Luttinger v. Rosen

Supreme Court of Connecticut

164 Conn. 45 (1972)

 LOISELLE, Associate Justice.

The plaintiffs contracted to purchase for $85,000 premises in the city of Stamford owned by the defendants and paid a deposit of $8500. The contract was “subject to and conditional upon the buyers obtaining first mortgage financing on said premises from a bank or other lending institution in an amount of $45,000 for a term of not less than twenty (20) years and at an interest rate which does not exceed 8 1/2 per cent per annum.” The plaintiffs agreed to use due diligence in attempting to obtain such financing. The parties further agreed that if the plaintiffs were unsuccessful in obtaining financing as provided in the contract, and notified the seller within a specific time, all sums paid on the contract would be refunded and the contract terminated without further obligation of either party.

In applying for a mortgage which would satisfy the contingency clause in the contract, the plaintiffs relied on their attorney who applied at a New Haven lending institution for a $45,000 loan at 8 1/4 percent per annum interest over a period of twenty-five years. The plaintiffs’ attorney knew that this lending institution was the only one which at that time would lend as much as $45,000 on a mortgage for a single-family dwelling. A mortgage commitment was obtained for $45,000 with “interest at the prevailing rate at the time of closing but not less that 8 3/4%.” Since this commitment failed to meet the contract requirement, timely notice was given to the defendants and demand was made for the return of the down payment. The defendants’ counsel thereafter offered to make up the difference between the interest rate offered by the bank and the 8½ percent rate provided in the contract for the entire twenty-five years by a funding arrangement, the exact terms of which were not defined. The plaintiffs did not accept this offer and on the defendants’ refusal to return the deposit an action was brought. From a judgment rendered in favor of the plaintiffs the defendants have appealed.

The defendants claim that the plaintiffs did not use due diligence in seeking a mortgage within the terms specified in the contract. The unattacked findings by the court establish that the plaintiffs’ attorney was fully informed as to the conditions and terms of mortgages being granted by various banks and lending institutions in and out of the area and that the application was made to the only bank which might satisfy the mortgage conditions of the contingency clause at that time. These findings adequately support the court’s conclusion that due diligence was used in seeking mortgage financing in accordance with the contract provisions. The defendants assert that notwithstanding the plaintiffs’ reliance on their counsel’s knowledge of lending practices, applications should have been made to other lending institutions. This claim is not well taken. The law does not require the performance of a futile act.

The remaining assignment of error briefed by the defendants is that the court erred in concluding that the mortgage contingency clause of the contract, a condition precedent, was not met and, therefore, the plaintiffs were entitled to recover their deposit. “A condition precedent is a fact or event which the parties intend must exist or take place before there is a right to performance. Lach v. Cahill, 138 Conn. 418, 421. If the condition precedent is not fulfilled the contract is not enforceable. In this case the language of the contract is unambiguous and clearly indicates that the parties intended that the purchase of the defendants’ premises be conditioned on the obtaining by the plaintiffs of a mortgage as specified in the contract. From the subordinate facts found the court could reasonably conclude that since the plaintiffs were unable to obtain a $45,000 mortgage at no more than 8½ percent per annum interest “from a bank or other lending institution” the condition precedent to performance of the contract was not met and the plaintiffs were entitled to the refund of their deposit. Any additional offer by the defendants to fund the difference in interest payments could be rejected by the plaintiffs. There was no error in the court’s exclusion of testimony relating to the additional offer since the offer was obviously irrelevant.

Acme Markets, Inc. v. Federal Armored Express, Inc.

Superior Court of Pennsylvania

437 Pa.Super. 41 (1994)

HESTER, Judge.

Acme Markets, Inc., appeals from the order entered in the Court of Common Pleas of Montgomery County on December 21, 1993, which granted Federal Armored Express, Inc. (“Federal”) summary judgment. For the reasons set forth below, we reverse that order and remand the matter for further proceedings.

[A]ppellant alleged that the parties had entered into a contract for armored car service and that the agreement later was amended to provide for the timely reimbursement of service-related losses. In addition, appellant averred that a Federal employee was robbed on May 19, 1990, after accepting possession of one of appellant’s cashbags. Finally, appellant asserted that even though it had notified Federal promptly of the $62,544.32 loss, Federal had not made the reimbursement required by the agreement. Consequently, appellant requested, among other things, an award of damages equivalent to the amount of the loss.

[In its answer,] Federal relied upon the fifth paragraph of the agreement which provides, “Responsibility of Federal under this contract shall begin when said [cash]bags or packages have been accepted and receipted for by Federal or its authorized employees, and shall terminate upon delivery to consignee or upon return to shipper.” Specifically, Federal claimed that it bore no responsibility for the loss since neither it nor any of its employees had accepted the bag or provided the necessary receipt prior to the robbery.

…In addition, Federal noted that neither party disputed the fact that the employee in question had not provided a receipt for the bag prior to its loss.

* * *

Initially, we note that a condition precedent may be defined as a condition which must occur before a duty to perform under a contract arises. While the parties to a contract need not utilize any particular words to create a condition precedent, an act or event designated in a contract will not be construed as constituting one unless that clearly appears to have been the parties’ intention. In addition, we note that the purpose of any condition set forth in a contract must be determined in accordance with the general rules of contractual interpretation. Those rules may be summarized as follows.

When construing agreements involving clear and unambiguous terms, this Court need only examine the writing itself to give effect to the parties[’] understanding. McMahon v. McMahon, 417 Pa.Super. 592, 612 A.2d 1360 (1992) (en banc ). The court must construe the contract only as written and may not modify the plain meaning of the words under the guise of interpretation. Trumpp v. Trumpp, 351 Pa.Super. 205, 505 A.2d 601 (1985). When the terms of a written contract are clear, this Court will not re-write it to give it a construction in conflict with the accepted and plain meaning of the language used. Litwack v. Litwack, 289 Pa.Super. 405, 433 A.2d 514 (1981). Conversely, when the language is ambiguous and the intention of the parties cannot be reasonably ascertained from the language of the writing alone, the parol evidence rule does not apply to the admission of oral testimony to show both the intent of the parties and the circumstances attending the execution of the contract. Dewitt v. Kaiser, 335 Pa.Super. 258, 484 A.2d 121 (1984).

Creeks v. Creeks, 422 Pa.Super. 432, 435, 619 A.2d 754, 756 (1993).

In the present case, the contested paragraph indicates that Federal’s responsibility under the contract “shall begin when ... bags or packages have been accepted and receipted for by Federal or its employees....” Our reading of this plain language demonstrates that it clearly and unambiguously conditions Federal’s performance under the contract upon both the acceptance of bags or packages and the granting of a receipt for them. Thus, it unquestionably delineates a condition precedent involving those requirements.

Since we have found that Federal’s liability under the contract was subject to a condition precedent and neither party disputes that the receipt portion of the condition remained unfulfilled at the time of the robbery, we must determine whether satisfaction of that requirement may be excused. Apparently arguing that strict application of the condition would be unfair, appellant asserts that the receipt requirement was immaterial and could only be seen as incidental to the far more significant satisfied requirement of possession and acceptance by Federal’s employee of appellant’s property.

Restatement (Second) of Contracts § 229 discusses the excuse of a condition to avoid unfairness in connection with its strict enforcement. More specifically, that section relates to the excuse of a condition leading to a forfeiture, a term referring to “the denial of compensation that results when the obligee loses his right to the agreed exchange after he has relied substantially, as by preparation or performance on the expectation of that exchange.” Restatement (Second) of Contracts § 229, comment b. Section 229 provides, “To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.” Restatement (Second) of Contracts § 229. Since Pennsylvania law “abhors forfeitures and penalties and enforces them with the greatest reluctance when a proper case is presented[,]” Fogel Refrigerator Co. v. Oteri, 391 Pa. 188, 195 (1958), section 229 is consistent with the law of this Commonwealth. Consequently, we will apply it in the present case.

There can be little doubt that the operation of the condition in question will lead to a forfeiture since the condition’s nonoccurrence results in the denial of compensation for the loss of a cashbag possessed by Federal for transportation in accordance with the contract. Thus, the question becomes whether the forfeiture would be disproportionate.

In determining whether the forfeiture is “disproportionate,” [the] court must weigh the extent of the forfeiture by the obligee against the importance to the obligor of the risk from which he sought to be protected and the degree to which that protection will be lost if the nonoccurrence of the condition is excused to the extent required to prevent forfeiture. Restatement (Second) of Contracts § 229, comment b.

In the present case, appellant obviously entered into the armored car service contract so that it would have a secure method of transporting cash and checks to the bank. Strict application of the condition precedent would result in the loss of appellant’s ability to recover from Federal for the theft of the bag entrusted to Federal’s care. Moreover, we believe that the receipting requirement was intended to provide Federal with proof that it accepted, at a specific time, a certain number of cashbags for shipment. Thus, in our opinion, the requirement probably was little more than an accounting device designed to track bags picked up in accordance with the agreement. Under such circumstances, the receipt primarily would serve to protect Federal rather than Acme from, among other things, theft by its own employees and disputes regarding the number of bags accepted. Those are two risks not at issue herein.

While we believe that the receipt requirement probably was an accounting device which had little impact upon the situation presently at issue, our examination of the certified record reveals that it is devoid of any evidence demonstrating the requirement’s actual purpose. Thus, even though we have speculated on the matter, the record is inadequate to determine whether our speculation is accurate. In view of the inadequate record, we may not conduct the critical weighing analysis required by the Restatement or determine whether fulfillment of the condition may be excused. Indeed, we note that the trial court erroneously believed that its analysis ended upon concluding that a receipt was required to fulfill the condition precedent. Thus, the court did not consider whether the forfeiture would be disproportionate, decide if the receipt requirement constituted a material part of the exchange, or require the parties to provide an adequate record either for resolving those issues or deciding whether summary judgment in favor of Federal would be appropriate. Accordingly, we must reverse the trial court’s grant of summary judgment and remand the matter for further proceedings.

On remand, the trial court should conduct an evidentiary hearing to determine the purpose of the receipt requirement and engage in the necessary weighing analysis. In addition, the court should determine whether the contested requirement constituted a material part of the agreement. While this determination rests to a large extent on the analysis of the requirement’s purpose, it also involves a consideration of the negotiations of the parties along with all other circumstances relevant to the formation of the contract or to the requirement itself, including the circumstances surrounding the theft.

Taylor v. Caldwell

122 Eng. Rep. 309 (1863)

BLACKBURN, Judge.

In this case the plaintiffs and defendants had, on the 27th May, 1861, entered into a contract by which the defendants agreed to let the plaintiffs have the use of The Surrey Gardens and Music Hall on four days then to come, viz., the 17th June, 15th July, 5th August and 19th August, for the purpose of giving a series of four grand concerts, and day and night fetes at the Gardens and Hall on those days respectively; and the plaintiffs agreed to take the Gardens and Hall on those days, and pay £100 for each day.

