Anticipatory Repudiation and Statute of Limitations Flashcards
2-610
UCC §2-610, “Anticipatory Repudiation,” addresses situations where one party to a contract repudiates their performance obligations before the time for performance has arrived. Here’s a concise summary:
- Definition: Anticipatory repudiation occurs when one party communicates—either through words or actions—that they will not perform their contractual obligations.
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Options for the Non-Breaching Party:
- Await Performance: The aggrieved party may wait for the repudiating party to perform within a reasonable time.
- Seek Remedies: They may immediately pursue remedies for breach, such as damages.
- Suspend Their Own Performance: The aggrieved party can suspend performance of their contractual obligations.
- Demanding Assurances: If reasonable grounds for insecurity exist, the aggrieved party may demand adequate assurance of performance, as outlined in §2-609.
Comment 2. Repudiation can result from an action which reasonably
indicated rejection of the continuing obligations.
2. Test for substantial impairment is the same test as is used for breach of
the contract. “Whether material inconvenience or injustice will result if
the aggrieved party is forced to wait and receive the ultimate tender
minus the part or aspect repudiated.
3. Note: there is a conflict with when to measure breach Is it a
commercially reasonable time after learning of the repudiation or at the
time performance would become due.
. Gives the repudiating party the right to retract the repudiation.
2. Comment 1. If the non-repudiating party relied on the reputation by
either cancelling the K or materially changing its position then the
repudiating party can not change its position.
3. Comment 2. After a timely and unambiguous expression of retraction,
aggrieved party is entitled to assurances within a reasonable time
2-611
- Timing: A repudiating party may retract their repudiation up until their next performance is due, unless the aggrieved party has cancelled the contract, materially altered their position, or treated the repudiation as final.
- How to Retract: Retraction must clearly signal the repudiating party’s intent to perform and must include any assurances reasonably demanded under §2-609 (assurances of performance).
- Effect of Retraction: Retraction restores the repudiating party’s rights under the contract but allows the aggrieved party reasonable adjustments for any delays caused by the repudiation.
2-725
Plaintiff must bring a law suit within 4 years from the time of
the breach.
2. Cause of action accrues at the time of the breach. For
breach of warranty this is generally when the good is
tendered.
3. Comment: Parties may contract a shorter statute of
limitation but in no event may that statute of limitation be
less than one year.
Problem 96
Analysis under UCC Sections
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§2-610 (Anticipatory Repudiation):
Hawaiian Cattle’s repudiation on July 10 triggers §2-610, allowing the Army (as the non-breaching party) to:- Await Hawaiian Cattle’s performance on October 8 (which it chose to do by rejecting the repudiation).
- Seek remedies immediately for breach, including damages.
- Suspend its own performance, which it essentially did by deciding not to cover and opting to serve beans instead.
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§2-713 (Buyer’s Damages for Non-Delivery or Repudiation):
This section provides damages based on the market price at the time of breach (July 10) and the original contract price.- The market price on July 10 was $6,000.
- The contract price was $5,000.
- The Army could recover $6,000 - $5,000 = $1,000 under §2-713 as damages for Hawaiian Cattle’s repudiation.
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§2-723(1) (Proof of Market Price):
If the price at the time of breach cannot be established, §2-723 allows the use of the market price at a commercially reasonable time after the breach—such as July 15, when the Army identified a potential substitute for $7,000. Using this approach:- Market price (July 15): $7,000.
- Contract price: $5,000.
- Damages would be $7,000 - $5,000 = $2,000.
Considerations Regarding Non-Covering:
While §2-712 incentivizes buyers to “cover” (procure substitute goods) to mitigate damages, the Army chose not to do so. Under §2-713, damages are still recoverable based on the market price at the time of breach, even when the buyer decides not to cover. The rising market price between July 10 ($6,000) and October 8 ($8,000) does not change the damages calculation under §2-713, because damages are calculated as of the time of breach (July 10).
Reconciliation of Sections:
The Army’s decision not to cover highlights a distinction between buyers who learn of repudiation before the performance date (as in this case) versus those learning after. The drafters of §2-713 assumed repudiation after the performance date, but the principle still applies: damages hinge on the market price at the time of repudiation. The Army could use §2-723(1) to argue that the commercially reasonable market price was $7,000 on July 15, increasing recoverable damages to $2,000.
