California First-Year Law Students' Exam (Baby Bar) — MCContractsHard
A homeowner contracts with a roofing company to replace their entire roof for $15,000. The contract specifies that payment will be made 'upon satisfactory completion of the work, as determined by the homeowner.' After the work is completed, the homeowner states that they are not satisfied with the aesthetic appearance of the roof, even though it is structurally sound and waterproof. The roofing company sues for payment. Assuming the homeowner's dissatisfaction is genuine and in good faith, what is the likely outcome?
- AThe court will appoint an independent arbiter to determine if the work is satisfactory.
- BThe homeowner is not obligated to pay due to the subjective satisfaction clause.
- CThe homeowner must pay because the roof is structurally sound and waterproof.
- DThe homeowner must pay, but can deduct damages for the aesthetic issues.
Show answer & explanationAnswer & explanation
Correct answer: B. The homeowner is not obligated to pay due to the subjective satisfaction clause.
When a contract contains a subjective satisfaction clause, and the performance involves matters of personal taste, judgment, or aesthetics, the condition for payment is the genuine, good-faith satisfaction of the party to be satisfied. If the homeowner is genuinely dissatisfied, even if objectively the work is sound, they are not obligated to pay.
Why the other options are wrong
- A. While arbitration is possible if agreed upon, a court will interpret the existing clause rather than create a new dispute resolution method.
- C. This applies to objective satisfaction clauses, not subjective ones relating to aesthetics.
- D. This would be the case for a minor breach, but here the condition for payment (satisfaction) has not been met.
Subjective Satisfaction Clause
A contract provision where one party's performance is conditioned upon the personal satisfaction of the other party, typically for matters of taste or aesthetics.
- Requires genuine, good-faith dissatisfaction to be valid.
- Performance is judged by the individual's personal judgment.
- Distinguished from objective satisfaction clauses (e.g., structural soundness).
Memory trick: Satisfaction is Subjective When Taste is the Judge.