Sackett v. Spindler - Brief PDF

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Sackett (stock buyer) v. Spindler (owner of newspaper) COURT AND DATE: California Court of Appeal (1967) PROCEDURAL HISTORY: The trial court held that Sackett’s refusal to pay the specified amounts by the specified dates constituted an unjustified breach of the agreement. The court entered judgment in Spindler's favor, and Sackett appealed to the California Court of Appeal.

ISSUE: If a party suspends performance under a contract in response to the other party's partial breach of the contract, does the suspension of performance constitute unlawful repudiation of the contract?

TRIGGER FACTS: Spindler (defendant) agreed to sell shares of stock to Sackett (plaintiff). Sackett agreed to pay for the stock in installments on specific dates. Spindler agreed to deliver the stock in full to Sackett when Sackett had paid the final installment, which was due on or before August 15. Sackett paid the first installment on time but then fell behind in his payments. Sackett’s check for his final payment, though technically delivered on time, was denied by the bank for insufficient funds. On September 12, Sackett assured Spindler that he had the funds and would transfer them. Sackett’s attorney contacted Spindler’s attorney, and the two met on September 19 to discuss Sackett’s performance under the contract. At that meeting, Spindler’s attorney provided notice that unless Sackett paid the final installment, plus interest, by September 22, then Spindler would consider the contract breached and would refuse to complete his performance under the contract. Sackett failed to pay the balance. Spindler agreed to extend Sackett’s time for performance until September 29. Again, Sackett failed to perform. On October 4, Sackett sent Spindler a telegram promising to perform under the contract. On October 5, Spindler's attorney informed Sackett by letter that, due to Sackett’s failure to perform, Spindler refused to sell the stock to Sackett. On October 6, Sackett offered to pay the balance for the stock in further installments. Spindler refused, but he stated that he would continue to honor the sale if Sackett would pay the full amount in cash or the equivalent. Sackett did not offer or tender cash or its equivalent. Sackett filed suit for breach of contract, claiming that Spindler’s October 5 letter constituted unlawful repudiation of the contract. Spindler filed a cross-complaint for breach of contract. PLAINTIFF’S MAIN ARGUMENTS: DEFENDANT’S MAIN ARGUMENTS: RULE (the law): If a party suspends performance under a contract in response to the other party's partial breach of the contract, the suspension of performance constitutes unlawful repudiation of the contract.

HOLDING + REASONING: Yes. If a party commits a total breach of a contract, then the other party is discharged from and may suspend further performance. However, if a party

commits only a partial breach of the contract, then the other party’s action in suspending further performance constitutes unlawful repudiation, which in turn constitutes a total breach of the contract. Whether a breach is total or partial depends upon the materiality of the breach. The following factors must be considered in determining materiality: (1) the extent of the injured party's ability to obtain a substantial benefit he reasonably could have anticipated under the contract; (2) the extent to which the injured party could be adequately compensated in damages for the breach; (3) the extent of the breaching party’s performance or preparation for performance; (4) the extent of the hardship suffered by the breaching party due to terminating the contract; (5) whether the breaching party’s behavior was willful, negligent, or innocent; and (6) the uncertainty that the breaching party will perform the remainder of the contract. Here, Spindler was justified in treating Sackett's behavior as a total, rather than a partial, breach of the contract. Although Sackett had paid part of the purchase price, and Spindler could be adequately compensated in damages 1. it was extremely uncertain that Sackett actually intended to complete the contract. 2. Additionally, given Spindler’s many requests for the balance due under the contract, Sackett’s behavior could be characterized as negligent or willful conduct. Accordingly, in light of Sackett's total breach, Spindler's letter to Sackett was not an unlawful repudiation of the contract and, therefore, did not constitute a breach of the contract. 3. Furthermore, even if Spindler’s letter was not justified, there is no merit to Sackett's argument that the letter was a repudiation that discharged Sackett's duty of performance. At the time of the letter, Sackett had not yet paid the balance due and, therefore, Spindler’s performance under the contract (i.e., delivery of the stock) was not yet due. In effect, if Sackett’s actions were not considered a total breach, Spindler’s letter was no more than an anticipatory repudiation. The effect of the anticipatory repudiation, then, was nullified when Sackett disregarded it by continuing to attempt to pay the balance due under the contract. 4. Additionally, Spindler retracted the anticipatory repudiation himself when he, through his attorney, indicated his willingness to continue his performance if Sackett paid the balance due. Therefore, Spindler was justified in his actions, and Sackett must pay damages for his breach of the contract. The trial court's judgment is affirmed, with the award of damages modified by deleting a portion of the interest award....