Emanuel Law Outlines, Inc. v. Multi-State Legal Studies, Inc.

Brief Fact Summary. A contract was entered into by two companies in the business of aiding law school students' studies.  The contract required one party to deliver a certain supplement within a certain amount of time to the other party.  The party was late in delivering the supplement.

Synopsis of Rule of Law. A contract will not be considered breached unless there is "substantial impairment of the whole contract."

Facts. Emanuel Law Outlines, Inc. ("ELO") entered an agreement with Multi-State Legal Studies, Inc. ("Multi-State") to provide Multi-State with a criminal procedure outline supplement (the "Outline") by May 1, 1993.  ELO delivered the outline on June 3, 1993.   ELO contends that although delivery was late it performed its contractual obligation.  ELO offers five arguments for this:  "(1) Multi-State orally agreed to change the May 1, 1993 contractual deadline to early June 1993; (2) any alleged breach was cured under the terms of the contract; (3) any alleged breach by ELO caused by failing to meet the May 1, 1993 deadline was not material; (4) the nonconforming delivery did not substantially impair the value of the entire contract; and (5) Multi-State reinstated the contract by accepting the supplement without seasonably notifying ELO of the breach."  Multi-State argues that ELO was in breach because they did not make the May 1, 1993 deadline and that it caused damage to Multi-State in the amount of $20,000.   As to certain factual issues, the court found there was insufficient evidence to establish any change in the May 1st deadline.  No writing evidenced this deadline change.  Additionally, the court found ELO did not receive two letters sent via normal mail from Multi-State.  One saying a delay in delivery of the supplement would be a material breach and the other canceling Multi-State's obligations because delivery was late.

Issue. Did Multi-State give ELO adequate notice of the breach?
•    Did Multi-State demonstrate a "substantial impairment of the whole contract?"

Held. No.  "The contract unequivocally requires that the agreement may not be terminated unless the breaching party receives written notice of the breach and such breach is not cured more than 30 days after the receipt of such notice." According to New York law "[a] person receives a notice or notification when (a) it comes to his attention; or (b) it is duly delivered to [his] place of business …" Since neither of the letters reached ELO they did not have notice. 
•    No.  "Under § 2-612(3), Multi-State's right to cancel the entire agreement required a showing of substantial impairment of the whole contract. Whether a breach constitutes 'substantial impairment' is a question of fact."  The court found no evidence that the entire contract was substantially impaired because the May 1, 1993 shipment of the supplement was delayed.  The purpose of the "substantial impairment" requirement was to stop parties from canceling contracts for trivial defects.  Additionally, the court determined any breach by ELO was subsequently cured.  As such, the delay was not a material breach and Multi-State was still bound by the contract.

Discussion. This case demonstrates the law will not award a contracting party for their   pettiness.  It is interesting to read this case alongside [Jacob & Young, Inc. v. Kent].