Class 16 Lecture 1 Recap

Class 16 Overview

• Class 16 will be split into three lectures and will cover two cases.
  • Lecture 1: Recap of Class 15 material.
  • Lecture 2: Turner Construction v. US Framing.
  • Lecture 3: BRC Rubber and Plastics v. Continental Carbon Co.

Recap of Class 15

Election of Remedies Doctrine

• Definition: When a party materially breaches a contract, the non-breaching party must choose between terminating the contract and recovering liquidated damages, or continuing the contract and recovering damages solely for the breach.
• Continuing performance or accepting performance indicates an election to continue the agreement. After such an election, the non-breaching party cannot later terminate the contract based on the initial breach.
• The election of remedies is a one-time decision determined by the party's conduct.

Waiver vs. Election of Remedies

• Waiver: A party may waive a provision or condition in a contract that was inserted for its benefit.
• Election of Remedies: A choice among available remedies; a decision on how to proceed after a breach.
• An election is not a waiver of rights but a choice between inconsistent remedies. The election of remedies doctrine applies in the absence of waiver. Once a remedy is chosen for a breach, the choice is binding for that breach.

UCC Perfect Tender Rule

• The UCC does not use the concept of material breach for contracts involving the sale of goods.
• Perfect Tender Rule (UCC 2-601): "If goods fail in any respect to conform to the terms of the contract, the buyer may reject them."
• Usage of trade is relevant in interpreting the agreement if the parties are or should be aware of it.
• Example from Panicke and Sons v. Smith:
  • The court addressed whether the buyer could refuse a shipment of onions that met all contractual specifications except for the field designation. The seller delivered onions not from the designated fields.
  • The court concluded that the buyer did not breach because the seller breached by not delivering goods as promised. Unlike common law, the buyer was able to reject the entire shipment.

Anticipatory Repudiation

• Repudiation (Restatement 250): A statement by one party (obligor) to the other (obligee) indicating that the obligor will commit a breach that would itself give the obligee a claim for damages for total breach. This can be through words or voluntary affirmative acts making the obligor unable or unwilling to perform.
• Effect of Repudiation (Restatement 253): If an obligor repudiates a duty before committing a breach by nonperformance and before receiving all agreed exchange, the repudiation alone allows a claim for damages for total breach.
• If repudiation involves a duty, the breach of which would have been a material breach, then repudiating it constitutes a material breach.
• The non-breaching party does not have to wait until the performance date to claim breach but can do so immediately after repudiation.
• UCC 2-610 recognizes the same concept.
• Hoxtur v. De la Tour established that a party may sue immediately for breach when the other party repudiates the agreement.
• Future topics: Retraction of repudiation and the relationship between repudiation and the doctrine of adequate assurances.