The parties inaccurately call this a “letting,” and the money to be paid a “rent;” but the whole agreement is such as to shew that the defendants were to retain the possession of the Hall and Gardens so that there was to be no demise of them, and that the contract was merely to give the plaintiffs the use of them on those days. Nothing however, in our opinion, depends on this. The agreement then proceeds to set out various stipulations between the parties as to what each was to supply for these concerts and entertainments, and as to the manner in which they should be carried on. The effect of the whole is to shew that the existence of the Music Hall in the Surrey Gardens in a state fit for a concert was essential for the fulfilment of the contract,—such entertainments as the parties contemplated in their agreement could not be given without it.

After the making of the agreement, and before the first day on which a concert was to be given, the Hall was destroyed by fire. This destruction, we must take it on the evidence, was without the fault of either party, and was so complete that in consequence the concerts could not be given as intended. And the question we have to decide is whether, under these circumstances, the loss which the plaintiffs have sustained is to fall upon the defendants. The parties when framing their agreement evidently had not present to their minds the possibility of such a disaster, and have made no express stipulation with reference to it, so that the answer to the question must depend upon the general rules of law applicable to such a contract.

There seems no doubt that where there is a positive contract to do a thing, not in itself unlawful, the contractor must perform it or pay damages for not doing it, although in consequence of unforeseen accidents, the performance of his contract has become unexpectedly burthensome or even impossible. … But this rule is only applicable when the contract is positive and absolute, and not subject to any condition either express or implied: and there are authorities which, as we think, establish the principle that where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless when the time for the fulfilment of the contract arrived some particular specified thing continued to exist, so that, when entering into the contract, they must have contemplated such continuing existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.

There seems little doubt that this implication tends to further the great object of making the legal construction such as to fulfil the intention of those who entered into the contract. For in the course of affairs men in making such contracts in general would, if it were brought to their minds, say that there should be such a condition. …

There is a class of contracts in which a person binds himself to do something which requires to be performed by him in person; and such promises, e.g. promises to marry, or promises to serve for a certain time, are never in practice qualified by an express exception of the death of the party; and therefore in such cases the contract is in terms broken if the promisor dies before fulfilment. Yet it was very early determined that, if the performance is personal, the executors are not liable; …

It seems that in those cases the only ground on which the parties or their executors, can be excused from the consequences of the breach of the contract is, that from the nature of the contract there is an implied condition of the continued existence of the life of the contractor, and, perhaps in the case of the painter of his eyesight. In the instances just given, the person, the continued existence of whose life is necessary to the fulfilment of the contract, is himself the contractor, but that does not seem in itself to be necessary to the application of the principle; as is illustrated by the following example. In the ordinary form of an apprentice deed the apprentice binds himself in unqualified terms to “serve until the full end and term of seven years to be fully complete and ended,” during which term it is covenanted that the apprentice his master “faithfully shall serve,” and the father of the apprentice in equally unqualified terms binds himself for the performance by the apprentice of all and every covenant on his part. It is undeniable that if the apprentice dies within the seven years, the covenant of the father that he shall perform his covenant to serve for seven years is not fulfilled, yet surely it cannot be that an action would lie against the father? Yet the only reason why it would not is that he is excused because of the apprentice’s death.

These are instances where the implied condition is of the life of a human being, but there are others in which the same implication is made as to the continued existence of a thing. For example, where a contract of sale is made amounting to a bargain and sale, transferring presently the property in specific chattels, which are to be delivered by the vendor at a future day; there, if the chattels, without the fault of the vendor, perish in the interval, the purchaser must pay the price and the vendor is excused from performing his contract to deliver, which has thus become impossible.

…

It may, we think, be safely asserted to be now English law, that in all contracts of loan of chattels or bailments if the performance of the promise of the borrower or bailee to return the things lent or bailed, becomes impossible because it has perished, this impossibility (if not arising from the fault of the borrower or bailee from some risk which he has taken upon himself) excuses the borrower or bailee from the performance of his promise to redeliver the chattel. … The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.

In none of these cases is the promise in words other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall at the time when the concerts were to be given; that being essential to their performance.

We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things.

Krell v. Henry

Court of Appeal

1 King’s Bench 740 (1903)

APPEAL from a decision of DARLING, J.

The plaintiff, Paul Krell, sued the defendant, C. S. Henry, for £50, being the balance of a sum of £75, for which the defendant had agreed to hire a flat at 56A, Pall Mall on the days of June 26 and 27, for the purpose of viewing the processions to be held in connection with the coronation of His Majesty. The defendant denied his liability, and counterclaimed for the return of the sum of £25, which had been paid as a deposit, …. The facts, which were not disputed, were as follows. The plaintiff on leaving the country in March, 1902, left instructions with his solicitor to let his suite of chambers at 56A, Pall Mall on such terms and for such period (not exceeding six months) as he thought proper. On June 17, 1902, the defendant noticed an announcement in the windows of the plaintiff’s flat to the effect that windows to view the coronation processions were to be let. The defendant interviewed the housekeeper on the subject, when it was pointed out to him what a good view of the processions could be obtained from the premises, and he eventually agreed with the housekeeper to take the suite for the two days in question for a sum of £75. On June 20 the defendant wrote the following letter to the plaintiff’s solicitor:

“I am in receipt of yours of the 18th instant, inclosing form of agreement for the suite of chambers on the third floor at 56A, Pall Mall, which I have agreed to take for the two days, the 26th and 27th instant, for the sum of £75. … [A]s arranged over the telephone I inclose herewith cheque for £25 as deposit, and will thank you to confirm to me that I shall have the entire use of these rooms during the days (not the nights) of the 26th and 27th instant. You may rely that every care will be taken of the premises and their contents. On the 24th inst. I will pay the balance, viz., £50, to complete the £75 agreed upon.”

On the same day the defendant received the following reply from the plaintiff’s solicitor:—

“I am in receipt of your letter of to-day’s date inclosing cheque for £25. deposit on your agreeing to take Mr. Krell’s chambers on the third floor at 56A, Pall Mall for the two days, the 26th and 27th June, and I confirm the agreement that you are to have the entire use of these rooms during the days (but not the nights), the balance, £50, to, be paid to me on Tuesday next the 24th instant.”

The processions not having taken place on the days originally appointed, namely, June 26 and 27, the defendant declined to pay the balance of £50 alleged to be due from him under the contract in writing of June 20 constituted by the above two letters. Hence the present action.

…

VAUGHAN WILLIAMS L.J. read the following written judgment:—

…

In my judgment the use of the rooms was let and taken for the purpose of seeing the Royal procession. It was not a demise of the rooms, or even an agreement to let and take the rooms. It is a licence to use rooms for a particular purpose and none other. And in my judgment the taking place of those processions on the days proclaimed along the proclaimed route, which passed 56A, Pall Mall, was regarded by both contracting parties as the foundation of the contract; and I think that it cannot reasonably be supposed to have been in the contemplation of the contracting parties, when the contract was made, that the coronation would not be held on the proclaimed days, or the processions not take place on those days along the proclaimed route; and I think that the words imposing on the defendant the obligation to accept and pay for the use of the rooms for the named days, although general and unconditional, were not used with reference to the possibility of the particular contingency which afterwards occurred. It was suggested in the course of the argument that if the occurrence, on the proclaimed days, of the coronation and the procession in this case were the foundation of the contract, and if the general words are thereby limited or qualified, so that in the event of the non-occurrence of the coronation and procession along the proclaimed route they would discharge both parties from further performance of the contract, it would follow that if a cabman was engaged to take some one to Epsom on Derby Day at a suitable enhanced price for such a journey, say £10, both parties to the contract would be discharged in the contingency of the race at Epsom for some reason becoming impossible; but I do not think this follows, for I do not think that in the cab case the happening of the race would be the foundation of the contract. No doubt the purpose of the engager would be to go to see the Derby, and the price would be proportionately high; but the cab had no special qualifications for the purpose which led to the selection of the cab for this particular occasion. Any other cab would have done as well. Moreover, I think that, under the cab contract, the hirer, even if the race went off, could have said, “Drive me to Epsom; I will pay you the agreed sum; you have nothing to do with the purpose for which I hired the cab,” and that if the cabman refused he would have been guilty of a breach of contract, there being nothing to qualify his promise to drive the hirer to Epsom on a particular day. Whereas in the case of the coronation, there is not merely the purpose of the hirer to see the coronation procession, but it is the coronation procession and the relative position of the rooms which is the basis of the contract as much for the lessor as the hirer; and I think that if the King, before the coronation day and after the contract, had died, the hirer could not have insisted on having the rooms on the days named. It could not in the cab case be reasonably said that seeing the Derby race was the foundation of the contract, as it was of the licence in this case. Whereas in the present case, where the rooms were offered and taken, by reason of their peculiar suitability from the position of the rooms for a view of the coronation procession, surely the view of the coronation procession was the foundation of the contract, which is a very different thing from the purpose of the man who engaged the cab—namely, to see the race—being held to be the foundation of the contract. Each case must be judged by its own circumstances. In each case one must ask oneself, first, what, having regard to all the circumstances, was the foundation of the contract? Secondly, was the performance of the contract prevented? Thirdly, was the event which prevented the performance of the contract of such a character that it cannot reasonably be said to have been in the contemplation of the parties at the date of the contract? If all these questions are answered in the affirmative (as I think they should be in this case), I think both parties are discharged from further performance of the contract. I think that the coronation procession was the foundation of this contract, and that the non-happening of it prevented the performance of the contract; and, secondly, I think that the non-happening of the procession, to use the words of Sir James Hannen in Baily v. De Crespigny, was an event “of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made, and that they are not to be held bound by general words which, though large enough to include, were not used with reference to the possibility of the particular contingency which afterwards happened.” The test seems to be whether the event which causes the impossibility was or might have been anticipated and guarded against. …

…It is not essential to the application of the principle of Taylor v. Caldwell that the direct subject of the contract should perish or fail to be in existence at the date of performance of the contract. It is sufficient if a state of things or condition expressed in the contract and essential to its performance perishes or fails to be in existence at that time. In the present case the condition which fails and prevents the achievement of that which was, in the contemplation of both parties, the foundation of the contract, is not expressly mentioned either as a condition of the contract or the purpose of it; but I think for the reasons which I have given that the principle of Taylor v. Caldwell ought to be applied. This disposes of the plaintiff’s claim for £50 unpaid balance of the price agreed to be paid for the use of the rooms. The defendant at one time set up a cross-claim for the return of the £25 he paid at the date of the contract. As that claim is now withdrawn it is unnecessary to say anything about it.

* * *

Restatement (Second) Contracts § 261. Discharge by Supervening Impracticability

Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.

* * *

Restatement (Second) Contracts § 262. Death or Incapacity of Person Necessary for Performance

If the existence of a particular person is necessary for the performance of a duty, his death or such incapacity as makes performance impracticable is an event the non-occurrence of which was a basic assumption on which the contract was made. 

* * *

Restatement (Second) Contracts § 265. Discharge by Supervening Frustration

Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.

Jacob & Youngs, Inc. v. Kent

Court of Appeals of New York

230 N.Y. 239 (1921)

CARDOZO, J.

The plaintiff built a country residence for the defendant at a cost of upwards of $77,000, and now sues to recover a balance of $3,483.46, remaining unpaid. The work of construction ceased in June, 1914, and the defendant then began to occupy the dwelling. There was no complaint of defective performance until March, 1915. One of the specifications for the plumbing work provides that——

“All wrought-iron pipe must be well galvanized, lap welded pipe of the grade known as ‘standard pipe’ of Reading manufacture.”