Final Advice:
The Army can recover $1,000 under §2-713 based on the July 10 market price or $2,000 if it uses §2-723(1) to argue the July 15 market price. Either approach reflects Hawaiian Cattle’s breach and compensates the Army for the higher cost of beef caused by the repudiation. Let me know if you’d like further insights!
Problem 97
Let’s evaluate each scenario under the statute of limitations and the relevant legal principles:
General Rule:
Under UCC §2-725, the statute of limitations for breach of warranty is four years from the time the goods are tendered. If the warranty explicitly extends to future performance, the statute of limitations begins when the defect is discovered during the warranty period.
(a) “These tires are merchantable”:
This is an implied warranty under UCC §2-314. The statute of limitations runs from the date of delivery (i.e., four years). Since the tire was delivered four years and two days before the defect caused Joe’s death, the statute of limitations has expired.
- Article 2A (Leases of Goods): Under §2A-506, the statute of limitations for leases is also four years. The result is the same—the claim is barred.
(b) “These tires have a lifetime guarantee”:
Lifetime guarantees may qualify as a warranty of future performance under UCC §2-725(2), meaning the statute begins when the defect is discovered, not at delivery. Since the tire defect was discovered when the spare tire burst, the statute of limitations likely has not expired, depending on how “lifetime” is interpreted.
- Cases like Kelleher v. Lumber and Rawls v. Associated Materials show courts often construe “lifetime guarantee” as extending to future performance. Joe’s estate could likely pursue a claim.
(c) Sales material: “Many tires are still on the road after five years”:
Statements about future performance must be explicit under UCC §2-725(2). This phrase is vague and ambiguous, and does not rise to the level of an explicit warranty. The statute of limitations began at delivery, so it expired four years after the purchase. The claim is barred.
(d) “These tires are warranted for seven years from date of purchase”:
This warranty explicitly covers future performance for seven years, so the statute of limitations begins when the defect is discovered.
- If the tire malfunctioned at the beginning of the third year, the statute of limitations would expire four years from that date. In this scenario, the statute would not have run yet for the spare tire defect.
(e) No express warranties; no disclaimers:
Absent express warranties, implied warranties like merchantability apply (§2-314). The statute of limitations for implied warranties begins at delivery, not upon discovery of the defect. Since the defect manifested over four years after delivery, the statute of limitations has expired, and the claim is barred.
Summary:
- (a) Statute expired.
- (b) Likely valid; depends on interpretation of “lifetime.”
- (c) Statute expired.
- (d) Statute likely valid; warranty of future performance applies.
- (e) Statute expired.
Let me know if you’d like further clarification on any point!
Problem 98
Under UCC §2-725, the statute of limitations for breach of warranty begins to run at the time of tender of delivery. For an implied warranty, the four-year period starts when the manufacturer delivers the vehicle to the dealership, not when the dealership sells it to the ultimate consumer. This principle was upheld in Wilson v. Class, where the court clarified that the statute accrues upon delivery to the first buyer in the chain of distribution (the dealership).
For an express warranty, the result may differ if the warranty explicitly extends to future performance. In such cases, the statute of limitations begins when the defect is discovered during the warranty period. If the express warranty does not explicitly cover future performance, the statute would still start at delivery to the dealership.
Problem 99
The Americas’ claim against DaDa Gallery for breach of express warranty hinges on whether the statute of limitations under UCC §2-725 has expired. Here’s the analysis:
1. Statute of Limitations: Under §2-725, the statute of limitations for breach of warranty is four years from the date of tender of delivery. Since the Americas purchased the paintings in 2025, the statute would typically expire in 2029. However, if the warranty explicitly extended to future performance, the statute would begin when the defect was discovered (2030, when Smock’s forgery was revealed).
2. 2. Relevant Case Law:
- Balog v. Center Art Gallery: The court held that continuous assurances of authenticity constituted an explicit warranty of future performance, tolling the statute of limitations until the defect was discovered. This precedent supports the Americas’ claim, as DaDa Gallery implicitly warranted the authenticity of the paintings.
- Doss, Inc. v. Christie’s, Inc.: The court ruled that the statute accrued at the time of sale, not when ownership was challenged years later. This case may weaken the Americas’ argument if the court finds no explicit warranty of future performance.
