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Class 37, Friday, April 21

Class 37, Friday, April 21. Last set of assignments Wed 807-31; Problem Set 7 Thur 831-36; 847-65 Fri 890-907—in Donovan Hall note—we meet on Wednesday, not Tuesday next week; and Friday’s class will meet in Donovan Hall, not Robinson. Today’s Agenda. Assessing the level of breach

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Class 37, Friday, April 21

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  1. Class 37, Friday, April 21 Last set of assignments Wed 807-31; Problem Set 7 Thur 831-36; 847-65 Fri 890-907—in Donovan Hall note—we meet on Wednesday, not Tuesday next week; and Friday’s class will meet in Donovan Hall, not Robinson Class 37

  2. Today’s Agenda Assessing the level of breach Sackett v. Spindler Anticipatory Repudiation Truman L. Flatt & Sons Co. v. Schupf Hornell Brewing Co. v. Spry Express Conditions Oppenheimer & Co. v. Oppenheim, Appel, Dixon J.N.A. Realty Corp. v. Cross Bay Chelsea Morin Building v. Baystone Conditions Handout Class 37

  3. Today is yet another good day to cover a lot of material. Class 37

  4. Sackett v. SpindlerCalifornia District Court of Appeal248 Cal. App. 220, 56 Cal. Rptr. 435 (1967) Class 37

  5. 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 37

  6. Did Sackett fulfill his performance obligations? Class 37

  7. 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 37

  8. What is a repudiation? • When is a repudiation lawful? Or its corollary—when is a repudiation unlawful? Class 37

  9. 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 37

  10. 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 37

  11. 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 37

  12. § 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 37

  13. § 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 37

  14. Truman L. Flatt & Sons v. SchupfAppellate Court of Illinois271 Ill. App. 3d 983, 649 N.E.2d 990 (1995) Class 37

  15. 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 37

  16. 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 37

  17. Typical Executory K prelim. executory anticipatory negotiations period repudiation -----------------|---------------------|----|--------------------- t K formation performance due (1) mutual assent (2) consideration Class 37

  18. 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 37

  19. was the May 21 letter from P a repudiation? Class 37

  20. 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 37

  21. Hornell Brewing Co. v. SprySupreme Court of New York County174 Misc. 2d 451, 664 N.Y.S.2d 698 (1997) Class 37

  22. 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 37

  23. What problems ensued for Hornell Brewing? • Did Spry breach the contract? Class 37

  24. What was the severity of the breach? • Did Spry cure the breach at some point? • What did Spry do next? Class 37

  25. How did Hornell Brewing respond to Spry’s large order? • How does the court characterize this demand? Class 37

  26. Under traditional common law, would Hornell have been entitled to make such a demand? Class 37

  27. 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 37

  28. 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 37

  29. recap anticipatory repudiation (1) anticipatory repudiation • (2) its retraction, including what might prevent retraction; and • (3) an alternative pathway to get to anticipatory repudiation—if reasonable grounds for insecurity arise, and there is a lawful demand for assurance of performance, failure to provide reasonable assurance may be treated as an anticipatory repudiation Class 37

  30. Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.New York Court of Appeals86 N.Y.2d 685, 660 N.E.2d 415, 636 N.Y.S.2d 734 (1995) Class 37

  31. web of K relationships Oppenheim, Appel, Dixon (OAD) Prime Landlord Oppenheimer O & Y lease 29th floor conditional sublease 33rd floor lease, with promise by O & Y to pay remainder of rent if Oppenheimer unable to sublease lease, 33rd floor 3 yrs. remaining attorney—possible malpractice???? Class 37

  32. Restatement §224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. Class 37

  33. express conditions • express conditions • preference against express conditions in cases of doubt/ambiguity • nonoccurrence may be excused • waiver/estoppel/election • prevention/breach • to prevent forfeiture Class 37

  34. Letter agreement between OAD & Oppenheimer • 1(a) • 4(c) • 4(d) • What is the role of K interpretation with regard to these provisions? • Do these provisions operate as conditions on one party’s duties or do they operate as conditions to the formation or existence of the sublease itself? Class 37