The defendant learned in March, 1915, that some of the pipe, instead of being made in Reading, was the product of other factories. The plaintiff was accordingly directed by the architect to do the work anew. The plumbing was then encased within the walls except in a few places where it had to be exposed. Obedience to the order meant more than the substitution of other pipe. It meant the demolition at great expense of substantial parts of the completed structure. The plaintiff left the work untouched, and asked for a certificate that the final payment was due. Refusal of the certificate was followed by this suit.

The evidence sustains a finding that the omission of the prescribed brand of pipe was neither fraudulent nor willful. It was the result of the oversight and inattention of the plaintiff’s subcontractor. Reading pipe is distinguished from Cohoes pipe and other brands only by the name of the manufacturer stamped upon it at intervals of between six and seven feet. Even the defendant’s architect, though he inspected the pipe upon arrival, failed to notice the discrepancy. The plaintiff tried to show that the brands installed, though made by other manufacturers, were the same in quality, in appearance, in market value, and in cost as the brand stated in the contract—that they were, indeed, the same thing, though manufactured in another place. The evidence was excluded, and a verdict directed for the defendant. The Appellate Division reversed, and granted a new trial.

We think the evidence, if admitted, would have supplied some basis for the inference that the defect was insignificant in its relation to the project. The courts never say that one who makes a contract fills the measure of his duty by less than full performance. They do say, however, that an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of a condition to be followed by a forfeiture. The distinction is akin to that between dependent and independent promises, or between promises and conditions. Some promises are so plainly independent that they can never by fair construction be conditions of one another. Others are so plainly dependent that they must always be conditions. Others, though dependent and thus conditions when there is departure in point of substance, will be viewed as independent and collateral when the departure is insignificant. Considerations partly of justice and partly of presumable intention are to tell us whether this or that promise shall be placed in one class or in another. The simple and the uniform will call for different remedies from the multifarious and the intricate. The margin of departure within the range of normal expectation upon a sale of common chattels will vary from the margin to be expected upon a contract for the construction of a mansion or a “skyscraper.” There will be harshness sometimes and oppression in the implication of a condition when the thing upon which labor has been expended is incapable of surrender because united to the land, and equity and reason in the implication of a like condition when the subject-matter, if defective, is in shape to be returned. From the conclusion that promises may not be treated as dependent to the extent of their uttermost minutiae without a sacrifice of justice, the progress is a short one to the conclusion that they may not be so treated without a perversion of intention. Intention not otherwise revealed may be presumed to hold in contemplation the reasonable and probable. If something else is in view, it must not be left to implication. There will be no assumption of a purpose to visit venial faults with oppressive retribution.

Those who think more of symmetry and logic in the development of legal rules than of practical adaptation to the attainment of a just result will be troubled by a classification where the lines of division are so wavering and blurred. Something, doubtless, may be said on the score of consistency and certainty in favor of a stricter standard. The courts have balanced such considerations against those of equity and fairness, and found the latter to be the weightier. The decisions in this state commit us to the liberal view, which is making its way, nowadays, in jurisdictions slow to welcome it. Where the line is to be drawn between the important and the trivial cannot be settled by a formula. … Nowhere will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract. There is no general license to install whatever, in the builder’s judgment, may be regarded as “just as good.” The question is one of degree, to be answered, if there is doubt, by the triers of the facts, and, if the inferences are certain, by the judges of the law. We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence. Then only can we tell whether literal fulfillment is to be implied by law as a condition. This is not to say that the parties are not free by apt and certain words to effectuate a purpose that performance of every term shall be a condition of recovery. That question is not here. This is merely to say that the law will be slow to impute the purpose, in the silence of the parties, where the significance of the default is grievously out of proportion to the oppression of the forfeiture. The willful transgressor must accept the penalty of his transgression. For him there is no occasion to mitigate the rigor of implied conditions. The transgressor whose default is unintentional and trivial may hope for mercy if he will offer atonement for his wrong.

In the circumstances of this case, we think the measure of the allowance is not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing. Some of the exposed sections might perhaps have been replaced at moderate expense. … It is true that in most cases the cost of replacement is the measure. The owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value. Specifications call, let us say, for a foundation built of granite quarried in Vermont. On the completion of the building, the owner learns that through the blunder of a subcontractor part of the foundation has been built of granite of the same quality quarried in New Hampshire. The measure of allowance is not the cost of reconstruction. “There may be omissions of that which could not afterwards be supplied exactly as called for by the contract without taking down the building to its foundations, and at the same time the omission may not affect the value of the building for use or otherwise, except so slightly as to be hardly appreciable.” Handy v. Bliss, 204 Mass. 513, 519. The rule that gives a remedy in cases of substantial performance with compensation for defects of trivial or inappreciable importance has been developed by the courts as an instrument of justice. The measure of the allowance must be shaped to the same end.

…

McLAUGHLIN, J.

I dissent. The plaintiff did not perform its contract. Its failure to do so was either intentional or due to gross neglect which, under the uncontradicted facts, amounted to the same thing, nor did it make any proof of the cost of compliance, where compliance was possible.

Under its contract it obligated itself to use in the plumbing only pipe (between 2,000 and 2,500 feet) made by the Reading Manufacturing Company. The first pipe delivered was about 1,000 feet and the plaintiff’s superintendent then called the attention of the foreman of the subcontractor, who was doing the plumbing, to the fact that the specifications annexed to the contract required all pipe used in the plumbing to be of the Reading Manufacturing Company. They then examined it for the purpose of ascertaining whether this delivery was of that manufacture and found it was. Thereafter, as pipe was required in the progress of the work, the foreman of the subcontractor would leave word at its shop that he wanted a specified number of feet of pipe, without in any way indicating of what manufacture. Pipe would thereafter be delivered and installed in the building, without any examination whatever. Indeed, no examination, so far as appears, was made by the plaintiff, the subcontractor, defendant’s architect, or anyone else, of any of the pipe except the first delivery, until after the building had been completed. Plaintiff’s architect then refused to give the certificate of completion, upon which the final payment depended, because all of the pipe used in the plumbing was not of the kind called for by the contract. After such refusal, the subcontractor removed the covering or insulation from about 900 feet of pipe which was exposed in the basement, cellar, and attic, and all but 70 feet was found to have been manufactured, not by the Reading Company, but by other manufacturers, some by the Cohoes Rolling Mill Company, some by the National Steel Works, some by the South Chester Tubing Company, and some which bore no manufacturer’s mark at all. The balance of the pipe had been so installed in the building that an inspection of it could not be had without demolishing, in part at least, the building itself.

I am of the opinion the trial court was right in directing a verdict for the defendant. The plaintiff agreed that all the pipe used should be of the Reading Manufacturing Company. Only about two-fifths of it, so far as appears, was of that kind. If more were used, then the burden of proving that fact was upon the plaintiff, which it could easily have done, since it knew where the pipe was obtained. The question of substantial performance of a contract of the character of the one under consideration depends in no small degree upon the good faith of the contractor. If the plaintiff had intended to, and had, complied with the terms of the contract except as to minor omissions, due to inadvertence, then he might be allowed to recover the contract price, less the amount necessary to fully compensate the defendant for damages caused by such omissions. But that is not this case. It installed between 2,000 and 2,500 feet of pipe, of which only 1,000 feet at most complied with the contract. No explanation was given why pipe called for by the contract was not used, nor that any effort made to show what it would cost to remove the pipe of other manufacturers and install that of the Reading Manufacturing Company. The defendant had a right to contract for what he wanted. He had a right before making payment to get what the contract called for. It is no answer to this suggestion to say that the pipe put in was just as good as that made by the Reading Manufacturing Company, or that the difference in value between such pipe and the pipe made by the Reading Manufacturing Company would be either “nominal or nothing.” Defendant contracted for pipe made by the Reading Manufacturing Company. What his reason was for requiring this kind of pipe is of no importance. He wanted that and was entitled to it. It may have been a mere whim on his part, but even so, he had a right to this kind of pipe, regardless of whether some other kind, according to the opinion of the contractor or experts, would have been “just as good, better, or done just as well.” He agreed to pay only upon condition that the pipe installed were made by that company and he ought not to be compelled to pay unless that condition be performed. The rule, therefore, of substantial performance, with damages for unsubstantial omissions, has no application.

…

Restatement (Second) of Contracts § 241

In determining whether a failure to render or to offer performance is material, the following circumstances are significant:

(a) the extent to which the injured party will be deprived of the benefit which it reasonably expected;

(b) the extent to which the injured party can be adequately compensated;

(c) extent to which breaching party will suffer forfeiture;

(d) the likelihood that the breaching party will cure its failure;

(e) good faith and fair dealing of breaching party

Walker and Company v. Harrison

Supreme Court of Michigan.

347 Mich. 630 (1957)

Opinion

SMITH, Justice.

This is a suit on a written contract. The defendants are in the dry-cleaning business. Walker & Company, plaintiff, sells, rents, and services advertising signs and billboards. These parties entered into an agreement pertaining to a sign. The agreement is in writing and is termed a ‘rental agreement.’ It specifies in part that:

The lessor agrees to construct and install, at its own cost, one 18’9” high x 8’8” wide pylon type d.f. neon sign with electric clock and flashing lamps * * *. The lessor agrees to and does hereby lease or rent unto the said lessee the said SIGN for the term, use and rental and under the conditions, hereinafter set out, and the lessee agrees to pay said rental * * *.

(a) The term of this lease shall be 36 months * * *. 

(a) The rental to be paid by lessee shall be $148.50 per month for each and every calendar month during the term of this lease; * * *.

(d) Maintenance. Lessor at its expense agrees to maintain and service the sign together with such equipment as supplied and installed by the lessor to operate in conjunction with said sign under the terms of this lease; this service is to include cleaning and repainting of sign in original color scheme as often as deemed necessary by lessor to keep sign in first class advertising condition and make all necessary repairs to sign and equipment installed by lessor. * * *.

At the ‘expiration of this agreement,’ it was also provided, ‘title to this sign reverts to lessee.’ This clause is in addition to the printed form of agreement and was apparently added as a result of defendants’ concern over title, they having expressed a desire ‘to buy for cash’ and the salesman, at one time, having ‘quoted a cash price.’

The sign was completed and installed in the latter part of July, 1953. The first billing of the monthly payment of $148.50 was made August 1, 1953, with payment thereof by defendants on September 3, 1953. This first payment was also the last. Shortly after the sign was installed, someone hit it with a tomato. Rust, also, was visible on the chrome, complained defendants, and in its corners were ‘little spider cobwebs.’ In addition, there were ‘some children’s sayings written down in here.’ Defendant Herbert Harrison called Walker for the maintenance he believed himself entitled to under subparagraph (d) above. It was not forthcoming. He called again and again. ‘I was getting, you might say, sorer and sorer. * * * Occasionally, when I started calling up, I would walk around where the tomato was and get mad again. Then I would call up on the phone again.’ Finally, on October 8, 1953, plaintiff not having responded to his repeated calls, he telegraphed Walker that:

‘You Have Continually Voided Our Rental Contract By Not Maintaining Signs As Agreed As We No Longer Have A Contract With You Do Not Expect Any Further Remuneration.’

