condition precedent to Art's performance, which excuses the performance.
DAMAGES
If Art is found to have breached the contract due to a failure to conform to a "material provision as to time," then Betty can sue for damages under this breach.
COVER DAMAGES
The starting point for Betty is the cost of "cover". The cost of obtaining substitute performance - here being the $4,500 paid to Carlos less the price she would have had to pay to Art for the job. This later figure would be $10 per foot times 300 feet which is where Art would have struck water. Betty would recover $4,500 less $3,000, or $1,500. Included in this is a refund of $500 from Art since he promised a refund. Betty will argue she should get more since Art said he wouldn't charge her for the useless hole, but Art would argue and the court would probably find that Art's statement was made as a condition of his continuing performance.
HADLEY v. BAXENDALE
Betty would probably claim her loss as a result of the crop failure. This is an incidental damage. Damages in contract must be caused by the breach, must be foreseeable as per Hadley v. Baxendale, certain and unavoidable. Although the damages here may be certain and unavoidable, there are serious problems with causation and foreseeability.
CAUSATION
The causation is extremely remote here, although Betty may claim that but for Art's non-performance she would have had water for her crops. The greater problem is foreseeability. Under Hadley, contract damages must be those that a reasonable person would foresee or those damages that would be foreseen by communication by the innocent party to the breaching party.
FORESEEABILITY
There is no way to have foreseen that the County dam would fail, leaving Betty with no irrigation water. More important, Betty told Art that the water was for drinking, so he was not on notice of any special facts: quite to the contrary since Betty specifically said the well was for drinking water.
Betty would fail on her claim for these special damages from crop loss.
If Art did not materially breach the contract and Betty prevented his performance, then the court would excuse Art and try to rescind the contract. Since the court can't rescind the contract to the starting point, they would likely give Art payment in the agreed-upon amount of his services, $2,000, and would ask him to refund the rest to Betty. This is the likely outcome.
The court may, if it finds Betty in breach, give Art the profit he would have made on the contract, "the benefit of his bargain," but this is not as likely as awarding him the value of services rendered with only the small refund to Betty.
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