  35. What 2 reasons does Oppenheimer offer for why their failure to comply strictly with the condition should not be held against them? Class 37

  36. What place does substantial performance have with regard to express conditions? • Why does it apply to constructive conditions and not to express conditions? Class 37

  37. analogous cases • Maxton Bldrs. v. Lo Galbo—condition: written notice of cancellation within 3 days if real estate taxes were in excess of $3500 • Jungmann & Co. v. Atterbury Bros.—”Shipment: May-June from Europe. Advice of shipment to be made by cable immediately goods are dispatched.” • can you distinguish this case from OAD v. Oppenheimer? • Jacob & Youngs v. Kent Class 37

  38. what about Oppenheimer’s argument that OAD had waived the written notice requirement and/or were estopped from asserting that aspect of the condition against Oppenheimer? Class 37

  39. what about forfeiture? • court appropriately notes that forfeiture was not argued, but why do you think Oppenheimer did not assert this as a basis? Class 37

  40. recap Oppenheimer • in Oppenheimer, we saw • that the court had no choice but to treat 1(a) and 4(c) as express conditions because of the clear language • that the doctrine of substantial performance applies only to constructive conditions and NOT to express conditions (with possible exception if there were a disproportionate forfeiture) • that although waiver and estoppel were argued, the court probably didn’t give it sufficient weight • that the plaintiff might have been able to make an argument based on forfeiture—they didn’t for reasons that are not apparent Class 37

  41. J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc.New York Court of Appeals42 N.Y.2d 392, 366 N.E.2d 1313, 397 N.Y.S.2d 958 (1977) Class 37

  42. is Cross Bay Chelsea the original lessee? • assignment of rights under a K—ch. 9 which we skipped Class 37

  43. Paragraph 58: granted tenants an option to renew for a 10-year term provided “that Tenant shall notify the landlord in writing by registered or certified mail six (6) months prior to the last day of the term of the lease that tenant desires such renewal.” • what’s the condition here? Class 37

  44. original lease term ended Jan. 1, 1974—by when did the lessee have to provide notice to exercise the option? • if lessee mailed their notice of intention to renew on July 1, 1973, would this have properly secured their option? Class 37

  45. why is a typical option to purchase treated differently from an option to renew an existing lease? • in addition to forfeiture, what else is necessary before the default in notice will be excused? Class 37

  46. what is the extent of forfeiture that Cross Bay Chelsea would suffer? • did the landlord JNA suffer prejudice because of Cross Bay Chelsea’s late notice? • why was Cross Bay Chelsea late in providing notice? • what do you make of JNA’s failure to inform Cross Bay Chelsea of the impending option deadline when they had regularly informed Cross Bay Chelsea of its obligations during the course of the lease? Class 37

  47. what do you think of the majority’s line drawing, suggesting that equitable relief would be denied if there had been willful or gross neglect? • what is the dissent worried about? • does it surprise you that this is a 4-3 decision? • if Cross Bay Chelsea, throughout the last year of the lease had been searching for a new location for its restaurant, would the condition in the option be excused? Class 37

  48. why do you think JNA waited until almost mid-November to inform Cross Bay Chelsea of its failure to exercise the option? • is this inequitable conduct? bad faith? Class 37

  49. Morin Building Products Co. v. Baystone Construction, Inc.New York Court of Appeals42 N.Y.2d 392, 366 N.E.2d 1313, 397 N.Y.S.2d 958 (1977) Class 37

  50. GM-----------Baystone------------Morin • “that all work shall be done subject to the final approval of the Architect or Owner’s authorized agent, and his decision in matters relating to artistic effect shall be final, if within the terms of the Contract Documents” • “should any dispute arise as to the quality or fitness of materials or workmanship, the decision as to acceptability shall rest strictly with the Owner, based on the requirement that all work done or materials furnished shall be first class in every respect. What is usual or customary in erecting other buildings shall in no wise enter into any consideration or decision.” Class 37

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