Walker’s reply was in the form of a letter. After first pointing out that ‘your telegram does not make any specific allegations as to what the failure of maintenance comprises,’ and stating that ‘We certainly would appreciate your furnishing us with such information,’ the letter makes reference to a prior collateral controversy between the parties, ‘wondering if this refusal on our part prompted your attempt to void our rental contract,’ and concludes as follows:

‘We would like to call your attention to paragraph G in our rental contract, which covers procedures in the event of a Breach of Agreement. In the event that you carry out your threat to make no future monthly payments in accordance with the agreement, it is our intention to enforce the conditions outlined under paragraph G through the proper legal channels. We call to your attention that your monthly rental payments are due in advance at our office not later than the 10th day of each current month. You are now approximately 30 days in arrears on your September payment. Unless we receive both the September and October payments by October 25th, this entire matter will be placed in the hands of our attorney for collection in accordance with paragraph G which stipulates that the entire amount is forthwith due and payable.’

No additional payments were made and Walker sued in assumpsit for the entire balance due under the contract, $5,197.50, invoking paragraph (g) of the agreement. Defendants filed answer and claim of recoupment, asserting that plaintiff's failure to perform certain maintenance services constituted a prior material breach of the agreement, thus justifying their repudiation of the contract and grounding their claim for damages. The case was tried to the court without a jury and resulted in a judgment for the plaintiff. The case is before us on a general appeal.

Defendants urge upon us again and again, in various forms, the proposition that Walker’s failure to service the sign, in response to repeated requests, constituted a material breach of the contract and justified repudiation by them. Their legal proposition is undoubtedly correct. Repudiation is one of the weapons available to an injured party in event the other contractor has committed a material breach. But the injured party’s determination that there has been a material breach, justifying his own repudiation, is fraught with peril, for should such determination, as viewed by a later court in the calm of its contemplation, be unwarranted, the repudiator himself will have been guilty of material breach and himself have become the aggressor, not an innocent victim.

What is our criterion for determining whether or not a breach of contract is so fatal to the undertaking of the parties that it is to be classed as ‘material’? There is no single touchstone. Many factors are involved. They are well stated in section 275 of Restatement of the Law of Contracts in the following terms:

In determining the materiality of a failure fully to perform a promise the following circumstances are influential:

(a) The extent to which the injured party will obtain the substantial benefit which he could have reasonably anticipated;

(b) The extent to which the injured party may be adequately compensated in damages for lack of complete performance;

(c) The extent to which the party failing to perform has already partly performed or made preparations for performance;

(d) The greater or less hardship on the party failing to perform in terminating the contract;

(e) The wilful, negligent or innocent behavior of the party failing to perform;

(f) The greater or less uncertainty that the party failing to perform will perform the remainder of the contract.

We will not set forth in detail the testimony offered concerning the need for servicing. Granting that Walker’s delay (about a week after defendant Herbert Harrison sent his telegram of repudiation Walker sent out a crew and took care of things) in rendering the service requested was irritating, we are constrained to agree with the trial court that it was not of such materiality as to justify repudiation of the contract, and we are particularly mindful of the lack of preponderant evidence contrary to his determination. The trial court, on this phase of the case, held as follows:

Now Mr. Harrison phoned in, so he testified, a number of times. He isn't sure of the dates but he sets the first call at about the 7th of August and he complained then of the tomato and of some rust and some cobwebs. The tomato, according to the testimony, was up on the clock; that would be outside of his reach, without a stepladder or something. The cobwebs are within easy reach of Mr. Harrison and so would the rust be. I think that Mr. Bueche’s argument that these were not materially a breach would clearly be true as to the cobwebs and I really can't believe in the face of all the testimony that there was a great deal of rust seven days after the installation of this sign. And that really brings it down to the tomato. And, of course, when a tomato has been splashed all over your clock, you don’t like it. But he says he kept calling their attention to it, although the rain probably washed some of the tomato off. But the stain remained, and they didn’t come. I really can’t find that that was such a material breach of the contract as to justify rescission. I really don’t think so.

Nor, we conclude, do we. There was no valid ground for defendants’ repudiation and their failure thereafter to comply with the terms of the contract was itself a material breach, entitling Walker, upon this record, to judgment.

Alenco, Inc. v. Warrington

Court of Appeals of Kansas

65 Kan.App.2d 79 (2024)

Opinion

Warner, J.:

This consolidated appeal arises from a contract for exterior renovation work between Alenco, Inc., and the owners of a home in Olathe. Alenco sued the homeowners for breach of contract after they refused to pay $27,000 due under the contract, claiming the siding Alenco installed on their home had a lesser insulation rating than the contract called for. After a trial, the jury found for Alenco, concluding that the homeowners had breached the contract by not satisfying their bill. The jury rejected the homeowners’ claims that Alenco had violated the Kansas Consumer Protection Act (KCPA) and that it breached the contract first by providing the wrong siding.

The homeowners requested a new trial, asserting that the jury’s verdict on their KCPA counterclaim was against the weight of the evidence. The district court disagreed and denied the motion. But the court then essentially reweighed the evidence and, despite the jury’s earlier assessments, found that Alenco had made several misrepresentations during the course of the transaction in violation of the KCPA. The court imposed a $10,000 civil penalty against Alenco and ordered the company to pay $40,000 of the homeowners’ attorney fees.

The homeowners and Alenco each challenge aspects of that trial and the district court’s posttrial rulings. After carefully reviewing the record and the parties’ arguments, we find that the district court erred by effectively substituting its factual findings for the jury verdict on the KCPA claim. We also vacate the attorney-fees award that was based on that same finding, but we affirm the district court’s discovery sanction for certain pretrial conduct. We thus affirm in part, reverse in part, vacate in part, and remand for entry of judgment in Alenco’s favor on the consumer-protection claim.

Factual and Procedural Background

Trina LeMaster and Bill Warrington own a home in Olathe. Alenco is a Kansas corporation that supplies and installs home improvement products. In 2019, LeMaster and Warrington (the homeowners) hired Alenco to perform construction work on their home, including installing new siding.

Before hiring Alenco, the homeowners met with one of Alenco’s sales representatives. The representative inspected the homeowners’ existing siding and identified it as hollow vinyl. After discussing Alenco’s products and services and the work the homeowners sought, the representative prepared a proposal for the work. The homeowners later went to Alenco’s showroom to view siding options and chose a siding product called “Cedar Ridge,” manufactured by Westlake Royal Building Products. Alenco purchases this siding product through a distributer.

The homeowners entered into a contract with Alenco to replace their siding and perform other construction work, including installing custom shutters and new guttering. This contract included several handwritten specifications about various aspects of the work to be completed and the products to be used. For example, the contract stated Alenco would install a siding product with “R-value 4” insulation—that is, siding with a particular thickness of pre-attached insulation. The contract also stated that Alenco would use “Cedar Ridge” solid core siding, type “Triple 6” with a “horizontal” style in a “slate” color. The total cost of the job was $30,000. The homeowners made a $3,000 downpayment upon execution of the contract, and construction began a few months later.

The parties’ disagreement over the siding product and insulation rating

When the project was nearly complete, the homeowners were observing the worksite and noticed a few pieces of scrap siding. They thought these pieces of siding looked different from the siding they previewed at the showroom; the box in their yard contained siding labeled as “CraneBoard 6” with an R-value of 2.2. The homeowners contacted an Alenco representative and told him that they believed the wrong siding was being installed on their home. In the meantime, Alenco placed an invoice on the homeowners’ door for $27,000 due under the contract. The homeowners refused to pay.

The homeowners and Alenco exchanged texts, phone calls, and emails about the siding that had been installed. The homeowners also had several meetings with representatives of Alenco, including the company’s vice president and sales manager, as well as its retired president, who was called in to help resolve the dispute.

In these meetings, the Alenco representatives explained that the confusion about the siding stemmed from a problem with the marketing materials it received from the manufacturer and from a change in the way the R-value was rated for energy-saving tax credits. They indicated that the product that had been installed on the homeowners’ property was the same in all essential details as the product the homeowners had chosen and that the siding on the home had the highest R-value available for siding product the homeowners had requested. The representatives noted that Cedar Ridge is a “white label” brand for a siding called CraneBoard, meaning the Cedar Ridge siding the homeowners selected is also labeled and marketed as CraneBoard.

Alenco proposed a few possible solutions to remedy the disagreement. For example, Alenco offered to temporarily remove the siding and add insulation to achieve the equivalent of the R-value 4 rating for no additional cost. Alternatively, it offered to discount the price of the work by $2,000—the amount that the homeowners would be expected to save in energy costs over 20 years with R-value 4 siding. The homeowners rejected both these offers, however, and informed Alenco that they did not intend to pay for the siding or the other work beyond the $3,000 downpayment since they had not received the product listed in the contract.

The lawsuit and eventual jury verdict in favor of Alenco

When the parties could not resolve their disagreement after several months, Alenco filed this lawsuit, alleging the homeowners owed it $27,000 under the contract, plus court costs and attorney fees. The homeowners counterclaimed, asserting that Alenco breached the contract first when it installed the wrong siding. The homeowners also alleged that Alenco had engaged in deceptive and unconscionable acts in violation of the KCPA.

Most of the parties’ claims and counterclaims were tried to a jury over the course of a four-day trial. The jury thus heard evidence relating to each party’s assertations about who breached the contract and when they had allegedly done so, as well as the homeowners’ claim that Alenco had violated the KCPA by engaging in several deceptive practices. … The homeowners and several representatives from Alenco testified about the parties’ contract, the nature of the siding industry, and the cause of the parties’ disagreement, as well as their negotiations to resolve that disagreement.

After hearing all the evidence, the jury found that the homeowners had breached their contract with Alenco by refusing to pay the invoice. It awarded Alenco $25,000 in damages—essentially the offer Alenco had previously presented with $2,000 deducted from the remaining amount due under the contract. The jury also found that Alenco had neither materially breached the contract nor engaged in any deceptive acts proscribed by the KCPA.

The crux of this appeal—the district court’s posttrial rulings

After trial, the homeowners filed several motions with the district court. Three of these requests make up the heart of this appeal. The homeowners requested either judgment as a matter of law or a new trial, claiming the jury’s verdict was against the great weight of the evidence and thus could not be upheld. …

The district court held a hearing on the homeowners’ posttrial motions. It later denied their request for judgment as a matter of law and for a new trial, finding there was evidence submitted at trial to support the jury’s verdict.

…

Discussion

The jury trial “is a central foundation of our justice system and democracy.” Pena-Rodriguez v. Colorado, 580 U.S. 206 (2017). Our courts entrust jurors with the responsibility to observe witnesses’ demeanor and listen to their testimony to determine what versions of events are credible. And once jurors have been instructed on the law, we rely on them to weigh the evidence presented in the context of each party’s arguments, make factual findings, and render a verdict. In this way, each jury is “a tangible implementation of the principle that the law comes from the people.” Id.

