Neumiller Farms, Inc. v. Cornett

Brief Fact Summary. Jonah D. Cornett and Ralph Moore (Plaintiffs) sued Neumiller Farms, Inc. (Defendant) for breach of contract. Defendant appealed from a judgment for the Plaintiffs.

Synopsis of Rule of Law. A rejection of goods based on dissatisfaction, which was not made in good faith, is invalid and constitutes a breach of contract upon which damages are recoverable.

Facts. Plaintiffs were potato farmers and Defendant was a corporation engaged in brokering potatoes from the growers to the makers of potato chips. The parties signed a contract, in which, Plaintiffs agreed to deliver twelve loads of potatoes to Defendant and Defendant agreed to pay $4.25 per hundredweight. The contract required the potatoes be grade number one and to buyer satisfaction. Plaintiff produced 20 to 24 loads of potatoes, and Defendant accepted three as $4.25 per hundredweight. Thereafter, the price dropped to $2.00 per hundredweight. Plaintiff tendered more loads of potatoes and Defendant rejected them for not being chip quality. Plaintiff responded by having samples of their crop tested by an expert who said they were of suitable quality. After receiving a letter from Plaintiff demanding performance, Defendant agreed to try one more load. Plaintiff tendered another load of potatoes, which had been purchased by another grower. Defendant claimed dissatisfaction with the l
oads. Plaintiffs offered to purchase the remaining nine loads from other growers but Defendant refused this offer. Plaintiffs’ efforts to sell the remaining loads of potatoes were hampered by poor market conditions.

Issue. Whether the Defendant’s refusal to accept Plaintiff’s delivery of potatoes was a breach of contract?

Held. Yes. Judgment affirmed.
An aggrieved party may recover for breach of contract when the buyer wrongfully rejects the goods. A buyer may reject delivery of goods if the delivery fails to conform to the contract. Here, Defendant did not claim that the tender was inadequate rather he asserted that the potatoes failed to conform to the requirements of the contract.
A claim of dissatisfaction must be made in good faith. Here, the Defendant deals in farm products and is a merchant with respect to dealing in such goods. In testing the good faith of a merchant, the Code of Alabama requires honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. Therefore, the rejection of goods based on a claim of dissatisfaction, which was not made in good faith is ineffectual and constitutes a breach of contract for which damages are recoverable.

Discussion. The standard used by the court to determine good faith of a merchant is an objective standard.
This case presents a common example of bad faith when the promisor is dissatisfied with the overall bargain rather than the other party’s performance.