- Equinox Gallery Ltd. v. Dorfman: This case involved fraudulent misrepresentation and breach of warranty, emphasizing the importance of explicit warranties and the timing of discovery. It aligns with Balog in recognizing warranties of future performance.
- Outcome: If DaDa Gallery’s representations about the paintings’ authenticity are deemed an explicit warranty of future performance, the statute of limitations would begin in 2030, making the Americas’ claim timely. Otherwise, the claim would be barred, as the statute expired in 2029.
Problem 100
Under UCC §2-725, the statute of limitations for breach of warranty is four years from the time the goods are tendered. For an express warranty, the statute begins at delivery unless the warranty explicitly extends to future performance, in which case it starts when the defect is discovered.
In this case:
- Notheby’s delivered the painting to Max Collector in 2027, and the statute of limitations for any claims against Notheby’s would have expired in 2031 (four years after delivery).
- Since Max Collector sold the painting to Grandiose Museum in 2044, the statute of limitations for indemnification against Notheby’s has long expired, barring any claims.
The result would be different if Notheby’s had explicitly warranted the painting’s authenticity as extending to future performance. However, based on the facts provided, there is no indication of such an explicit warranty. Therefore, Max Collector cannot pursue indemnification against Notheby’s.
Anticipatory Repudiation
Key Concept: Anticipatory Repudiation under the UCC
- Definition: When one party to a contract makes a clear refusal to perform before the performance date, the other party can treat it as a breach and sue immediately (Hochster v. De La Tour, 1853).
- Common Law: Innocent party could wait for performance or choose to treat it as a breach.
- UCC Changes (Sections 2-610 & 2-611):
- Repudiation: Must be a definite refusal to perform, not equivocation.
- Right to Adequate Assurance (Section 2-609): The innocent party can demand assurance of performance from the repudiating party.
- Problem: UCC sections on damages for anticipatory repudiation are not fully consistent, leading to potential confusion about when to measure damages.
Statute of Limitations (2-725)
- Time Period: The statute of limitations for transactions in goods is 4 years, starting when the cause of action accrues (when a suit can be filed).
- Agreement Modifications: Parties can shorten the period to 1 year, but cannot extend it beyond 4 years.
- Court Ruling: In Jandreau v. Sheesley Plumbing (1982), an agreement reducing the limitation period need not be conspicuous to be enforceable.
- Affirmative Defense: The statute of limitations is a defense that must be pleaded and proven, or it is waived (e.g., Mysel v. Gross, 1977).
Mydlach v Daimler Chrysler Corporation
Case Brief: Mydlach v. DaimlerChrysler Corporation
Court: Supreme Court of Illinois, 2007
Citation: 226 Ill. 2d 307, 314 Ill. Dec. 760, 875 N.E.2d 1047
Issue
The issue in this case is whether the statute of limitations for a breach of a repair warranty under the Magnuson-Moss Warranty Act (MMWA) begins from the “tender of delivery” of the vehicle, as prescribed by the Uniform Commercial Code (UCC), or from the failure of the manufacturer to repair a defect after reasonable attempts.
Facts
- Plaintiff, Mydlach, purchased a used 1996 Dodge Neon from McGrath Buick-Nissan in Elgin, Illinois, on June 20, 1998. The vehicle was under a three-year/36,000-mile limited warranty.
- The vehicle had 26,296 miles at the time of purchase, leaving about 10,000 miles or one year left on the warranty.
- Plaintiff encountered recurring issues with the car, including fluid leaks, and brought the car in for repairs multiple times beginning July 7, 1998. However, the repairs were unsuccessful.
- On May 16, 2001, Plaintiff filed suit against DaimlerChrysler, seeking legal relief under the Magnuson-Moss Warranty Act for breach of warranty.
- The question arose regarding the statute of limitations and when the cause of action for breach of warranty accrued.
Rule
Under the Magnuson-Moss Warranty Act, if a written warranty is breached, a private right of action is provided, but the Act does not specify a statute of limitations. Courts apply the statute of limitations from the most analogous state law, in this case, the Uniform Commercial Code (UCC), specifically Section 2-725, which governs contracts for the sale of goods and sets a four-year statute of limitations.
Application
- Defendant’s Argument: DaimlerChrysler argued that the statute of limitations began when the vehicle was delivered in 1996, in accordance with UCC Section 2-725, which states that a breach of warranty occurs at the time of delivery.