Out of respect for the jury’s solemn responsibility, Kansas law recognizes that a jury’s verdict, when based on the correct law and supported by evidence, should not be set aside lightly. For this reason, courts tend to view posttrial motions like the two the homeowners filed here—a motion for a new trial … and a motion for judgment as a matter of law … —with some degree of skepticism, as these motions seek to set aside the jury’s assessment of the evidence.

…

Our review of the record shows that the district court appropriately denied the homeowners’ posttrial motions because the jury’s verdict was supported by evidence—albeit disputed evidence—at trial. …

1. The jury’s findings regarding the parties’ respective breach-of-contract claims were supported by evidence presented at the trial.

The first disputed findings on appeal concern the jury’s verdict as it related to the parties’ contract. As we have noted, the jury found that the homeowners had breached the contract with Alenco and owed Alenco $25,000 in damages. The jury also found that Alenco had not materially breached its contract with the homeowners. The homeowners now assert that the jury’s verdict cannot be reconciled with the undisputed fact that Alenco installed a siding with a lower R-value than the parties had agreed upon. The homeowners argue that they had no duty to pay for Alenco’s work or for the products used because Alenco used different siding than what they had chosen. Our review shows that the jury’s verdict is supported by evidence presented at trial. Thus, the district court did not err when it denied the homeowners’ request to set aside the verdict.

Kansas law generally holds people responsible for the agreements they make. But not every breach of an agreement justifies rescinding the entire contract. When a person “fails to precisely meet” every contract term, their performance “may still be considered complete if the essential purpose of the contract is accomplished” and they have made “a good-faith attempt to comply with the terms of the agreement.” Dexter v. Brake, 46 Kan. App. 2d 1020, 1033 (2012). The guiding question is whether a person has substantially performed their contractual obligations or whether they have materially breached the agreement in a way that eviscerates the purpose of the contract.

Substantial performance is “‘performance which, despite deviation or omission, provides the important and essential benefits of the contract.’ ”Almena State Bank v. Enfield, 24 Kan. App. 2d 834, 840 (1998). Courts have found that technical breaches of an agreement may be excused if the parties performed the essence of their contractual obligations. In these instances, the “‘technical breach of the terms of the contract is excused not because compliance with the terms of the contract ... is objectively impossible, but because the actual performance is so similar to the required performance that “any breach is immaterial.” [].

Conversely, a material breach is “so substantial as to defeat the object of the parties in making the agreement.” Federal Land Bank of Wichita v. Krug, 253 Kan. 307, 313 (1993). When a party materially breaches a contract, they are precluded from enforcing the contract against the nonbreaching party until the material breach has been cured. In this situation, the nonbreaching party is entitled to “suspend or terminate performance under that contract” until the previous breach is resolved.

The tension between substantial performance and material breaches often arises in construction contracts. Several considerations are relevant to this assessment, including

“whether the contractor performed the construction substantially as promised, and whether the owner can use the property for the purposes it intended when contracting with the builder in the first instance, even though there are minor matters that must be completed or corrected, so that it can be said that the owner obtained substantially that for which it bargained.” 15 Williston on Contracts § 44:57.

When a contractor has substantially performed their obligations under a construction contract, they are entitled to be paid “the contract price, less damages for any minor deficiencies.” 15 Williston on Contracts § 44:57.

This question—whether a party has substantially performed their obligations or has materially breached the agreement—is a factual determination resolved by the jury. Only when all relevant facts are undisputed does this inquiry become a legal decision for the court.

The jury here was instructed on the law relating to substantial performance and material breaches. After hearing all the evidence presented, the jury found that Alenco did not materially breach the contract when it installed siding with an R-value of 2.2 instead of 4.0. This finding was supported by evidence presented at trial. And although there was conflicting evidence on this point, we do not reweigh that evidence on appeal.

The homeowners point out that it was undisputed that the parties’ contract stated Alenco would install Cedar Ridge siding with an R-value of 4.0, and yet the company instead installed CraneBoard siding with an R-value of 2.2. They argue that the siding’s type and insulation were crucial reasons for their decision to hire Alenco to perform the work on their home. And “ ‘there can be no “substantial performance” where the part unperformed touches the fundamental purpose of the contract and defeats the object of the parties entering into the contract.’ ” [] Thus, they assert, the jury’s finding that Alenco substantially performed its contractual obligations was contrary to the evidence and cannot stand.

Alenco acknowledges on appeal, as it did at trial, that it had installed siding on the homeowners’ property with a different R-value than that listed on the contract. But Alenco asserts that ample evidence presented to the jury showed that this difference was not a material breach that vitiated the contract in its entirety. After reviewing the trial record, we agree with Alenco.

The homeowners, along with Alenco’s sales representative, agree the R-value of the siding was an important consideration for the homeowners in the construction project. But this was not the only evidence pertinent to the jury’s charge. Rather, the parties also presented evidence about the nature of the R-value rating, the reasons why the siding installed had a different R-value rating than what the parties had originally anticipated, and the ways the differences in siding types could be compensated without defeating the purpose of the contract. All these considerations were relevant to the question of whether Alenco had substantially performed its obligations under the contract.

For example, the jury heard evidence that the R-value is essentially a designation about the degree to which the siding insulates a house. Alenco’s vice president and sales manager both testified that the difference in the siding installed on the homeowners’ house was partly a branding issue (Cedar Crest was also marketed as CraneBoard under a different label) and partly a mix-up due to erroneous marketing materials that Alenco received from the siding’s manufacturer (Alenco had not previously known that the product it received had a lower R-value than what was listed in the manufacturer’s brochure). Alenco’s witnesses explained that the company had offered to compensate for the difference in R-value in other ways, such as supplementing the insulation behind the siding (which it was willing to do at no additional cost) or reducing the contract price to account for the difference in energy savings. But the homeowners were not amenable to these proposals. Based on this evidence, the jury found Alenco substantially performed under the contract and made a good-faith effort to comply with the contract terms, meaning it did not completely forfeit its right to compensation under the contract.

This finding is bolstered by other evidence before the jury demonstrating that the parties’ contract was not limited to the installation of siding with a particular R-value. The old siding on the homeowners’ house had been removed, and the house had been prepared for the new siding by removing wood rot and installing a moisture wrap. Alenco had also removed the old gutters and had installed new ones. And it had ordered and received custom shutters, but the homeowners had refused to allow it to install them after the homeowners discovered the issue with the R-value of the siding. The homeowners had refused to pay for any of this work.

In a last effort to undermine the jury’s findings, the homeowners point to the district court’s ruling that Alenco had engaged in unconscionable acts by installing a different siding, which cannot be squared with the jury’s finding that Alenco had not materially breached the parties’ contract. As we discuss in the next section, we agree that the court’s ruling—which in essence found that Alenco had committed several deceptive acts—cannot be reconciled with the jury’s finding that Alenco had not knowingly committed any deceptive acts. But that juxtaposition was not the result of a lack of evidence presented to the jury on the breach-of-contract claim. Instead, it was the result of the district court’s improper reweighing of the evidence after trial. Whether a party has materially breached a contract is a question of fact for the jury. And there was evidence to support the jury’s finding here.

Indeed, the verdict demonstrates that the jury took all of this evidence into consideration. The jury ultimately found that the homeowners must pay Alenco $25,000—the amount due under the contract minus the $2,000 in savings the homeowners would lose out on over the next 20 years without the more insulated siding.

There was evidence presented at trial to support the jury’s finding that the difference in the siding’s R-value did not defeat the purpose of the parties’ contract. The district court did not err when it denied the homeowners’ posttrial motions seeking to set aside the jury’s verdict.

Panike & Sons Farms, Inc. v. Smith

Supreme Court of Idaho

147 Idaho 562 (2009)

BURDICK, Justice.

This action involves a dispute over a pre-season contract between Appellant Panike & Sons Farms, Inc. (Panike) and Respondent Four Rivers Packing Co. (Four Rivers) for the sale of onions. The contract stated that the buyer (Four Rivers) would designate the fields from which the onions would come, and then required that the onions “meet 75% three-inch minimum requirements.” Panike contends that the district court erred in finding that Panike breached the contract by failing to deliver onions from the fields specified by Four Rivers. Panike also argues that the district court improperly calculated the damages awarded to Four Rivers. We affirm in part, but remand for an entry of judgment on damages consistent with this opinion.

I. Factual and Procedural Background

Panike is an Oregon based corporation, operated by Greg Panike, that raises crops including onions. Four Rivers is an Idaho corporation organized for the purpose of purchasing onions from area growers, packing, and contracting to resell those onions nationwide. Randy Smith is the general manager of Four Rivers. In January 2006, Panike entered into a contract with Four Rivers for the sale of onions from Panike’s 2006 and 2007 onion crops. The contract required Panike to deliver 25,000 hundredweight (cwt) 75% three-inch minimum field run onions to Four Rivers from fields specified by Four Rivers, for the price of $4.75 per cwt. The field selection clause stated the “[b]uyer will specify field(s).”

In mid-August 2006, Mr. Panike contacted Mr. Smith, who owns farmland adjacent to Panike’s land in Malheur County, Oregon, to inform him that water leaking from Mr. Smith’s ditch was running into Panike’s field. During that conversation, Mr. Smith told Mr. Panike that Four Rivers would be designating the fields from which Panike was to deliver the 25,000 cwt of onions. Mr. Panike then informed Mr. Smith that Panike would not deliver onions from those fields, as Mr. Panike believed those onions were a different variety and larger than those specified by the contract. On August 15, 2006, Four Rivers sent a letter to Panike reiterating that it would designate the fields from which the onions were to be delivered. Four Rivers sent another letter to Panike on August 25 designating the fields, with a map attached that illustrated which fields Four Rivers had chosen.

On October 3, 2006, Panike attempted to deliver two truck loads of onions to Four Rivers’s packing shed. When Mr. Panike arrived, Janine Smith, part owner of Four Rivers and wife of Mr. Smith, asked Mr. Panike whether the onions were from the specified fields. When he stated they were not, Mrs. Smith rejected the onions. Panike then had the onions inspected by the Idaho Department of Agriculture, which determined the onions were 89% three-inch minimum or larger.

…

II. Analysis

…

B. Four Rivers properly rejected the onions tendered by Panike.

Panike argues that the onions it attempted to deliver to Four Rivers conformed to the contract in kind, quality, condition, and amount, and therefore Four Rivers wrongfully rejected onions that met or exceeded every essential element of the contract. Four Rivers counters that the contract speaks in terms of minimum quality requirements and specifically allows Four Rivers to designate the fields. In addition, Four Rivers argues that designation of onion fields is a method of dealing regularly observed in the onion trade justifying an expectation that it would be observed with respect to the transaction here.

Where the language of the contract makes the intentions of the parties clear, the interpretation and legal effect of the contract are questions of law over which this Court exercises free review. When interpreting a contract provision, we must view the entire agreement as a whole to discern the parties’ intentions. Here, the language at issue in the contract simply stated: “Buyer will specify field(s). The onions described above must meet 75% three-inch minimum requirements.” That language specifically states that Four Rivers would specify the fields from which Panike would tender onions. However, Mr. Panike testified he believed that any designation of fields was to occur when the contract was signed. In contrast, Four Rivers contends that, in accordance with [U.C.C. § 1-303(c) and (d)], the usage of trade among onion growers allowed for the fields to be designated during the growing season.

