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.
A contract by which one party agrees to perform to the "satisfaction" of the adversary party, presents questions which, in some respects, are intermediate between the questions which arise out of performance or breach of express conditions, and the questions which arise out of the performance or breach of covenants. The difficulty of classifying such provisions either as conditions or covenants arises in part out of the fact that in some conditions such provisions are treated as true conditions for some classes of contract at least, and in addition to substantial performance of the covenants, the satisfaction of the adversary party must be shown as a condition in order to enable the party who has performed to recover on the contract, even if he is able to show substantial performance;1 while in other jurisdictions, in some classes of contract at least, the courts are inclined to regard such provision as little more than a covenant for performance, and accordingly to hold that the party who seeks to recover upon such contract, need not do more than show performance of the covenants on his part.2 Some doubt has been expressed as to whether such a transaction can, properly speaking, be called a contract, or whether it is a preliminary negotiation in which the offer consists in performance according to the preliminary negotiations, leaving the adversary party free then to accept or to reject.3 If the contract is so worded as to leave the adversary party free to accept or to reject at his pleasure, whether he is actually dissatisfied or whether he alleges dissatisfaction as a pretext, this view of the transaction is undoubtedly correct. If, on the other hand, the contract is construed as one which must be performed to the actual satisfaction of the adversary party, but if on performance to his actual satisfaction he is bound to perform on his part, and if he can not evade such contract by alleging dissatisfaction, a positive obligation on his part undoubtedly exists, which furnishes consideration for the promise on the part of the adversary party; and the transaction amounts to a contract.4
3 See Sec. 2625 et seq. 1 See Sec. 2619 et seq. 2 See Sec. 2622.
3 Joliet Bottling Co. v. Joliet Citi-zens' Brewing Co., 254 III. 215, 96 N. £.
263; Gibson v. Carnage, 39 Mich. 49, 33 Am. Rep. 351; Midgley v. Campbell Building Co., 38 Utah 293, 112 Pac 820.
Whether such transactions are to be regarded as contracts or not, full effect must be given to such provisions in accordance with their true meaning.5
Dissatisfaction such as justifies termination of the contract may exist before performance has begun,6 as it may be caused by the delay of the adversary party in commencing performance.7
4 Lilienthal v. Stearns, 121 Fed. 197; Livesley v. Johnston, 46 Or. 30, 106 Am. St. Rep. 647, 65 L. R. A. 783, 76 Pac. 13, 946; Northern Central Ry. v. Walworth, 193 Pa. St. 207, 74 Am. St. Rep. 683, 44 Atl. 253.
5 United States. Campbell Printing Press Co. v. Thorp, 36 Fed. 414, 1 L. R. A. 645.
Alabama. Electric Lighting Co. v. Elder, 115 Ala. 138, 21 So. G83.
Connecticut. Zaleski v. Clark, 44 Conn. 218, 26 Am. Rep. 446.
Kansas. Hollingsworth v. Colthurst, 78 Kan. 455, 18 L. R. A. (N.S.) 741, 96 Pac. 851.
Maryland. Goldberg v. Feldman, 108 Md. 330, 70 Atl. 245.
Massachusetts. McCarren v. Mc-Nulty, 73 Mass. (7 Gray) 13ft; Williams Mfg. Co. v. Brass Co., 173 Mass. 356, 53 N. E. 862.
Michigan. Sullivan v. Ross, 124 Mich. 287, 82 N. W. 1071; Carlisle v. Spain, 147 Mich. 158, 110 N. W. 532.
Oregon. Livesley v. Johnston, 45 Or. 30, 106 Am. St. Rep. 647, 65 L. R. A. 783, 76 Pac. 13, 946.
Rhode Island. Pennington v. Howland, 21 R. T. 65, 79 Am. St. Rep. 774, 41 Atl. 891.
West Virginia. 08borne v. Francis, 38 W. Va. 312, 45 Am. St. Rep. 859, 18 S. E. 591.
Wisconsin. Manning v. School District, 124 Wis. 84, 102 N. W. 356.
"It may be that the plaintiff was injudicious or indiscreet in undertaking to labor and furnish materials for a compensation, the payment of which was made dependent on a contingency so hazardous or doubtful as the approval or satisfaction of a party particularly in interest. But of that he was the sole judge. Against the consequences resulting from his own bargain the law can afford him no relief. Having voluntarily assumed the obligations and risk of the contract, his legal rights are to be ascertained and determined solely according to its provisions." McCarren v. McNulty, 73 Mass. (7 Gray) 139,. 141 [quoted in Campbell Printing Press Co. v. Thorp, 36 Fed. 414, 415; 1 L. R. A. 6451.
6 Magee v. Lumber Co., 78 Minn. 11, 80 N. W. 781.
7 Magee v. Lumber Co., 78 Minn. 11, 80 N. W. 781.
As far as it is important to distinguish between contracts which must be performed to the satisfaction of the adversary party, and contracts which are to be performed to the satisfaction of a third person, such as an architect, engineer, and the like,8 a contract which is to be performed to the satisfaction of a corporation and one of its designated officers, is regarded as a contract to be performed to the satisfaction of the adversary party, and not one to be performed to the satisfaction of a third person.9
It has been said that there is no practical distinction between a contract which is to be performed to the satisfaction of an architect or engineer, and one which is to be performed to the satisfaction of the adversary party.10
8 See Sec. 2625 et seq.
9 . C.W. Hunt Co. v. Boston Elevated Ry. Co., 199 Mass. 220, 85 N. E. 446.
"Had Mr. Sergeant been a third person and not an officer of the defendant corporation, the provisions of the specifications would have been enough to make him a quasi-arbitrator within the rule applied in Atkins v. Barnstable, 97 Mass. 428; Palmer v. Clark, 106 Mass. 373; Flint v. Gibson, 106 Mass. 301; Bobbins v. Clark, 120 Mass. 145; Nat9onal Contracting Co. v. Commonwealth, 183 Mass. 80; Norcross v. Wyman, 187 Mass. 25.
"But Mr. Sergeant represented the railway company in this transaction, and was not a third person. That being so, the provision that the work was to be done 'subject to acceptance by the railway company and its vice-president' would have brought this case within Hawkins v. Graham, 149 Mass. 284, without a doubt, had that been the only provision of the contract on this point. In such a case Mr. Sergeant in accepting or not accepting the work would have acted for and represented the railway company, and would not have been a third person acting as arbitrator.
"Although, as we have said, the provisions in the specifications look the other way, we are of opinion on the whole that Mr. Sergeant must be taken to have been the representative of the defendant and not a third person in this matter. This conclusion is enforced by the fact that all the corre-spondence set forth in the report which took place under the contract was carried on by Mr. Sergeant in behalf of the railway company." C. W. Hunt Co. v. Boston Elevated Ry. Co., 199 Mass. 220, 85 N. E. 446.
lO Keachie v. Starkweather Drainage District, 168 Wis. 208, 170 N. W. 236.
"Given the premise that one may lawfully contract to perform, certain work according to plans and speciiica-tions to the satisfaction of a third party, and that contracts to be executed to the satisfaction of one of the contracting parties will be enforced, it is difficult to appreciate the logic which condemns a contract to be performed according to plans and specifications to the satisfaction of the other contracting party. Certainly no consideration of public policy calls for the condemnation of one that does not also condemn the other. The powers and duties of the one appointed as arbiter are not materially different in the one ease than in the other. In neither case can the arbiter act arbitrarily or capriciously. There must be the exer-cise of honest judgment, and the person performing the contract is not to be denied the fruits thereof by a fraudulent, arbitrary or capricious action on the part of the other.