- Plaintiff’s Argument: Plaintiff contended that the cause of action for breach of the repair warranty did not accrue until the manufacturer failed to repair the vehicle after reasonable attempts. This argument was based on previous cases, such as Cosman v. Ford Motor Co., which held that a repair warranty is not breached until the manufacturer fails to make the necessary repairs.
- The court looked to UCC Section 2-725 and recognized that while it provides that a breach occurs upon delivery, this provision is not applicable to repair warranties that are not based on the quality or condition of goods at the time of delivery, but rather on the manufacturer’s obligation to repair or replace defective parts over time.
- The court also emphasized that a promise to repair or replace goods is distinct from a promise that the goods conform to a description or sample at the time of delivery. As such, the breach of a repair warranty cannot be said to occur upon delivery.
Conclusion
The Illinois Supreme Court ruled that the statute of limitations under the Magnuson-Moss Warranty Act did not begin upon the delivery of the vehicle. Instead, the cause of action for breach of the repair warranty began when the manufacturer failed to repair the vehicle after reasonable attempts. The court overruled the decision in Nowalski and held that the four-year limitations period under UCC Section 2-725 began when the breach occurred, i.e., when the repairs were not successfully made, not at the time of delivery. Therefore, Plaintiff’s lawsuit, filed within four years of the failed repair attempts, was timely.
Significance
This case clarifies that when a warranty promises repairs (rather than a guarantee of the quality of goods at the time of delivery), the statute of limitations for a breach of warranty claim does not start when the product is delivered but rather when the manufacturer fails to repair the product after a reasonable opportunity to do so. This decision helps ensure that consumers can seek relief for defects that are discovered after the sale, and the statute of limitations is not prematurely triggered.
Central Washington Refrigeration, Inc. v. Barbee
In the case Central Washington Refrigeration, Inc. v. Barbee, the Washington Supreme Court addressed two important legal issues regarding indemnity claims and the statute of limitations under the Uniform Commercial Code (U.C.C.).
Facts of the Case:
- Central Washington Refrigeration, Inc. (Central) contracted with a Yakima orchard to install refrigeration systems in cold storage rooms.
- Central bought refrigeration coils from McCormack Engineering (McCormack), which McCormack specially manufactured to Central’s specifications.
- However, after the installation, the orchard experienced ongoing problems with the refrigeration system, leading to a legal dispute. The orchard counterclaimed that Central was responsible for defective design and installation.
- Central, in turn, filed a third-party complaint against McCormack, alleging that the coils were defective and seeking indemnity for any damages that might be awarded to the orchard.
Legal Issues:
1. Whether a buyer of goods can bring an indemnity action against the seller for defects in the goods that caused liability to a third party.
2. When the statute of limitations for such an indemnity action begins to run.
Court’s Ruling:
The Washington Supreme Court ruled in favor of Central. The court held that:
1. A buyer can maintain an indemnity action against the seller for defects in the goods. The Court followed the majority rule, which recognized that the contractual relationship between the buyer and seller under the U.C.C. is sufficient to give rise to an implied right of indemnity.
2. The statute of limitations for an indemnity action begins to run when the buyer pays damages to the third party or when the third party obtains a judgment against the buyer, whichever occurs first. In this case, Central’s indemnity action was not time-barred because it was filed when Central paid the orchard to settle the orchard’s claims.
Dissenting Opinion:
Justice Guy dissented, arguing that the indemnity claim should fall under the U.C.C.’s four-year statute of repose (RCW 62A.2-725), which governs claims for breach of warranty. Justice Guy emphasized the need for predictability and uniformity in commercial transactions, arguing that the statute of repose should apply to all claims, including indemnity claims, arising from a sale of goods.
Key Takeaways:
1. Implied indemnity: The court held that the U.C.C. provides a sufficient basis for an implied indemnity claim when a defect in the goods results in third-party damages.
2. Statute of limitations: The statute of limitations on an indemnity claim begins when the buyer settles or is adjudicated liable for third-party damages, not necessarily when the defect is discovered.
3. Dissent: The dissent focused on the purpose of the U.C.C. to provide a clear and uniform statute of limitations for breach of warranty claims, arguing that all claims, including indemnity, should be governed by the four-year statute of repose under the U.C.C.
The case clarifies the circumstances under which a buyer may bring an indemnity claim against a seller for defects in goods and sets the timeline for when such claims must be filed.