Pursuant to [U.C.C. § 1-303(c)] “usage of trade” is “any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts.” In addition, [U.C.C. § 1-303(d)] provides that usage of trade “of which [the parties] are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement.”

The district court found that Four Rivers had “established through the combined testimony of Steve Walker, George Rodriguez, Floyd Johnson, Dennis Ujiiye, and Randy Smith that the designation of fields in mid to late summer is the normal practice in the industry.” Mr. Walker testified that his business monitors the fields of the growers it contracts with throughout the season and then requests certain fields: “So generally with our growers we will go out and say, yeah, we’d like to have this field, and they’ll say, well, will you take part of this field and part of this field, you know. So there is a little give and take....” Mr. Rodriguez testified that his company usually makes field designations in July, so if a field does not meet requirements the company can designate another field. Mr. Johnson stated that, as manager and vice president of Lynn Josephson Produce, he enters into pre-season contracts with area growers that reserve the right to specify fields, and that the fields are specified at the time of harvest. In contrast, Mr. Ujiiye, as a grower, testified that he did not sign pre-season contracts because he “didn’t want the buyer to be able to designate the fields.” Finally, Mr. Smith testified that Four Rivers always includes a provision allowing it to specify fields in preseason contracts. Mr. Panike also testified that he was familiar with the designation of fields in the onion business, but his understanding was that such designation was to take place at the time of contracting.

The district court based its determination that designating fields during the growing season was the usage of the onion trade on substantial and competent evidence. Therefore, Four Rivers had a contractual right to designate the fields from which Panike was to tender the onions.

If goods fail in any respect to conform to the terms of the contract, a buyer may reject them. [U.C.C. § 2-601(a). More specifically, [U.C.C. § 2-601] states:

[I]f the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may

     (a) reject the whole; or

     (b) accept the whole; or

     (c) accept any commercial unit or units and reject the rest.

Four Rivers first sought to exercise the field selection provision on August 15, 2006 when it sent a letter to Panike informing Panike that Four Rivers would be designating the fields within the next few days. On August 25, 2006, Four Rivers sent a letter to Panike designating the fields. Panike concedes that it refused to deliver onions from the fields specified by Four Rivers.

We find, based upon the clear language of the contract and usage of trade, that Four Rivers had a right to designate the fields. Therefore, when Panike attempted to deliver onions that were not from the designated fields, Four Rivers rightfully rejected the non-conforming goods.

* * *

Ramirez v. Autosport

Supreme Court of New Jersey

88 N.J. 277 (1982)

POLLOCK, J.

This case raises several issues under the Uniform Commercial Code (“the Code” and “UCC”) concerning whether a buyer may reject a tender of goods with minor defects and whether a seller may cure the defects. We consider also the remedies available to the buyer, including cancellation of the contract. The main issue is whether plaintiffs, Mr. and Mrs. Ramirez, could reject the tender by defendant, Autosport, of a camper van with minor defects and cancel the contract for the purchase of the van.

The trial court ruled that Mr. and Mrs. Ramirez rightfully rejected the van and awarded them the fair market value of their trade-in van. The Appellate Division affirmed in a brief per curiam decision which, like the trial court opinion, was unreported. We affirm the judgment of the Appellate Division.

I

Following a mobile home show at the Meadowlands Sports Complex, Mr. and Mrs. Ramirez visited Autosport’s showroom in Somerville. On July 20, 1978 the Ramirezes and Donald Graff, a salesman for Autosport, agreed on the sale of a new camper and the trade-in of the van owned by Mr. and Mrs. Ramirez. Autosport and the Ramirezes signed a simple contract reflecting a $14,100 purchase price for the new van with a $4,700 trade-in allowance for the Ramirez van, which Mr. and Mrs. Ramirez left with Autosport. After further allowance for taxes, title and documentary fees, the net price was $9,902. Because Autosport needed two weeks to prepare the new van, the contract provided for delivery on or about August 3, 1978.

On that date, Mr. and Mrs. Ramirez returned with their checks to Autosport to pick up the new van. Graff was not there so Mr. White, another salesman, met them. Inspection disclosed several defects in the van. The paint was scratched, both the electric and sewer hookups were missing, and the hubcaps were not installed. White advised the Ramirezes not to accept the camper because it was not ready.

Mr. and Mrs. Ramirez wanted the van for a summer vacation and called Graff several times. Each time Graff told them it was not ready for delivery. Finally, Graff called to notify them that the camper was ready. On August 14 Mr. and Mrs. Ramirez went to Autosport to accept delivery, but workers were still touching up the outside paint. Also, the camper windows were open, and the dining area cushions were soaking wet. Mr. and Mrs. Ramirez could not use the camper in that condition, but Mr. Leis, Autosport’s manager, suggested that they take the van and that Autosport would replace the cushions later. Mrs. Ramirez counteroffered to accept the van if they could withhold $2,000, but Leis agreed to no more than $250, which she refused. Leis then agreed to replace the cushions and to call them when the van was ready.

On August 15, 1978 Autosport transferred title to the van to Mr. and Mrs. Ramirez, a fact unknown to them until the summer of 1979. Between August 15 and September 1, 1978 Mrs. Ramirez called Graff several times urging him to complete the preparation of the van, but Graff constantly advised her that the van was not ready. He finally informed her that they could pick it up on September 1.

When Mr. and Mrs. Ramirez went to the showroom on September 1, Graff asked them to wait. And wait they did-for one and a half hours. No one from Autosport came forward to talk with them, and the Ramirezes left in disgust.

On October 5, 1978 Mr. and Mrs. Ramirez went to Autosport with an attorney friend. Although the parties disagreed on what occurred, the general topic was whether they should proceed with the deal or Autosport should return to the Ramirezes their trade-in van. Mrs. Ramirez claimed they rejected the new van and requested the return of their trade-in. Mr. Lustig, the owner of Autosport, thought, however, that the deal could be salvaged if the parties could agree on the dollar amount of a credit for the Ramirezes. Mr. and Mrs. Ramirez never took possession of the new van and repeated their request for the return of their trade-in. Later in October, however, Autosport sold the trade-in to an innocent third party for $4,995. Autosport claimed that the Ramirez’ van had a book value of $3,200 and claimed further that it spent $1,159.62 to repair their van. By subtracting the total of those two figures, $4,159.62, from the $4,995.00 sale price, Autosport claimed a $600-700 profit on the sale.

On November 20, 1978 the Ramirezes sued Autosport seeking, among other things, rescission of the contract. Autosport counterclaimed for breach of contract.

II

Our initial inquiry is whether a consumer may reject defective goods that do not conform to the contract of sale. The basic issue is whether under the UCC, adopted in New Jersey as N.J.S.A. 12A:1-101 et seq., a seller has the duty to deliver goods that conform precisely to the contract. We conclude that the seller is under such a duty to make a “perfect tender” and that a buyer has the right to reject goods that do not conform to the contract. That conclusion, however, does not resolve the entire dispute between buyer and seller. A more complete answer requires a brief statement of the history of the mutual obligations of buyers and sellers of commercial goods.

In the nineteenth century, sellers were required to deliver goods that complied exactly with the sales agreement. That rule, known as the “perfect tender” rule, remained part of the law of sales well into the twentieth century. By the 1920’s the doctrine was so entrenched in the law that Judge Learned Hand declared “(t)here is no room in commercial contracts for the doctrine of substantial performance.” Mitsubishi Goshi Kaisha v. J. Aron & Co., Inc., 16 F.2d 185, 186 (2d Cir. 1926).

The harshness of the rule led courts to seek to ameliorate its effect and to bring the law of sales in closer harmony with the law of contracts, which allows rescission only for material breaches. Nevertheless, a variation of the perfect tender rule appeared in the Uniform Sales Act. The chief objection to the continuation of the perfect tender rule was that buyers in a declining market would reject goods for minor nonconformities and force the loss on surprised sellers.

To the extent that a buyer can reject goods for any nonconformity, the UCC retains the perfect tender rule. Section 2-106 states that goods conform to a contract “when they are in accordance with the obligations under the contract.” N.J.S.A. 12A:2-106. Section 2-601 authorizes a buyer to reject goods if they “or the tender of delivery fail in any respect to conform to the contract.” N.J.S.A. 12A:2-601. The Code, however, mitigates the harshness of the perfect tender rule and balances the interests of buyer and seller. The Code achieves that result through its provisions for revocation of acceptance and cure. N.J.S.A. 12A:2-608, 2-508.

Initially, the rights of the parties vary depending on whether the rejection occurs before or after acceptance of the goods. Before acceptance, the buyer may reject goods for any nonconformity. N.J.S.A. 12A:2-601. Because of the seller’s right to cure, however, the buyer’s rejection does not necessarily discharge the contract. N.J.S.A. 12A:2-508. Within the time set for performance in the contract, the seller’s right to cure is unconditional. Id., subsec. (1); see id., Official Comment 1. Some authorities recommend granting a breaching party a right to cure in all contracts, not merely those for the sale of goods. Underlying the right to cure in both kinds of contracts is the recognition that parties should be encouraged to communicate with each other and to resolve their own problems.

The rights of the parties also vary if rejection occurs after the time set for performance. After expiration of that time, the seller has a further reasonable time to cure if he believed reasonably that the goods would be acceptable with or without a money allowance. N.J.S.A. 12A:2-508(2). The determination of what constitutes a further reasonable time depends on the surrounding circumstances, which include the change of position by and the amount of inconvenience to the buyer. N.J.S.A. 12A:2-508, Official Comment 3. Those circumstances also include the length of time needed by the seller to correct the nonconformity and his ability to salvage the goods by resale to others. Thus, the Code balances the buyer’s right to reject nonconforming goods with a “second chance” for the seller to conform the goods to the contract under certain limited circumstances. N.J.S.A. 12A:2-508, New Jersey Study Comment 1.

After acceptance, the Code strikes a different balance: the buyer may revoke acceptance only if the nonconformity substantially impairs the value of the goods to him. N.J.S.A. 12A:2-608. This provision protects the seller from revocation for trivial defects. It also prevents the buyer from taking undue advantage of the seller by allowing goods to depreciate and then returning them because of asserted minor defects. Because this case involves rejection of goods, we need not decide whether a seller has a right to cure substantial defects that justify revocation of acceptance.

Other courts agree that the buyer has a right of rejection for any nonconformity, but that the seller has a countervailing right to cure within a reasonable time.

… [W]e conclude that the perfect tender rule is preserved to the extent of permitting a buyer to reject goods for any defects. Because of the seller’s right to cure, rejection does not terminate the contract. Accordingly, we disapprove the suggestion in Gindy that curable defects do not justify rejection.

A further problem, however, is identifying the remedy available to a buyer who rejects goods with insubstantial defects that the seller fails to cure within a reasonable time. The Code provides expressly that when “the buyer rightfully rejects, then with respect to the goods involved, the buyer may cancel.” N.J.S.A. 12A:2-711. “Cancellation” occurs when either party puts an end to the contract for breach by the other. N.J.S.A. 12A:2-106(4). Nonetheless, some confusion exists whether the equitable remedy of rescission survives under the Code.

