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Class 36, Thursday, April 20. Announcements F 779-804; handout on conditions Today’s agenda No Oral Modification Clauses Brookside Farms v. Mama Rizzo’s Problem 8-3 Consequences of nonperformance Material breach Jacob & Youngs, Inc. v. Kent Sackett v. Spindler

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class 36 thursday april 20
Class 36, Thursday, April 20

Announcements

F 779-804; handout on conditions

Today’s agenda

No Oral Modification Clauses

Brookside Farms v. Mama Rizzo’s

Problem 8-3

Consequences of nonperformance

Material breach

Jacob & Youngs, Inc. v. Kent

Sackett v. Spindler

Anticipatory Repudiation

Truman L. Flatt & Sons Co. v. Schupf

Hornell Brewing Co. v. Spry

Class 36

brookside farms v mama rizzo s
Brookside Farms v. Mama Rizzo’s
  • NOM clause
    • common law approach
    • UCC approach
      • 2-209(2)
      • 2-209(3)
      • 2-209(4)
      • 2-209(5)
    • no waiver clause

Class 36

problem 8 3
Problem 8-3
  • sale of goods?
  • changed circumstances excusing Waller Bros. from having to perform
  • Modification
    • UCC 2-209(1); good faith
    • Restatement 73 & 89(a) and (c)
    • Duress
    • no-oral-modification clause
      • UCC 2-209(2), (4), (5)
      • common law—generally ineffective

Class 36

note 4 p 703
Note 4, p. 703
  • accord and satisfaction
  • “payment in full” check
  • point of emphasis—amount in question must be unliquidated for a payment in full check to be effective

Class 36

justifications for nonperformance
Justifications for nonperformance
  • A sues B
  • K
  • A asserts that B breached a duty owed under K
  • If K existed, and B owed this duty, and B did not do the duty, B will be liable unless B was justified in not performing because of ____________
  • this chapter—justifications include material breach by the other party; anticipatory repudiation by the other party; and the operation of express conditions

Class 36

typical executory k
Typical Executory K

prelim. executory

negotiations period breach

-----------------|-------------------------|--------------|------- t

K formation performance due

(1) mutual assent

(2) consideration

Class 36

jacob youngs inc v kent new york court of appeals 230 n y 239 129 n e 889 1921

Jacob & Youngs, Inc. v. KentNew York Court of Appeals230 N.Y. 239, 129 N.E. 889 (1921)

Class 36

slide9
Who is suing whom? For what kind of damages? What is the legal basis for the claim?
  • What duty does the plaintiff claim that defendant has breached?
  • On what basis does the defendant justify his failure to pay the balance?

Class 36

k duties
J & Y’s duties

build country residence to specifications

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

Kent’s duties

make progress payments

make final payment

subject to express condition of Architect’s final certificate

K duties

Class 36

slide11
Are duties in a K independent? dependent?
  • What’s the difference between the two?

Class 36

slide12
Cardozo, p. 746, middle
  • “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.”

Class 36

substantial performance
substantial performance
  • bottom of 746-747
  • “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. . . . The willful transgressor must accept the penalty of his transgression.”
  • Is this an elements or factors analysis?

Class 36

cardozo s factors reformulated
Cardozo’s factors, reformulated
  • 1. effect of breach on non-breaching party’s expectations given the purpose of the K
  • 2. excuse for deviation/good faith on part of breaching party
  • 3. forfeiture suffered by breaching party

BUT—willful transgressor cannot utilize this doctrine

Class 36

slide15
What does the doctrine of substantial performance achieve?
  • lawnmower hypo—A promises to mow B’s lawn; B promises to pay $10. A mows the lawn but misses a small portion of it. May B assert A’s failure to provide full performance to excuse B from her performance obligation (paying $10)?

Class 36

slide16
A has a duty to mow

this duty is a constructive condition of B’s obligation to pay

in other words, B’s duty to pay under the K doesn’t come due until A has fully performed

without the substantial performance doctrine, this could have harsh results

B has a duty to pay

Class 36

slide17
A has a duty to use Reading Pipe

this duty is a constructive condition of B’s obligation to pay

in other words, B’s duty to pay under the K doesn’t come due until A has fully performed

without the substantial performance doctrine, this could have harsh results

B has a duty to pay

Class 36

slide18
if there is substantial performance by one party, the result is that the other’s performance obligation is due; however, the non-breaching party is entitled to an offset for the breach
  • issue then turns to damages

Class 36

cost to remedy v difference or diminution in value
cost to remedyv.difference or diminution in value
  • Which is the standard remedy in construction cases where there has not been full performance?
  • Does Cardozo apply the standard remedy?

Class 36

slide20
Why not?
  • What test does Cardozo come up with?

Class 36

slide21
Does the dissent disagree with the doctrine of substantial performance or with its application in this case by the majority?

Class 36

slide22
If there isn’t substantial performance, even though the non-breaching party’s payment obligation under the contract may not be due, the non-breaching party may owe restitution to the breaching party for the benefit that the non-breaching party received from the breaching party’s performance.

Class 36

restitution for the breaching party
restitution for the breaching party
  • hypo—lawnmowing hypo—A agrees to mow B’s lawn; B agrees to pay A $10. A mows half the lawn then runs out of gas. A goes to get gas but then is delayed by one thing after another. Assume that B is justified in hiring someone else to finish mowing the lawn. B pays substitute mower $7 and incurs no other transaction costs.
  • 1. May A recover under the K?
  • 2. If not, is A entitled to any recovery?

