Chapter 9: Breach – General Concept

1. Breach
Example 9.1: A homeowner and a painter enter into a contract under which
the painter promises to paint the homeowner’s toolshed and, in exchange,
the
homeowner promises to pay the painter a specified amount of money.
Although the homeowner does not particularly care what color the shed is
painted, under the contract, the painter promises to use “ocean blue” paint
color. At the paint store, the store clerk inadvertently provides the painter
with “river blue” paint color, which is almost identical to “ocean blue” paint
color, the distinction only discernable upon very close inspection. The painter
does not realize he has been given the wrong paint color and paints the
toolshed “river blue. ” The painter refuses to repaint the shed when the
homeowner discovers the mistake, pointing out that the homeowner said he
can barely notice the difference. The painter has breached the contract.

2. Repudiation
Example 9.2: A homeowner and a builder enter into a contract under which
the builder promises to renovate the homeowner’s house by a specified date
and, in exchange, the homeowner promises to pay the builder a specified
amount of money upon the job being completed. After completing about
twenty percent of the job, the builder tells the homeowner he has obtained
another job that will pay him more mon ey, and he will, therefore, not
renovate the homeowner’s house. The builder has repudiated the contract.

Example 9.3: A homeowner and a builder enter into a contract under which
the builder promises to renovate the homeowner’s house by a specified date
and, in exchange, the homeowner promises to pay the builder a specified
amount of money upon the job being completed. After completing about ten
percent of the job, the builder tells the homeowner, “I’m not sure I’ll be able
to finish the job. ” The builder has not repudiated the contract.

Example 9.4: A homeowner and a builder enter into a contract under which
the builder promises to renovate the homeowner’s house by a specified date
and, in exchange, the homeowner promises to pay the builder a specified
amount of money upon the job being completed. Before starting the job, the
builder says to the homeowner, “The cost of materials has risen. Would you
be willing to pay me extra to cover the increased cost?” The builder has not
repudiated the contract.

Example 9.5: A homeowner and a builder enter into a contract under which
the builder promises to renovate the homeowner’s house by a specified date
and, in exchange, the homeowner promises to pay the builder a specified
amount of money upon completion of the job. Before starting the job, the
builder says to the homeowner, “The cost of materials has risen. I will not do
the job unless you pay me extra money to cover the increased cost. ” The
builder has repudiated the contract.

Example 9.6: A landowner enters into a contract with a buyer under which
the landowner promises to transfer ownership of the land to the buyer and,
in exchange, the buyer promises to pay the landowner a specified amount of
money. The parties agree to exchange the deed and the purchase price at a
closing on a specified date. Before the closing, the landowner enters into a
contract with a third party to sell the same parcel of land to the third party
and closes on that transaction. The landowner has repudiated the contract
with the buyer.

2.1 Distinctions Between Breach and Repudiation

Example 9.7: A homeowner and a carpenter enter into a contract under
which the carpenter promises to fix the roof on the homeowner’s house on a
particular day. The problem with the roof is not serious, and time is not of
the essence. The carpenter thereafter tells the homeowner that he will fix it
on the day after the agreed-upon day because his current job is taking
longer than expected. The carpenter has not repudiated the contract
because the breach would be immaterial, since time is not of the essence.

Example 9.8: A homeowner and a painter enter into a contract under which
the painter promises to paint the homeowner’s shed “desert tan. ” The
homeowner is not particular about the paint color, and is primarily interested
in getting a new paint job for the shed because the old paint is starting to
crack. Later, the painter (after completing his current job) has some extra
paint named “sandy beach,” which is almost identical to “desert tan. ” The
painter refuses to paint the shed unless the homeowner agrees that the
painter can paint it with his extra “sandy beach” color paint. Even if painting
the shed “sandy beach” rather than “desert tan” would be a minor breach
under the circumstances, the painter has repudiated the contract because he
is refusing to perform at all unless the homeowner agrees to the
modification.

2.2 Aggrieved Party’s Options Upon a Repudiation

When a party repudiates, the aggrieved party’s duties are discharged, and
the aggrieved party has the privilege to sue for breach of contract
immediately or at any time prior to an actual breach (the aggrieved party
need not wait until after performance is due, except as previously stated), or
may wait for performance and sue after the actual breach.

Example 9.9: A landowner and a builder enter into a contract under which
the builder promises to build a house on the landowner’s parcel of land and,
in exchange, the landowner promises to pay the builder a specified amount
of money. The builder promises to have the house completed within six
months. Just after entering into the contract and before starting work, the
builder, without any excuse, tells the landowner that he will not do the job.
The landowner has the power to immediately sue the builder for breach of
contract or sue at any time prior to an actual breach; or wait and sue the
builder after the actual breach. The landowner may urge the builder to
perform, and urging performance will not eliminate the landowner’s privilege
to declare the repudiation to be final.

