This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Another source of confusion in the use of the word condition has grown out of the fact that, unfortunately, it is sometimes used as a means of explaining the effect of facts which may prevent a contract from coming into existence, or which may operate as a discharge of a contract which has already been made. A mistake as to the existence of one of the essential elements of a contract, such as the parties, the subject-matter, and the like,1 prevents the contract from coming into existence, although as a result of our defective terminology, we frequently are obliged to speak of it as a void contract.2 This result is unfortunately explained sometimes by saying that the contract is entered into upon condition that the parties and the subject-matter are in existence, and upon condition that the parties to the contract are aware of the identity of each.3
If taken as a fiction or as a figure of speech, this method of explaining this result is harmless enough. It is an unfortunate explanation, however, in that it is likely to rise to confusion. In eases in which the contract fails to exist by reason of mistake as to one of the essential elements,4 the party who seeks relief did not contemplate the possibility of the non-existence of the adversary party, the subject-matter, and the like, or of his mistake as to the identity of the party or subject-matter. If he had contemplated such possibility, and if he had not seen fit to guard against it by inserting an express condition, he could not have avoided liability on the ground of mistake, since mistake is unconscious ignorance or forgetfulness; and in cases of this sort the party is conscious of the possibility of his ignorance or forgetfulness, and elects to enter into the contract, taking chances as to the outcome of the unknown event. If he does so enter into the contract, he can not thereafter escape liability on the ground that the event happened contrary to his hopes and expectations.5 If the parties attempt to enter into a contract, thinking that they are dealing with a subject-matter which has in fact ceased to exist,6 or if they are dealing with what they suppose to be legal rights, but to which the law denies a legal existence,7 no contract exists. This result is sometimes explained on the theory that there must be a subject-matter;8 and it is sometimes explained on the theory of mistake.9 It is probably better to explain cases of this sort as due to mistake than as due to the necessity of a subject-matter, since if the parties know that the subject-matter may have ceased to exist, and if they deliberately elect to take chances with reference to its existence, the contract can not be defeated by the fact that it is subsequently discovered that the subject-matter has ceased to exist when the contract was made.10
6See Sec. 308 et eeq.
7 United States. Phoenix Mutual Life Ins. Co. v. Raddin, 120 U. S. 183, 30 L. ed. 664; Northern Assurance Co. v. Grand View Building Association, 183 U. S. 308, 46 L. ed. 213; Franklin State Bank v. Maryland Casualty Co., 256 Fed. 356.
Illinois. Norwaysz v. Thuringia Ins. Co., 204 III. 334, 68 N. E. 551.
Louisiana. Bank of Cotton Valley v. McInnis, 143 La. 436, 78 So. 727.
Oklahoma. Deming Investment Co. v. Shawnee F. Ins. Co., 16 Okla 1, 4 L. R. A. (N.S.) 607, 83 Pac. 918.
Virginia. Rochester German Ins. Co. v. Monumental Savings Association, 107 Va. 701, 60 S. E. 93.
8 See Sec. 372 et seq.
9 National Annuity Asso. v. McCall, 103 Ark. 201, 48 L. R. A. (N.S.) 418, 146 S. W. 125; Hughes v. Metropolitan Life Ins. Co., 117 Me. 244, 103 Atl. 465; Pacific Mutual Life Ins. Co. v. Glaser, 245 Mo. 377, 150 S. W. 549.
1 See Sec. 251 et seq.
2 See Sec. 54.
3 Nickoll v. Ashton, Elbridge & Co. , 2 K. B. 126.
The parties may enter into a contract concerning a specific subject-matter or requiring services of a personal nature; and although such contract is valid when it is made, the subsequent death or disability of the party who is rendering such services, or the destruction of the specific subject-matter, may operate as a discharge of such contract on the theory of subsequent impossibility.11 This result is unfortunately explained sometimes on the theory that the continued existence of the specific subject-matter or the continued ability of the party who is to render such personal service, is an implied condition of the contract.12 Here again we have cases in which the parties have in all probability never thought of the possibility of the disability of the party, or the destruction of the specific subject-matter. If they had thought of it, they would probably have made some specific provision fixing their respective rights upon the happening of such event. In the absence of such specific agreement, the law attaches certain consequences to the transaction. To use the term condition, both of events upon which the parties agree as affecting the legal effect of the contract, and also of facts which operate as a discharge because of rules of law without regard to the actual intention of the parties, is simply furnishing another source of confusion.
4 See Sec. 251 et seq.
5 Headley v. Aetna Ins. Co., - Ala. - , 80 So. 466; Ins. Co. v. Carnahan, 63 O. S. 258, 58 N. E. 805. See Sec. 253.
6 See Sec. 261 et seq. and Sec. 658.
7 See Sec. 659.
8 See Sec. 658 et seq.
9 See Sec. 261 et seq. 10 See Sec. 658.
11 See ch. LXXVIII.