Also known as: special limitations
Written by attorneys — see sources below.
A restriction in the language of a conveyance that causes the created interest to expire automatically upon the occurrence of a stated event. The restriction supplies a terminability beyond the normal duration of the estate. Words such as so long as, while, during, or until typically signal the presence of the restriction.
Serena Soto conveyed Blackacre to Silverline Industries by deed stating that the land was granted so long as it remained used for manufacturing. When Silverline later converted the property into a retail center, the estate ended automatically and title reverted to Serena without any need for court action or reentry. The language in the deed operated as a special limitation that fixed the outer boundary of the grantee's interest.
Samuel Soto accepted employment with Solstice Ventures after the company promised permanent work provided sales targets continued to be met. When quarterly sales fell below the stated threshold, the employment relationship terminated automatically under the agreed restriction. No separate notice or cause determination was required because the restriction itself supplied the outer limit of the promise.
Interactive Data Corporation hired John Foley in June 1976 as an assistant product manager at a starting salary of $18,500. As a condition of employment Foley signed a confidential and proprietary information agreement. The company's president told Foley that if he performed his job well he would have a long and rewarding employment with the firm. Over the next six years and nine months Foley received steady salary increases, promotions, bonuses, awards, and superior performance evaluations, rising to branch manager of the Los Angeles office with an annual salary of $56,164 plus a merit bonus. In January 1983 Foley learned that his new supervisor, Robert Kuhne, was under investigation by the FBI for embezzlement from his former employer, Bank of America. Foley reported the information to Vice President Richard Earnest because he was worried about working for Kuhne in a supervisory position. Earnest told Foley not to discuss rumors and to forget what he had heard. In early March 1983 Kuhne informed Foley that the company had decided to replace him for performance reasons and offered a transfer to another division. Foley was later told he could continue as branch manager if he agreed to a performance plan, but when Kuhne met with him the next day Kuhne instead gave Foley the choice of resigning or being fired. Foley was discharged on March 13, 1983. Foley filed suit against Interactive Data Corporation alleging three causes of action: tortious discharge in violation of public policy, breach of an implied-in-fact contract to terminate only for good cause, and tortious breach of the implied covenant of good faith and fair dealing. The superior court sustained the company's demurrer without leave to amend and dismissed the action. The Court of Appeal affirmed the judgment. The Supreme Court granted review.
View caseA special limitation causes the estate to end automatically when the stated event occurs. A condition subsequent requires the grantor or successor to take affirmative action such as reentry to terminate the estate. The distinction turns on the language used and the intent shown by the instrument.
Courts construe the words so long as, while, during, and until as creating a special limitation. These words appear in the granting clause or habendum and signal that the estate ends by its own terms upon the described event. Other phrasing may be examined for intent but these terms are the classic indicators.
No court action is needed. The estate expires automatically when the limiting event occurs and the next interest becomes possessory without further steps by the grantor. This automatic quality distinguishes the limitation from interests that require affirmative termination.
Supporting sources
Yes. A lease may be created subject to a special limitation that terminates the tenancy automatically upon the stated event. The same words of limitation apply and the distinction from a condition subsequent remains important for determining whether termination is self-executing.
…employment context. We discern no basis for departing from otherwise applicable general contract principles. The doctrine that special limitations should be placed on the enforceability of employment security agreements arose during the late 19th century in the context of interpretation of contracts which promised "permanent"…