Example 9.10: A landowner and a buyer enter into a contract for the sale of
the landowner’s parcel of land, under which the buyer immediately pays the
full contract price and, in exchange, the landowner promises to transfer
ownership of the parcel of land to the buyer within two months. Immediately
after the buyer pays the full contract price, the landowner repudiates the
contract. The buyer does not have a claim for damages against the
landowner until the time for the landowner’s performance becomes due
since the landowner has already received full performance from the buyer.

Example 9.11: A lender and a borrower enter into a contract for a loan, under
which the lender loans the borrower $100,000. The borrower promises to
repay the loan over five years in yearly installment payments plus interest.
After making one installment payment, the borrower repudiates the contract.
Unless the contract has an acceleration clause, the lender does not have an
immediate claim for damages against the borrower for the full loan amount.
Rather, the lender can only sue upon an actual breach. (As will be explained
later, absent an acceleration clause, even after an actual breach the lender
can only sue for the breach of the particular installment.)

2.3 Nullification of Repudiation

Example 9.12: A landowner and a builder enter into a contract under which
the builder promises to build a house on the landowner’s parcel of land and,
in exchange, the landowner promises to pay the builder a specified amount
of money. The builder promises to have the house completed within six
months. Just after entering into the contract, and before starting work, the
builder tells the landowner he will not do the job. One week later, before the
landowner has detrimentally and materially relied on the repudiation or told
the builder she considers the repudiation to be final, the builder states he will
perform as promised. The repudiation is retracted and thus nullified. The
landowner’s duty to perform is reinstated, and the landowner no longer has
the power to sue.

2.4 Demand for Adequate Assurance

When reasonable grounds for insecurity arise, the party may demand
adequate assurance from the other party that he will perform when the time
comes, and until receiving such assurance may, if commercially reasonable,
suspend his own performance. If the other party does not provide reasonable
assurance within a reasonable time (not exceeding thirty days under the
U.C.C.), the failure is a repudiation (U.C.C.) or may be treated as a
repudiation (common law).

Example 9.13: The owner of a music hall enters into a contract with a string
quartet, under which the string quartet promises to play a show at the music
hall in the evening on a particular date. Later, the owner learns that the
string quartet has booked a show in another town for the afternoon of the
same day. The owner correctly believes it will be difficult for the string
quartet to make both shows, though it is neither impossible nor nearly
impossible. The owner may demand adequate assurance from the string
quartet that it will play the show at his music hall. If the string quartet fails to
provide adequate assurance within a reasonable time, the owner may treat
the failure as a repudiation. “Adequate” assurance would likely include
explaining how the string quartet plans to make it to both shows. If the
owner had refused to perform the contract without demanding and failing to
receive adequate assurance, the owner would itself have likely repudiated
the contract. The string quartet’s booking of the other show did not render it
unable or apparently unable to perform the contract.

Insolvency
There is a special rule for when a promisor’s insolvency gives the promisee
reasonable grounds to believe the promisor will commit a material breach. In
such a situation, the promisee may suspend any performance for which he
has not already received return performance until he receives (1)
performance, (2) an offer of performance with the manifested present ability
to perform, or (3) adequate security. A party is insolvent if he has ceased to
pay his debts, cannot pay his debts as they become due, or is insolvent
under the federal bankruptcy law’s definition.

Example 9.14: A landowner and a builder enter into a contract under which
the builder promises to build a house on the landowner’s parcel of land and,
in exchange, the landowner promises to pay the builder a specified amount
of money upon the job’s completion. Shortly after entering into the contract,
the builder learns that the homeowner cannot pay her debts as they become
due and is considering filing for bankruptcy. The builder may suspend
performance until he receives (1) payment, (2) an offer of payment with the
manifested ability to pay, or (3) adequate security for payment.

Key Takeaways for Chapter 9

1. A breach is a failure to perform a contract duty at the time performance is
due, and anything short of full performance is a breach. Thus, even a minor
deviation from what is required under the contract is a breach.
2. Contract liability is usually strict liability, meaning that a promisor is
generally liable for breach of contract even if, in breaching the contract, she
did not act negligently or with a bad motive.
3. A repudiation necessarily occurs before the time when the defendant’s
duty to perform is due and is either a definite and unequivocal statement by
the defendant that he will commit a material breach of the contract when the
time for performance becomes due, or a voluntary, affirmative act by the
party that makes performance of a material contract duty impossible or that
demonstrates a clear determination not to perform a material contract duty.
4. When a party repudiates, the aggrieved party’s duties are discharged, and
in general, the aggrieved party has the privilege to sue for breach of contract
immediately or at any time prior to an actual breach (the aggrieved party
need not wait until after performance is due), or wait for performance and
sue after the actual breach.
5. If the aggrieved party does not immediately sue, he may urge the
repudiating party to perform despite the repudiation and urging performance
will not eliminate the aggrieved party’s privilege to declare the repudiation
to be final or to sue at any time.
6. A party who repudiated by statement may retract the repudiation if the
aggrieved party receives notification of
the retraction before she either materially changes position in reliance on
the repudiation or indicates to the repudiating party that she considers the
repudiation to be final.
7. When a party has reasonable grounds to believe the other party will not
perform, the party may demand adequate assurance from the other party
and, if the other party does not provide adequate assurance within a
reasonable time, treat the failure as a repudiation (under the U.C.C. it is a
repudiation).

