Oloffson v. Coomer

Brief Fact Summary.

Plaintiff sued Defendant to recover damages for having to buy cushels of corn for a higher price when Defendant refused to deliver the 40,000 bushels of corn for approximately $1.12 per bushel to Plaintiff as agreed. The trial court ruled in favor of Plaintiff. Defendant appealed.

Synopsis of Rule of Law.

When a merchant buyer learns of a seller’s anticipatory breach, the buyer may await performance by the repudiating seller for a commercially reasonable time as long as the buyer deals with the seller in good faith, or may resort to other remedies.

Facts.

Oloffson (Plaintiff) is a grain dealer who was in the business of merchandising grain. He is thus considered a “merchant” under Section 2-104 of the Uniform Commercial Code (UCC). Coomer (Defendant) is a farmer who supplied corn for Plaintiff’s merchandising business. On April 16, 1970, Defendant agreed to sell Plaintiff 40,000 bushels of corn for approximately $1.12 per bushel, to be delivered in two installments of 20,000 bushels each in October and December of 1970. On June 3, 1970, Defendant informed Plaintiff that he was not going to plant corn because the season had been too rainy. Defendant told Plaintiff to arrange to obtain corn elsewhere to meet his merchandising needs. On this date, the price of corn for future delivery had risen to $1.16 per bushel. Plaintiff again asked Defendant about delivering corn in September 1970, and Defendant repeated that he would not be able to deliver. Plaintiff persisted, but the scheduled delivery dates passed with no delivery of corn. Plaintiff covered his own obligations to third party vendees by purchasing 40,000 bushels of corn at $1.35 and $1.49 per bushel. Plaintiff sued to recover damages from Defendant. The trial court awarded Plaintiff $1,500, or the difference between the contract prices and the prices of corn on June 3, 1970 when Defendant first told Plaintiff he would not deliver. Plaintiff appealed and argued that the proper measure of damages was the difference between the contract price and the market prices on the October and December dates when the corn should have been delivered pursuant to the original April 16, 1970 contract.

Issue.

Whether, when a merchant buyer learns of a seller’s anticipatory breach, the buyer has a right to await the seller’s performance for a commercially reasonable time before attempting to recover damages.

Held.

Yes. The trial court’s ruling is affirmed. When a merchant buyer learns of a seller’s anticipatory breach, the buyer may await performance by the repudiating seller for a commercially reasonable time as long as the buyer deals with the seller in good faith, or may resort to other remedies.

Discussion.

Plaintiff had a right to await Defendant’s performance for a commercially reasonable time before seeking damages, which expired on June 3, 1970. After this, Plaintiff had a duty to pursue other remedies under the UCC. Under Section 2-610 of the UCC, when a merchant buyer learns of a seller’s anticipatory breach, the buyer may await performance by the repudiating seller for a commercially reasonable time as long as the buyer deals with the seller in good faith, or may resort to other remedies under UCC Section 2-703 or 2-711. These other remedies may include canceling the contract and recovering any purchase price already paid, “covering” and having damages for all goods affected, or recovering damages for non-delivery according to UU Section 2-713. In all instances, the buyer has a duty to act in good faith with a repudiating seller. Since Defendant unequivocally stated to Plaintiff on June 3, 1970 that he would not be delivering corn, this is the date when Plaintiff’s “commercially reasonable time” to await Defendant’s performance expired. Plaintiff missed this date, and thus had a duty to pursue other remedies under UCC Sections 2-703 or 2-711. On June 3, 1970, the possibility of “covering” was still very much available to Plaintiff, and thus it would have reflected bad faith on the part of Plaintiff for him to have awaited Defendant’s performance on the contract rather The consequences of what Defendant’s knowledge would have been had Plaintiff apprised him of this option are thus imputed to Plaintiff. Assuming Defendant would have exercised this option on June 3, 1970 (the date he told Plaintiff he would not perform), the proper measure of Plaintiff’s damages is the difference between the contract price on April 16, 1970 and the market price on June 3, 1970. This is the measure used by the trial court in calculating damages.