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Western Hills, Oregon, Ltd. v. Pfau | 508 P.2d 201 (1973)
A condition is an uncertain event that must occur before a party’s promised performance becomes due. A condition of satisfaction means the uncertain event is a party’s approval.
Conditioning contractual obligations on personal satisfaction can lead to trouble. Does a condition of satisfaction enable a party to avoid its obligations at a whim? In Western Hills, Oregon, Limited versus Pfau, the court takes up this claim.
A partnership known as Western Hills, Oregon, Limited owned a parcel spanning two hundred eighty-six acres in McMinnville, Oregon. Western Hills listed the property for sale.
Edward Pfau spotted the listing. With a group of investors, Pfau hoped to build a planned unit development on the site. Pfau knew he’d have to work with the city of McMinnville to obtain approval for the development. Pfau and Western Hills started negotiating the sale.
The parties came to an agreement. They made closing conditional on an approved development. Specifically, the contract stated that closing was subject to a development approved by the city that was satisfactory to Pfau and the other purchasers.
When they made the contract, Pfau and the purchasers knew that city sewer facilities wouldn’t reach the planned development. They understood that the development would have to rely on a private sewer service, which would be costly to install.
After signing the contract, Pfau and the purchasers proposed the development to the city’s planning commission and received a favorable reaction. But the purchasers later abandoned the project because of the cost associated with installing a private sewer system. The purchasers refused to close on the property.
Western Hills claimed Pfau and the purchasers were obligated to buy the property and sued for specific performance. The trial court found for Western Hills and ordered Pfau and the purchasers to complete the sale. They appealed to the Oregon Supreme Court.
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