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.
Railway aid contracts, which were far more common in the past than they are today, afforded a number of illustrations of precedent covenants, although from the wording of many of these contracts the precedent act is rather in the nature of an acceptance of the offer,1 or in the nature of a condition,2 than like a covenant. Under a contract to give a railroad company a right of way if a certain route were selected, the selection of such route is precedent to obtaining such right of way.3 Under a contract to pay a certain sum of money in aid of a railroad if it is ready for operation by a certain time, getting it ready for operation by such time is precedent to enforcing payment. Under a contract by which the owner of land agrees to pay to the promoter of a railroad five thousand dollars when he shall extend his railroad southerly to a certain section of land, and ten thousand dollars if the land sells at a specified price per acre, the extension of such railroad is precedent to the right of the promoter to recover under the contract, and without such extension the promoter of the railroad can not recover, even if the land sells for the stipulated amount.4 A contract to pay when a certain railroad "is constructed and the cars are running thereon between" certain specified points, does not make the construction of the entire road precedent to recovering such subscription, but only the construction and operation of the road between the points named.5 A provision to the effect that the road shall be so far completed that trains are run over its track between certain points, is not performed if trains can be run between such points only by using a substantial portion of the track of another railway.6 A provision to the effect that the cars shall run over a given portion of the track by a certain time, is performed if the track is so far completed that construction trains can run over it and do run regularly, although it is not yet ready for passenger traffic.7 A provision requiring the railway to be completed in a certain time is performed, although stations and other terminal facilities have not yet been constructed.8 A provision for locating a station within a certain distance of a town is performed if the station is located within such distance from the limits of the town, although the track and side-track are not located within such distance.9
"But I fear that this is not the true meaning and effect of the contract. The engagements to give the bonds are not entered into in consideration one of the other; but the fulfillment of his own engagement by each of the parties is a necessary preliminary to his right to recover on the agreement. It is the true intent and object of the agreement that each party should find security within the time prescribed. If this be not done by either party both may be in effect released from the contract, which may fall to the ground; but neither party can recover for breach of the covenants in the agreement, unless he has performed this precedent obligation." Roberts v. Brett, 11 H. L. Cas. 337.
5 Harriman National Bank v. Seldom-ridge, 249 U. S. 1, - L. ed. -.
6 Koppitz-Melchers Brewing Co. v. Schultz, 68 O. S. 407, 67 N. E. 719.
7 Louisiana & N. W. R. Co. v. Athena Lumber Co., 134 La. 788, L. R. A. 1915B, 856, 64 So. 714.
1 See Sec. 190 et seq.
2 See Sec. 2574 et seq.
3 New Orleans v. Texas & Pacific Ry., 171 U. S. 312, 43 L. ed. 178; Crane v. Indiana Ry., 59 Ind. 165; Davenport Ry. v. O'Connor, 40 Ia. 477.
If the contract of subscription shows that the money which is to be paid in is to be expended by the railway company in constructing its road, the construction of the road is not a precedent covenant on the part of the railway company to its right to enforce such contract of subscription for furnishing aid, although the contract refers to the construction of the road as a condition.10