Class 36

slide24
the notes following Jacob & Youngs are quite good
  • note 8, p. 752—restitution and divisibility—we’ll do more on this in a later class

Class 36

sackett v spindler california district court of appeal 248 cal app 220 56 cal rptr 435 1967

Sackett v. SpindlerCalifornia District Court of Appeal248 Cal. App. 220, 56 Cal. Rptr. 435 (1967)

Class 36

slide26
Sackett’s duties

pay $6000 by July 10

pay $20,000 by July 14

pay $59,000 by Aug. 15

Spindler’s duties

deliver all shares of newspaper

when does Spindler’s performance obligation become due?

Class 36

slide28
If his failure to make the final payment is breach, what effect does this have on Spindler’s performance obligation?
  • What argument does Sackett make based on Spindler’s Oct. 5 letter?

Class 36

slide29
What is a repudiation?
  • When is a repudiation lawful? Or its corollary—when is a repudiation unlawful?

Class 36

characterizing breach
Characterizing breach
  • total or partial
    • partial and material
    • partial and immaterial
    • total

Why is it important to characterize the severity of one party’s breach of a contract?

Class 36

slide31
What are the options of the non-breaching party in the following scenarios?

non-breaching breachparty’s options

    • partial and immaterial
    • partial and material
    • total

Class 36

slide32
How did this court characterize Sackett’s breach?
  • Was the repudiation in the Oct. 5 letter lawful?
  • If it wasn’t lawful, would that have affected the outcome in this case?

Class 36

241 circumstances significant in determining whether a failure is material
§ 241. Circumstances Significant In Determining Whether A Failure Is Material

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 he reasonably expected;
  • (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
  • (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
  • (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
  • (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Class 36

242 circumstances significant in determining when remaining duties are discharged
§ 242. Circumstances Significant In Determining When Remaining Duties Are Discharged

In determining the time after which a party's uncured material failure to render or to offer performance discharges the other party's remaining duties to render performance under the rules stated in §§ 237 and 238, the following circumstances are significant:

  • (a) those stated in § 241;
  • (b) the extent to which it reasonably appears to the injured party that delay may prevent or hinder him in making reasonable substitute arrangements;
  • (c) the extent to which the agreement provides for performance without delay, but a material failure to perform or to offer to perform on a stated day does not of itself discharge the other party's remaining duties unless the circumstances, including the language of the agreement, indicate that performance or an offer to perform by that day is important.

Class 36

truman l flatt sons v schupf appellate court of illinois 271 ill app 3d 983 649 n e 2d 990 1995

Truman L. Flatt & Sons v. SchupfAppellate Court of Illinois271 Ill. App. 3d 983, 649 N.E.2d 990 (1995)

Class 36

slide36
What’s the subject matter of this transaction?
  • What duty does the plaintiff claim that defendant has breached?
  • On what basis do the defendants justify their failure to perform?

Class 36

chronology
chronology
  • March 1993 K
    • clause 1
    • clause 14
  • public meeting re: rezoning
  • May 21 letter from P
  • June 9 letter from D
  • June 14 letter from P
  • June 23 letter from P
  • June 30 performance due by P and D??????
  • July 6 letter from P
  • July 8 letter from D

Class 36

typical executory k38
Typical Executory K

prelim. executory anticipatory

negotiations period repudiation

-----------------|---------------------|----|--------------------- t

K formation performance due

(1) mutual assent

(2) consideration

Class 36

slide39
what is an anticipatory repudiation?
  • under early common law, was anticipatory repudiation recognized as breach of contract?
  • the doctrine’s origins—1853 British case, Hochster v. De La Tour

Class 36

slide41
if the May 21 letter had been a repudiation, was there a valid retraction of the repudiation?
  • until when may an anticipatory repudiation be retracted?

Class 36

hornell brewing co v spry supreme court of new york county 174 misc 2d 451 664 n y s 2d 698 1997

Hornell Brewing Co. v. SprySupreme Court of New York County174 Misc. 2d 451, 664 N.Y.S.2d 698 (1997)

Class 36

slide43
What contractual relationship does Hornell Brewing Co. create with Spry?
  • Are the duties embodied in a writing?
  • Are these agreements by Hornell usually embodied in a detailed writing?
  • Why do you think Vultaggio didn’t follow normal business procedure?

Class 36

slide44
What problems ensued for Hornell Brewing?
  • Did Spry breach the contract?

Class 36

slide45
What was the severity of the breach?
  • Did Spry cure the breach at some point?
  • What did Spry do next?

Class 36

slide46
How did Hornell Brewing respond to Spry’s large order?
  • How does the court characterize this demand?

Class 36

slide47
Under traditional common law, would Hornell have been entitled to make such a demand?

Class 36

slide48
Which UCC section authorizes Hornell to make such a demand?
  • What conditions must arise before you can make a demand for assurance of due performance?

Class 36

slide49
Then, assuming that reasonable grounds for insecurity arose that justify the making of a demand for assurance of performance, what counts as sufficient assurance?

Class 36

end of class
End of Class

Friday 779-804; handout on conditions

Class 36