Previously, our focus on contract breaches has been when only one party fails to perform. Here, we begin to examine what happens when one party has such a material breach, the other party is justified in not performing either.
Jacob & Youngs, Inc. v. Kent
129 N.E. 889 (N.Y. 1921).
Jacob & Youngs are the plaintiffs. They lost in trial court, won in the appellate division, and the defendant’s appealed.
Did Jacob substantially perform (or not) where Kent has to pay for the project (or not)?
A party has substantially performed if the difference in the work promised and the work performed is so minimal that it has nearly no effect on the value of the property.
The plaintiffs had made their showing that they had substantially performed and a new trial should be granted to include that evidence. Affirmed.
Jacob & Youngs was a plumbing corporation focused on installing the plumbing in new builds. In this instance, the company was installing the plumbing into the Kent mansion. The contract had called for plumbing manufactured by Reading, a brand which the homeowner trusted and wanted to be uniform. So, Jacob inspected and installed the first batch, being Reading, and ordered more. However, failing to inspect the other batches of shipped plumbing, they unintentionally installed several different brands. The architect noticed the discrepancy when the home was nearly completed. As such, Kent demanded that the plumbing be replaced. In turn, Jacob demanded the certificate of completion necessary to complete payment. To support his demands, Jacob showed that the difference in the value, quality, etc. of the different brands was almost nonexistent. When Kent refused, Jacob sued.
The trial court excluded evidence related to the similarities in the brands and a verdict was directed for the defendant. On appeal, the appellate division said that the evidence should have been included and remanded for a new trial.
This case adopts two principles that are similar but different when conducting an analysis of material breaches. First, substantial performance. Second, constructive conditions.
Substantial performance is when a party has performed substantially enough to necessitate the other party’s performance. Here, Jacob had substantially performed (if the evidence is found true), because the difference in brands has such a minimal effect on the value of the home.
This case was also an example of a constructive condition. Rather than an express condition, a constructive condition is implied. Here, the condition was that completion of the plumbing was conditional to receive a certificate of completion. Then, in turn, the certificate of completion was conditional to receive payment for the work completed. The substantial performance may be used to show that the constructive conditions were met.
It is also important to note that there is no defined line of when substantial performance may be satisfied. A party may complete 80 percent of the work and not have substantially performed. Ultimately, performance comes down to the value difference, habitability, and willful intentions.
Here, there was a breach, the wrong brand was used. A material breach is really a question of “does it make a difference?” All the pipes were of the same grade, albeit different brands. The purpose of the pipes remained the same, water comes out of it and as such, the breach is immaterial.
If Kent wished all pipes to be manufactured by Reading, they should have added to the contract saying, “and any deviation as to either grade or manufacturer shall be a material default requiring replacement.”
Another thing the court looks for is if there are specific circumstances that makes one party want something or if that desire is pretext.
Although not explicitly set for in the contract (express), a situation where one party’s performance is conditioned on the initial performance of the other party.
For example, a failure of A to perform will justify B in not performing if B’s performance is dependent on A’s, and B does not thereby waive its claim for breach by A.
237 Effect on Other Party’s Duties of a Failure to Render Performance
Except as outlined in § 240, a person will still be required to render performance even though the other party has breached the agreement.
240 Part Performance as Agreed Equivalents
If we arrange things in pairs and sequences, then performance
In other words, the order of who performs first is necessary because you may fear that one party may not perform.
235 Effect of Performance as Discharge and of Non-Performance as Breach:
- Full performance of a duty discharges the duty
- When performance of a duty is due any nonperformance becomes a breach
241 Circumstances significant
Is it material?
- Deprived of the benefit
- Adequately compensated
- suffer forfeiture
- likelihood of cure
- lack of good faith
See the rule in Sackett v. Spindler for the full statements of material factors.
The following is the analysis we should ask when determining if a breach matters.
- Is it a breach?
- Is it material?
Sackett v. Spindler
56 Cal. Rptr. 435 (Ct. App. 1967).
Sackett is the plaintiff who lost in trial court costing him nearly 35,000 on his cross-defense.
Was there a material breach? If so was there a total breach which justify’s Spindler’s non-performance?
A total breach would justify nonperformance while a partial breach does not. However, a partial breach would allow you to recover for damages up to that time (total breach collects for damages in the future).
The factors to consider when determining if a breach is total are:
- How much the injured party would have gained without the breach
- How much the injured party would be adequately compensated for lack of performance
- The extent the failing party has already partly performed
- Examine the greater or less hardship on the failing party when the contract is terminated
- Consider willful, negligent, or innocent behavior of the failing party
- The certainty the failing party will perform the remainder of the contract.
The trial court got it right. This was a total breach on Sackett’s part justifying Spindler’s nonperformance.
Spindler was the manager and part owner of a newspaper in California. He entered into negotiations with Sackett to sell shares of the newspaper for 85,000 at periodic intervals according to the contract. Sackett paid the first interval on time, was 200 dollars short and late on the second interval, and made up for the lacking amount on the third interval. However, the payment for the third interval was denied. Thus, Spindler took back the shares of stock from the escrow agent.
Later, Sackett came to Spindler wanting to continue the deal. At this time, Sackett stated that he had the funds and would be able to pay. Spindler agreed if the payment was made by a certain date, but that failed. About a month later, Sackett came again saying that he could pay. Spindler denied the offer unless it was made in cash. However, no offer was ever made in cash and Spindler never delivered the stock.
As such, Sackett sued for not receiving the stock after making his partial payments. On the other hand, Spindler countersued arguing that Sackett never completed his performance, thus justifying the termination of the contract.
A total performance does not consider whether parts of the contract was fulfilled. Instead, the court considers the several factors listed above. Here, there was a total material breach because of the uncertainty in completing the contract. Sackett wished the contract to be completed on his time and at his convenience. This was in total opposition to the terms of the agreement which required payments at specific times. Additionally, Sackett’s actions could have been willful conduct or gross negligence, thus justifying Spindler’s nonperformance. Thus, the court heavily weighs the 5th and 6th factors in the determining whether Sackett’s breach was partial or total.
Note the relationship between partial performance and total/partial breach. A partial performance is automatically a partial breach which requires continued performance from the non breaching party. Damages for partial performance may only be collected for current costs.
Here, there is no doubt that there was a breach. Sackett promised to pay the full price and failed to do so. Next, we need to ask if this is a partial or total breach. Doing so determines if the breach was material. Thus, the court examines the factors listed in § 241 of Restatement (2d) of Contracts.
Although part of the price was paid, it was reasonable to infer that the full payment would not be made on time (missing several deadlines) so it is fair for the defendant to terminate as a total material breach.
Stages of Breach
Note also that damages are different from material breach. An immaterial breach will only provide nominal damages. A material breach allows for compensatory for present and future damages.
Time is of the essence clause
Adding a time is of the essence clause shows that the deadline is not just there as a place holder, but it is a hard and fast deadline.
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.