The Code eschews the word “rescission” and substitutes the terms “cancellation,” “revocation of acceptance,” and “rightful rejection.” N.J.S.A. 12A:2-106(4); 2-608; and 2-711 & Official Comment 1. Although neither “rejection” nor “revocation of acceptance” is defined in the Code, rejection includes both the buyer’s refusal to accept or keep delivered goods and his notification to the seller that he will not keep them. Revocation of acceptance is like rejection, but occurs after the buyer has accepted the goods. Nonetheless, revocation of acceptance is intended to provide the same relief as rescission of a contract of sale of goods. N.J.S.A. 12A:2-608 Official Comment 1; N.J. Study Comment 2. In brief, revocation is tantamount to rescission. Similarly, subject to the seller’s right to cure, a buyer who rightfully rejects goods, like one who revokes his acceptance, may cancel the contract. N.J.S.A. 12A:2-711 & Official Comment 1.

Although the complaint requested rescission of the contract, plaintiffs actually sought not only the end of their contractual obligations, but also restoration to their pre-contractual position. That request incorporated the equitable doctrine of restitution, the purpose of which is to restore plaintiff to as good a position as he occupied before the contract. In UCC parlance, plaintiffs’ request was for the cancellation of the contract and recovery of the price paid. N.J.S.A. 12A:2-106(4), 2-711.

General contract law permits rescission only for material breaches, and the Code restates “materiality” in terms of “substantial impairment.” The Code permits a buyer who rightfully rejects goods to cancel a contract of sale. N.J.S.A. 12A:2-711. Because a buyer may reject goods with insubstantial defects, he also may cancel the contract if those defects remain uncured. Otherwise, a seller’s failure to cure minor defects would compel a buyer to accept imperfect goods and collect for any loss caused by the nonconformity. N.J.S.A. 12A:2-714.

Although the Code permits cancellation by rejection for minor defects, it permits revocation of acceptance only for substantial impairments. That distinction is consistent with other Code provisions that depend on whether the buyer has accepted the goods. Acceptance creates liability in the buyer for the price, N.J.S.A. 12A:2-709(1), and precludes rejection. N.J.S.A. 12A:2-607(2); N.J.S.A. 12A:2-606, New Jersey Study Comment 1. Also, once a buyer accepts goods, he has the burden to prove any defect. N.J.S.A. 12A:2-607(4); White & Summers, supra, § 8-2 at 297. By contrast, where goods are rejected for not conforming to the contract, the burden is on the seller to prove that the nonconformity was corrected.

Underlying the Code provisions is the recognition of the revolutionary change in business practices in this century. The purchase of goods is no longer a simple transaction in which a buyer purchases individually-made goods from a seller in a face-to-face transaction. Our economy depends on a complex system for the manufacture, distribution, and sale of goods, a system in which manufacturers and consumers rarely meet. Faceless manufacturers mass-produce goods for unknown consumers who purchase those goods from merchants exercising little or no control over the quality of their production. In an age of assembly lines, we are accustomed to cars with scratches, television sets without knobs and other products with all kinds of defects. Buyers no longer expect a “perfect tender.” If a merchant sells defective goods, the reasonable expectation of the parties is that the buyer will return those goods and that the seller will repair or replace them.

Recognizing this commercial reality, the Code permits a seller to cure imperfect tenders. Should the seller fail to cure the defects, whether substantial or not, the balance shifts again in favor of the buyer, who has the right to cancel or seek damages. N.J.S.A. 12A:2-711. In general, economic considerations would induce sellers to cure minor defects. Assuming the seller does not cure, however, the buyer should be permitted to exercise his remedies under N.J.S.A. 12A:2-711. The Code remedies for consumers are to be liberally construed, and the buyer should have the option of cancelling if the seller does not provide conforming goods. See N.J.S.A. 12A:1-106.

To summarize, the UCC preserves the perfect tender rule to the extent of permitting a buyer to reject goods for any nonconformity. Nonetheless, that rejection does not automatically terminate the contract. A seller may still effect a cure and preclude unfair rejection and cancellation by the buyer. N.J.S.A. 12A:2-508, Official Comment 2; N.J.S.A. 12A:2-711, Official Comment 1.

III

The trial court found that Mr. and Mrs. Ramirez had rejected the van within a reasonable time under N.J.S.A. 12A:2-602. The court found that on August 3, 1978 Autosport’s salesman advised the Ramirezes not to accept the van and that on August 14, they rejected delivery and Autosport agreed to replace the cushions. Those findings are supported by substantial credible evidence, and we sustain them. Although the trial court did not find whether Autosport cured the defects within a reasonable time, we find that Autosport did not effect a cure. Clearly the van was not ready for delivery during August, 1978 when Mr. and Mrs. Ramirez rejected it, and Autosport had the burden of proving that it had corrected the defects. Although the Ramirezes gave Autosport ample time to correct the defects, Autosport did not demonstrate that the van conformed to the contract on September 1. In fact, on that date, when Mr. and Mrs. Ramirez returned at Autosport’s invitation, all they received was discourtesy.

On the assumption that substantial impairment is necessary only when a purchaser seeks to revoke acceptance under N.J.S.A. 12A:2-608, the trial court correctly refrained from deciding whether the defects substantially impaired the van. The court properly concluded that plaintiffs were entitled to “rescind”-i.e., to “cancel”-the contract.

Because Autosport had sold the trade-in to an innocent third party, the trial court determined that the Ramirezes were entitled not to the return of the trade-in, but to its fair market value, which the court set at the contract price of $4,700. A buyer who rightfully rejects goods and cancels the contract may, among other possible remedies, recover so much of the purchase price as has been paid. N.J.S.A. 12A:2-711. The Code, however, does not define “pay” and does not require payment to be made in cash.

A common method of partial payment for vans, cars, boats and other items of personal property is by a “trade-in.” When concerned with used vans and the like, the trade-in market is an acceptable, and perhaps the most appropriate, market in which to measure damages. It is the market in which the parties dealt; by their voluntary act they have established the value of the traded-in article. In other circumstances, a measure of damages other than the trade-in value might be appropriate.

The ultimate issue is determining the fair market value of the trade-in. This Court has defined fair market value as “the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.” In re Estate of Romnes, 79 N.J. 139, 144, 398 A.2d 543 (1978). Although the value of the trade-in van as set forth in the sales contract was not the only possible standard, it is an appropriate measure of fair market value.

Hochster v. de la Tour

Queen’s Bench

118 Eng. Rep. 922 (1853)

[On the trial, before Erle J., at the London sittings in last Easter Term, it appeared that plaintiff was a courier, who, in April, 1852, was engaged by defendant to accompany him on a tour [of the European continent], to commence on 1st June 1852, on the terms mentioned in the declaration. On the 11th May 1852, defendant wrote to plaintiff that he had changed his mind, and declined his services. He refused to make him any compensation. The action was commenced on 22d May. The plaintiff, between the commencement of the action and the 1st June, obtained an engagement with Lord Ashburton, on equally good terms, but not commencing till 4th July. The defendant’s counsel objected that there could be no breach of the contract before the 1st of June.] 

LORD CAMPBELL, C.J.

On this motion …, the question arises, whether, if there be an agreement between A. and B., whereby B. engages to employ A. on and from a future day for a given period of time, to travel with him into a foreign country as a courier, and to start with him in that capacity on that day, A. being to receive a monthly salary during the continuance of such service, B. may, before the day, refuse to perform the agreement and break and renounce it, so as to entitle A. before the day to commence an action against B. to recover damages for breach of the agreement; A. having been ready and willing to perform it, till it was broken and renounced by B. The defendant’s counsel very powerfully contended that, if the plaintiff was not contented to dissolve the contract, and to abandon all remedy upon it, he was bound to remain ready and willing to perform it till the day when the actual employment as courier in the service of the defendant was to begin; and that there could be no breach of the agreement, before that day, to give a right of action. But it cannot be laid down as a universal rule that, where by agreement an act is to be done on a future day, no action can be brought for a breach of the agreement till the day for doing the act has arrived. If a man promises to marry a woman on a future day, and before that day marries another woman, he is instantly liable to an action for breach of promise of marriage. If a man contracts to execute a lease on and from a future day for a certain term, and, before that day, executes a lease to another for the same term, he may be immediately sued for breaking the contract. So, if a man contracts to sell and deliver specific goods on a future day, and before the day he sells and delivers them to another, he is immediately liable to an action at the suit of the person with whom he first contracted to sell and deliver them§. One reason alleged in support of such an action is, that the defendant has, before the day, rendered it impossible for him to perform the contract at the day: but this does not necessarily follow; for, prior to the day fixed for doing the act, the first wife may have died, a surrender of the lease executed might be obtained, and the defendant might have repurchased the goods so as to be in a situation to sell and deliver them to the plaintiff. Another reason may be, that, where there is a contract to do an act on a future day, there is a relation constituted between the parties in the meantime by the contract, and that they impliedly promise that in the meantime neither will do any thing to the prejudice of the other inconsistent with that relation. As an example, a man and woman engaged to marry are affianced to one another during the period between the time of the engagement and the celebration of the marriage. In this very case, of traveller and courier, from the day of the hiring till the day when the employment was to begin, they were engaged to each other; and it seems to be a breach of an implied contract if either of them renounces the engagement. … If the plaintiff has no remedy for breach of the contract unless he treats the contract as in force, and acts upon it down to the 1st June 1852, it follows that, till then, he must enter into no employment which will interfere with his promise “to start with the defendant on such travels on the day and year,” and that he must then be properly equipped in all respects as a courier for a three months’ tour on the continent of Europe. But it is surely much more rational, and more for the benefit of both parties, that, after the renunciation of the agreement by the defendant, the plaintiff should §be at liberty to consider himself absolved from any future performance of it, retaining his right to sue for any damage he has suffered from the breach of it. Thus, instead of remaining idle and laying out money in preparations which must be useless, he is at liberty to seek service under another employer, which would go in mitigation of the damages to which he would otherwise be entitled for a breach of the contract. It seems strange that the defendant, after renouncing the contract, and absolutely declaring that he will never act under it, should be permitted to object that faith is given to his assertion, and that an opportunity is not left to him of changing his mind. … The man who wrongfully renounces a contract into which he has deliberately entered cannot justly complain if he is immediately sued for a compensation in damages by the man whom he has injured: and it seems reasonable to allow an option to the injured party, either to sue immediately, or to wait till the time when the act was to be done, …. An argument against the action before the 1st of June is urged from the difficulty of calculating the damages: but this argument is equally strong against an action before the 1st of September, when the three months would expire.

…If it should be held that, upon a contract to do an act on a future day, a renunciation of the contract by one party dispenses with a condition to be performed in the meantime by the other, there seems no reason for requiring that other to wait till the day arrives before seeking his remedy by action: and the only ground on which the condition can be dispensed with seems to be, that the renunciation may be treated as a breach of the contract.

…

Turner Construction Co. v. US Framing, Inc.

Supreme Court, Albany County, New York

49 Misc.3d 1213(A) (2015) (Unreported Disposition)

Opinion 

Richard M. Platkin, J.

