Capistrant v. Lifetouch National School Studios, Inc.Annotate this Case
At issue was whether a former employee’s (Employee) delay in returning his employer’s (Employer) property excused Employer from paying a commission otherwise due to Employee.
The district court concluded that a return-of-property clause in the parties’ employment contract was a condition precedent to Employer’s contractual obligation to pay the residual commission, and therefore, Employer was excused from its obligation to pay that commission. The court of appeals applied Restatement (Second) of Contracts 229 and reversed, determining that a loss of the commission would cause a “disproportionate forfeiture." Therefore, the court held that Employee’s failure immediately to return Employer’s property was excused as a matter of law.
The Supreme Court affirmed in part and reversed in part, holding (1) because section 229 reflects this Court’s reluctance to enforce forfeitures, the court of appeals properly looked to it for guidance in resolving this case; but (2) on this record, the materiality and proportionality analysis contemplated by section 229 should not be resolved as a matter of law on appeal, and therefore, a remand is necessary.