Class 36, Thursday, April 20

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Class 36, Thursday, April 20

• Announcements
• F 779-804 handout on conditions
• Todays agenda
• No Oral Modification Clauses
• Brookside Farms v. Mama Rizzos
• 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

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Today is a good day to cover a lot of material.
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Brookside Farms v. Mama Rizzos

• NOM clause
• common law approach
• UCC approach
• 2-209(2)
• 2-209(3)
• 2-209(4)
• 2-209(5)
• no waiver clause

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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 lawgenerally ineffective

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Note 4, p. 703

• accord and satisfaction
• payment in full check
• point of emphasisamount in question must be
  unliquidated for a payment in full check to be
  effective

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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 chapterjustifications include material
  breach by the other party anticipatory
  repudiation by the other party and the operation
  of express conditions

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Typical Executory K

• prelim. executory
• negotiations period breach
• ------------------------------------------------
  --------------- t
• K formation performance due
• (1) mutual assent
• (2) consideration

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

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K duties

• J Ys 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.

• Kents duties
• make progress payments
• make final payment
• subject to express condition of Architects final
  certificate

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• Are duties in a K independent? dependent?
• Whats the difference between the two?

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• 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.

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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?

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Cardozos factors, reformulated

• 1. effect of breach on non-breaching partys
  expectations given the purpose of the K
• 2. excuse for deviation/good faith on part of
  breaching party
• 3. forfeiture suffered by breaching party
• BUTwillful transgressor cannot utilize this
  doctrine

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• What does the doctrine of substantial performance
  achieve?
• lawnmower hypoA promises to mow Bs lawn B
  promises to pay 10. A mows the lawn but misses
  a small portion of it. May B assert As failure
  to provide full performance to excuse B from her
  performance obligation (paying 10)?

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• A has a duty to mow
• this duty is a constructive condition of Bs
  obligation to pay
• in other words, Bs duty to pay under the K
  doesnt come due until A has fully performed
• without the substantial performance doctrine,
  this could have harsh results

• B has a duty to pay

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• A has a duty to use Reading Pipe
• this duty is a constructive condition of Bs
  obligation to pay
• in other words, Bs duty to pay under the K
  doesnt come due until A has fully performed
• without the substantial performance doctrine,
  this could have harsh results

• B has a duty to pay

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

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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?

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

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

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• If there isnt substantial performance, even
  though the non-breaching partys 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
  partys performance.

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restitution for the breaching party

• hypolawnmowing hypoA agrees to mow Bs 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?

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• the notes following Jacob Youngs are quite good
• note 8, p. 752restitution and divisibilitywell
  do more on this in a later class

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Sackett v. SpindlerCalifornia District Court of
Appeal248 Cal. App. 220, 56 Cal. Rptr. 435 (1967)
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• Sacketts duties
• pay 6000 by July 10
• pay 20,000 by July 14
• pay 59,000 by Aug. 15

• Spindlers duties
• deliver all shares of newspaper
• when does Spindlers performance obligation
  become due?

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• Did Sackett fulfill his performance obligations?

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

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• What is a repudiation?
• When is a repudiation lawful? Or its
  corollarywhen is a repudiation unlawful?

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Characterizing breach

• total or partial
• partial and material
• partial and immaterial
• total
• Why is it important to characterize the severity
  of one partys breach of a contract?

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• What are the options of the non-breaching party
  in the following scenarios?
• non-breaching breach partys options
• partial and immaterial
• partial and material
• total

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• How did this court characterize Sacketts breach?
• Was the repudiation in the Oct. 5 letter lawful?
• If it wasnt lawful, would that have affected the
  outcome in this case?

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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.

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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.

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

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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

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Typical Executory K

• prelim. executory anticipatory
• negotiations period repudiation
• -----------------------------------------------
  ---------------- t
• K formation performance due
• (1) mutual assent
• (2) consideration

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• what is an anticipatory repudiation?
• under early common law, was anticipatory
  repudiation recognized as breach of contract?
• the doctrines origins1853 British case,
  Hochster v. De La Tour

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• was the May 21 letter from P a repudiation?

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• 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?

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Hornell Brewing Co. v. SprySupreme Court of New
York County174 Misc. 2d 451, 664 N.Y.S.2d 698
(1997)
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• 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 didnt follow normal
  business procedure?

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

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

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• How did Hornell Brewing respond to Sprys large
  order?
• How does the court characterize this demand?

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

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• 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?

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

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End of Class

• Friday 779-804 handout on conditions