This is a commercial contract action. Discovery is complete… Plaintiff Turner Construction Company (“Turner”) … moved for partial summary judgment, as to liability only, on its breach of contract claims against defendant U.S. Framing Inc. (“Framing”). Turner also moved for dismissal of Framing’s counterclaims, which allege breaches of the same construction contract by Turner, and for the setting of an inquest to determine damages. Framing opposed the motion and cross-moved for partial summary judgment in its favor. …

At a pre-trial conference held on October 6, 2015, the parties explored with the Court several options for facilitating the cost-effective resolution of their competing liability claims in the event that the issue of liability could not be determined as matter of law in advance of trial. The conference concluded with both sides expressing a desire to have the liability issues determined on the basis of the summary judgment record presently before the Court, including affidavits, deposition transcripts and documentary evidence. In essence, the parties requested a trial on the papers.

…

BACKGROUND

In January 2013, Turner entered into a contract with non-party Shelter Cove LLC to provide general construction services with respect to a 104–unit apartment complex. On January 16, 2013, Tom English and Mike Humble, Framing’s president and vice-president, respectively, attended a meeting in Turner’s Albany office with Jason Perillo, Turner’s project manager, and another Turner employee. At the meeting, a written agreement naming Turner as contractor and Framing as framing subcontractor, dated January 14, 2013 (“Subcontract”), was executed by Humble on behalf of Framing, with Humble and a Turner employee initialing each page. Framing left the meeting with a copy of the Subcontract signed by Framing and initialed by both sides.

A supply bond dated January 16, 2013 then was issued on behalf of Framing’s lumber supplier, Bridgewell Resources, LLC (“Bridgewell”). Within one week of execution of the Subcontract, Framing submitted to Turner two applications for payment. The payment requests referenced the Subcontract sum of $2,370,000 and sought payments of $996,968, corresponding to the value of Framing’s lumber contract with Bridgewell, and $25,000, corresponding to Framing’s cost to store the building materials. Turner paid the applications by check on January 31, 2013, and Framing accepted and deposited the funds on or about February 4, 2013.

On February 7, 2013, Turner countersigned the Subcontract and sent it to Framing via Federal Express (“FedEx”) to the address set forth in the Subcontract. However, Framing’s address had changed in the interim, and Framing claims that the fully executed Subcontract never was delivered. Apparently, the FedEx package was forwarded to Framing’s new address, a multi-tenant complex, and an unknown individual signed for and accepted receipt of the package.

In late April and early May 2013, Framing and Bridgewell made several submittals to Turner, and there were ongoing discussions between Framing and Turner concerning certain pricing issues. Turner claims that it was growing concerned by delays in Framing’s hardware submittals and by the failure of Framing to return calls and emails. Framing denies any failure to perform under the Subcontract and claims that it was growing concerned about Turner’s delays in approving change orders and fixing a firm start date.

On the morning of June 4, 2013, after receiving an “out of office” reply to an email sent to Humble, Perillo sent the following email to Humble (with a copy to English and Bridgewell): “Turner is calling the bond in on the lumber and will be soliciting pricing from a local framer. US Framing has made it clear that they cannot perform on this project.” Turner claims that the purpose of this email (“Perillo email”) was to generate a sense of urgency on the part of Framing to timely perform its obligations under the Subcontract. Turner maintains that the email was not a termination notice and was not issued pursuant to the termination provisions of the Subcontract. Framing responds that the only reasonable interpretation of the Perillo email is as a termination notice and that such conclusion is supported by other contemporaneous communications between Turner and Framing’s material suppliers.

In this connection, Framing submits an email from Turner engineer Aaron Straight to Framing’s truss supplier, sent shortly after the Perillo email, in which Turner requests “truss pricing as we will be looking to hold a contract with you direct.” In addition, the sales manager for Bridgewell, who was copied on the Perillo email, submits an affidavit averring to discussions with Perillo regarding Turner’s efforts to find a replacement for Framing and the effect that replacing Framing would have on the purchased lumber.

After sending the email, Perillo made repeated efforts throughout the day to reach Humble or English, leaving multiple messages for both individuals. Perillo finally reached English that evening. Perillo maintains that English assured him that Framing would perform under the Subcontract. English denies this, claiming that he told Perillo that he did not understand why Perillo had sent the email terminating Framing’s contract and that Turner should expect a letter on the subject. In an email sent to English the following afternoon, Perillo referred to their conversation of the prior evening and requested that English contact him after speaking with the Framing team about the delays encountered by Framing.

On June 6, 2013, Framing’s counsel advised Turner in writing that it considered the June 3, 2013 [ed.: probably should be June 4, 2013] email to represent a wrongful termination of the Subcontract. The letter also took the alternative position that the parties never had a valid Subcontract because Turner had failed to return a countersigned copy to Framing or advise Framing in writing that the Subcontract had been countersigned within 45 days, as required by Article II(1) of the General Conditions of the Subcontract (“Article II”).

Turner’s counsel responded on June 7, 2013 with proof that the Subcontract had been executed and delivered to Framing on February 13, 2013. The letter also attempted to clarify that the June 4, 2013 email was not a termination notice and that Turner expected Framing’s continued performance under the Subcontract. The letter sought assurances from Framing that it would continue to honor the Subcontract, as well as certain specific actions on Framing’s part, including the prompt delivery of outstanding submittals.

Framing did not respond to the letter. By letter dated June 14, 2013, Turner invoked Article XI of the Subcontract and issued a three-day written notice to Framing of its default. Framing did not respond to the notice, and on June 21, 2013, Turner issued a notice of termination of the Subcontract.

Turner thereafter engaged replacement contractors to complete the work called for under the Subcontract. By novation agreement dated August 20, 2013, Framing’s materials contract with Bridgewell was assigned to a replacement contractor.

This action was commenced on or about July 1, 2013. In an Amended Verified Complaint filed on November 1, 2013 (“Complaint”), Turner seeks damages for Framing’s alleged unjustified repudiation of the Subcontract and for its failure or refusal to perform thereunder. In an amended answer filed on December 12, 2013 (“Answer”), Framing alleges that it is not bound by the Subcontract due to Turner’s failure to give timely notice of acceptance. Framing further contends that, even if the Subcontract remained in effect, Turner wrongfully terminated it via the Perillo email. In its two counterclaims, Framing seeks damages from Turner’s breach of the Subcontract and recovery for unjust enrichment.

ANALYSIS

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B. Repudiation

Framing contends that Perillo’s email of June 4, 2013 constituted an unjustified repudiation of the Subcontract that it was entitled to treat as an anticipatory breach. Turner responds that the Perillo email was not a contractual notice of termination or a repudiation of the Subcontract, but simply was designed to elicit a response from Framing after it repeatedly ignored Turner’s calls and emails. Turner further maintains that subsequent conversations between the parties confirmed that Turner had not repudiated the Subcontract and was, in fact, relying upon Framing’s continued performance. Finally, Turner argues that even if the Perillo email were construed as a repudiation of the Subcontract, any such repudiation was timely retracted.

At the outset, it is clear that the Perillo email was not a contractual notice of termination. As Turner observes, the email makes no reference to the termination provisions of the Subcontract, it includes no particularized allegations of default, and it fails to accord Framing the opportunity to cure—provisions that ordinarily would appear in a proper notice of termination. But as Framing correctly argues, even a “defective notice of cancellation [may constitute] an anticipatory repudiation of the contract.” []

“A claim of anticipatory repudiation must be supported by evidence of an unqualified and clear refusal to perform with respect to the entire contract.” Joseph P. Carrara & Sons, Inc. v. A.R. Mack Constr. Co, Inc., 89 AD3d 1190, 1991 (2011). The declared refusal to perform must be “positive and unequivocal.” [] Measured against this standard, the Perillo email falls short of evincing the clear and unequivocal announcement of Turner’s refusal to perform required for Framing to invoke the doctrine of anticipatory repudiation.

In contracting with Turner, Framing bound itself to an intricate Subcontract consisting of 75 or so pages of contractual language, general conditions, special conditions and specifications, including detailed provisions governing disputes, defaults and termination. Against this backdrop, Perillo’s informal email can reasonably be understood as notifying Framing of Turner’s dissatisfaction and articulating certain measures that Turner intended to take to prepare for a potential default. In other words, the Perillo email can be construed as a statement of Turner’s intention to avail itself of its rights and remedies under the Subcontract, rather than as an extra-contractual repudiation. As such, the email “was not an unequivocal, definite, and final expression of the plaintiff’s intention not to perform its obligations.” Children of Am. [Cortlandt Manor], LLC v. Pike Plaza Assoc., LLC, 113 AD3d 583, 585 (2014). ¹

In any event, even if the June 4, 2013 email from Perillo could be understood as announcing Turner’s clear and unqualified refusal to continue performance under the Subcontract, any such repudiation was nullified by Perillo’s subsequent retraction. “The effect of a statement as constituting a repudiation ... is nullified by a retraction of the statement if notification of the retraction comes to the attention of the injured party before he materially changes his position in reliance on the repudiation or indicates to the other party that he considers the repudiation to be final” (Restatement [Second] of Contracts § 256[1] ).

Perillo testified that in a telephone conversation with English later on June 4, 2013, he spoke to English about Framing’s lack of responsiveness and the need for improvement. During the call, English is said to have reaffirmed Framing’s desire to complete the Subcontract, and he assured Perillo that he would speak to the Framing team about moving the project forward. Consistent with that conversation, Perillo sent English an email the following day memorializing their telephone conversation and requesting the follow-up that was discussed.

While English denies Perillo’s account of the telephone conversation, the Court finds Perillo’s account to be more credible given his confirming email of the following day and the lack of any contemporaneous response from Framing. Moreover, in his affidavit, English does not that he told Perillo that Framing considered the Subcontract to have been terminated. Under the circumstances, the Court finds that the subsequent telephone and email communications between Perillo and English amounted to a bona fide retraction.

Finally, even if Perillo’s subsequent communications with English did not effect a retraction of any repudiation, the June 7, 2013 letter to Framing from Turner’s counsel plainly amounted to a bona fide retraction. This letter, which was written in response to a letter from Framing’s counsel that did not treat Perillo’s alleged repudiation as final, manifested Turner’s intent to continue to perform its obligations under the Subcontract and, if necessary, to pursue contractual remedies against Framing.

In this connection, the Court rejects Framing’s contention that the June 7, 2013 letter from Turner’s counsel would not represent a bona fide retraction because it attempted to impose new, extra-contractual terms. Given the letter from Framing’s counsel of June 6, 2013, Turner was entitled to demand adequate assurances of due performance, a demand that went entirely unresponded to by Framing. And Framing has failed to demonstrate that specific demands for performance made by Turner’s counsel were extra-contractual.

The Court therefore concludes that Turner was entitled to issue a notice of default to Framing on June 14, 2013. And following Framing’s failure to cure the default, Turner permissibly terminated the Subcontract on June 21, 2013.

CONCLUSION

Based on the foregoing, Turner has established its claim that Framing breached the Subcontract. Further, Framing’s counterclaims, which are predicated upon allegations that Turner breached the Subcontract or Framing validly rescinded the Subcontract, are without merit and must be dismissed. …