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.
By the terms of the contract, the mental state of one of the parties to the contract, or of a third party, may be selected as the condition upon which performance depends. The contract may provide that performance is to be to the satisfaction of the adversary party, and if such provision is to be treated literally, the right to compensation of the party who has performed, depends upon the satisfaction of the adversary party.1 The courts are strongly inclined to treat such a covenant outside of matters involving personal taste as a covenant to perform in such a way that a reasonable man would be satisfied. While the contract might be so worded that a declaration by the adversary party, to the effect that he was dissatisfied, might be conclusive, it would be difficult to find consideration for such a promise. A transaction of this sort would amount to little more than an offer which was to be accepted after performance, on the one side, by acceptance as satisfactory performance, on the other side.2
Ins. Co., 96 Tenn. 193, 32 L. R. A. 172, 33 S. W. 1041; Chapman v. Rockford Ins. Co., 89 Wis. 572, 28 L. R. A. 405, 62 N. W. 422.
8 Fire Association v. Appel, 76 O. S. 1, 80 N. E. 952.
9 Fire Association v. Appel, 76 O. S. 1, 80 N. E. 952.
10 Phoenix Ins. Co v. Carnahan, 63 O. S. 258, 68 N. E. 805.
11 Harlow v. Oregonian Pub. Co., 49 Or. 520, 78 Pac. 737.
1 See Sec. 2618 et seq.
See, Non-Satisfaction as a Defense in Case of Contract, by Grosvenor Nicholas, 9 Yale Law Journal, 114.
2 See Sec. 75 et seq., 575 et seq. and ch. LXXX.
The mental state, which by the terms of the contract is made a condition, may be the mental state of one who is not a party to the contract, although he may be the agent or employe of one of the parties.
Contracts frequently contain provisions to the effect that performance is to be to the satisfaction of an architect, engineer, and the like, and that his certificate of satisfactory performance is to be a condition precedent to the contractor or builder to recover under his contract. Pull effect is ordinarily given to provisions of this sort, subject to the restriction that the satisfaction or dissatisfaction must exist in good faith.3