Franconia Associates v. United States, 536 U.S. 129, 14 (2002)

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Opinion of the Court

omitted)); see also 18 W. Jaeger, Williston on Contracts 2021A, p. 697 (3d ed. 1978) (same).

In declaring ELIHPA a present breach of petitioners' loan contracts, the Federal Circuit reasoned that the Government had but one obligation under those agreements: "to continue to allow borrowers the unfettered right to prepay their loans at any time." 240 F. 3d, at 1363; see also 43 Fed. Cl., at 710 (Government's contractual duty was "to keep its promise to allow borrowers an unfettered prepayment right"). If that continuing duty was breached, the court maintained, the breach occurred immediately, totally, and definitively when ELIHPA took away the borrowers' unfettered right to prepay. See 240 F. 3d, at 1363. The Court of Appeals so ruled despite petitioners' insistence that "the government's performance obligation under the contracts was to accept pre-payment" whenever tendered during the long life of the loans, even decades into the future. Id., at 1362 (emphasis added); see also 43 Fed. Cl., at 710.

The Federal Circuit, we are persuaded, incorrectly characterized the performance allegedly due from the Government under the promissory notes. If petitioners enjoyed a "right to prepay their loans at any time," 240 F. 3d, at 1363, then necessarily the Government had a corresponding obligation to accept prepayment and execute the appropriate releases. See Brief for Petitioners 5-6. Absent an obligation on the lender to accept prepayment, the obligation "to allow" borrowers to prepay would be meaningless. A loan contract of such incomplete design would be illusory. See J. Murray, Contracts 2, p. 5 (2d rev. ed. 1974) (promise required to create a binding contract must be an "undertaking or commitment to do or refrain from doing [some]thing in the future").

Once the Government's pledged performance is properly comprehended as an obligation to accept prepayment, the error in the Federal Circuit's reasoning becomes apparent. Failure by the promisor to perform at the time indicated for performance in the contract establishes an immediate

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