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Pat v Danco

 

MODEL BAR ANSWERS

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PAT v. DANCO

Whether Pat will prevail in a suit against Danco for breach of contract will initially depend on the validity of their contract as well as its terms. The measure of any damages Pat may receive will also depend on these initial issues.

VALIDITY OF CONTRACT

Presuming a valid “written services contract” between Pat and Danco reflecting their mutual assent for Pat to supply four computer programs for use by Danco by May 1st for valuable consideration of $25,000 – and which satisfies the defense of the Statute of Frauds – at issue are the terms the parties agreed upon – and whether they were breached – as discussed below.

TERMS OF THE CONTRACT

Express Condition Precedent

An express condition precedent is one that must occur before an absolute duty of performance arises in the other party.

Thus, payment to Pat of the $25,000 is based on Pat’s duty to perform by completing and delivering the four computer programs to Danco by May 1st. Absent an excuse, Danco may argue that Pat’s failure to meet this time of the essence express condition precedent would relieve the company of its obligation to perform its duty to pay Pat the $25,000.

PERFORMANCE

APRIL 15TH COMMUNICATION BY PAT/CHELSEA

Pat’s call to Chelsea, Danco’s President, on April 15th that he was “having problems” with computer program’s three and four – and that he may not be able to deliver them before May 8th or 15th – constituted the basis of relieving Danco of its duty to perform to Pat. Danco would make the following arguments:

Excuse of Condition by Actual Breach

Although Pat’s statement did not signal his failure to cooperate, Danco might argue that it was an actual and material breach of the express time of the essence condition. Pat would make the argument that the potential delay – while not meeting the May 1st condition – was at best incidental and minor given the need for a one to two week delay. This would only suspend Danco’s duty to perform – but not excuse it.

Excuse of Condition by Anticipatory Repudiation

Anticipatory repudiation must be unequivocal, not just an expression of doubt or the prospective inability or unwillingness to perform.

It seems clear Pat’s expression of doubt – “having some problems” would fall short of the unequivocality standard in which event Danco’s duty to perform would remain.

Excuse of Condition by Waiver or Estoppel

A party may waive a condition by indicating that he will not insist upon it. Such a waiver, however, may be retracted unless the other party relies on the waiver and changes his position to his detriment. Upon such detrimental reliance, the waiving party is estopped from non-performance.

In this regard, Chelsea’s response to Pat’s communication that (Danco) would “have to live with the May 15th (date)” in the event Pat could not resolve the programming problems would seem to constitute a sufficient waiver of the time of the essence condition. On the other hand, Chelsea might argue that she retracted the waiver with her April 28th communication that she would treat Pat’s April 15th statement as a “repudiation” of his duty to perform. Pat, however, could successfully argue that the nearly two week delay in informing him caused him to change his position to his detriment – and especially given the fact at the time of the making of the contract that “he turned away opportunities to take on more lucrative work.” In this event, subject to a valid modification, as discussed below, Chelsea’s waiver would also be valid.

APRIL 28TH COMMUNICATION BY PAT/CHELSEA

Anticipatory Repudiation by Danco

Pat would argue that Chelsea’s representation, as described above, that Danco would treat Pat’s April 15th communication as an actual breach and not pay Pat “because of the language in their contract” – itself is an unequivocal repudiation of the terms of the April 1st contract – supporting a successful cause of action by Pat against Danco for material breach.

Modification of the May 1st Contract

Pat would also contend that Danco’s waiver – as discussed – through Chelsea’s April 15th communication to him – was valid even though it was not supported by consideration. Pat would argue that his detrimental reliance was a valid substitute – and that the modified time for performance was extended to May 15th. As such, his assertion on April 28th that full performance would be satisfied by May 12th was within the terms of the modified contract.

MEASURE OF DAMAGES

Compensatory

Pat would argue that the standard measure of compensatory damages will be expectation damages that will permit him to fully benefit under the terms of the May 1st contract. In this event, Pat would be justified in arguing for the full $25,000.

Consequential

These damages are awarded in addition to compensatory damages in the event a reasonable person would have foreseen at the time of entering the contract that such damages would result from the breach. Here, Pat would argue that his contract with Danco – in “anticipation that it would lead to significant work in the future with Danco” – foreseeably resulted in his turning down more “lucrative work.” Here, Pat would argue that he should also be compensated for the loss of work that at least would cover the nearly one month of time from the start of the contract to Danco’s April 28th repudiation.

Punitive

It is unlikely Pat would be successful in arguing for punitive damages in view of the commercial nature of his contract with Danco.

Duty to Mitigate

Pat should cease work on behalf of Danco in his attempt to find alternative employment that would lead to mitigating any compensatory or consequential damages owed to him by Danco for their repudiation of their duty to perform under the terms of the April 1st contract.

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This answer was provided by Cal Bar Tutorial Review. Cal Bar is a customized and personalized total review course – and has been serving California bar candidates since 1979. Cal Bar may be reached through 800-783-6168. Cal Bar’s website address is: www.cbtronline.com.