Chapter 10: Identifying the Contract Duties

When determining if a party breached or repudiated a contract, it is
necessary to identify the duties that are part of the contract. If the defendant
failed to perform or refused to perform a particular act, but that act is not a
contract duty, there is no breach or repudiation. While you might think it is
easy to determine if a particular duty is part of a contract (and it often is),
there are situations where it is open to dispute.
This chapter addresses four situations that might arise when determining
contract duties. The first involves a defendant accused of repudiating or
breaching a term in the written contract, but the defendant did not read the
contract or that particular term. The second involves a promise or agreement
omitted from a written document setting forth the deal’s terms. The third
involves interpreting a term whose meaning is disputed by the parties. The
fourth involves supplementing the deal’s express terms. The first situation
invokes the duty-to-read rule; the second, the parol evidence rule; the third,
the rules of interpretation; and the fourth, the rules surrounding implied
terms.

Duty-to- Read Rule

Duty-to-read rule provides that, in general, a party's manifestation of assent
to a written contract is effective even if the party did not read the written
contract before assenting. You thus learned that a party's failure to read a
written contract does not prevent the formation of a contract, provided that
the party knew or had reason to know of the document's character ( both
that it was a contract and its essential terms ).
But not only does the duty-to-read rule provide that, in general, a contract is
formed despite a party's failure to read the written contract, the duty-to-read
rule also provides that, in general, a party is bound by all the terms ( read
and unread ) in the written contract that was formed. This is sometimes
called the " blanket assent " principle. Thus, as a general rule, the failure at
the time of contract formation ( or thereafter ) to read and be aware of the
contract term
allegedly breached (or understand it) is no defense to a breach of contract
claim. Any promises within the written contract become contract duties upon
formation, despite a failure to be aware of the particular promise. 5 However,
the good news for such a party is that the party can also obtain the benefit
of favorable terms in the written contract, even if the party was unaware of
them.

But just like the exception to formation when a party did not know or have
reason to know the proposed document was a contract, a party is not bound
by any terms the party was unaware of and had no reason to be aware of
because of where they were located, such as on the back of a coat check
ticket or the wall of a store. 7 Also, a party might be able to avoid an unread
term or the entire contract when the other party misrepresented the
contract’s terms or failed to correct the party’s mistake about the terms.
That exception will be taken up later when the remedy of reformation and
the defense of misrepresentation are discussed.

Example 10.1: A businessperson enters into a contract with a dry-cleaning

service to dry clean her suits. The businessperson does not know that the
back of the claim ticket has contract terms, including a release from liability.
A reasonable person would believe the claim ticket was simply designed to
identify which suits were hers and would not include contractual language.
The language on the back of the ticket is not part of the contract.

Example 10.2: A businessperson enters into a contract with a dry-cleaning

service to dry clean his suits. The businessperson does not notice a sign on
the back wall, which is difficult to see and includes a release from liability for
damage to clothes. The language on the sign is not part of the contract.

Example 10.3: A consumer desires to purchase an item over the internet.

The order form includes a box containing additional contract terms that can
be scrolled through and reviewed by the consumer. The website makes it
clear that the terms are additional contract terms. Before proceeding with
the transaction, the consumer must click an " I accept " button at the bottom
of the box with the additional terms. The consumer clicks the " I accept "
button and purchases the item. The additional terms are part of the contract,
even if the consumer did not read them before making the purchase.

Example 10.4: A consumer desires to purchase an item over the internet.

The order form includes a conspicuous hyperlink to additional contract terms
that can be reviewed by the consumer. The website makes it clear that the
terms are additional contract terms. The consumer purchases the item. The
additional terms are part of the contract, even if the consumer did not read
them before making the purchase.

Example 10.5: A consumer buys a vacuum cleaner in a retail store. The box
in which the vacuum cleaner is packaged conspicuously notes that additional
terms are included inside the box. After opening the box at home, the
consumer uses the vacuum cleaner and does not exercise his power to
return it within 30 days and obtain a refund ( as provided for in the enclosed
terms ). The acceptance occurs after the consumer had an opportunity to
read the enclosed terms, and the terms inside the box are, therefore, part of
the parties ' contract.

Example 10.6: A consumer buys a concert ticket over the internet, with an
electronic ticket to be delivered later. The consumer has reason to know that
the " back " of the ticket will include additional terms. The ticket is delivered,
and the consumer goes to the concert. The terms are part of the contract.

Study Sheet: Breach, Repudiation & Contract Duties

Chapter 9: Breach & Repudiation
1. Breach
 Definition: Failure to perform a contract duty when performance is
due.
 Key Principle: Even minor deviations constitute a breach, regardless
of intent or negligence (strict liability).
 Example 9.1: Painter uses “river blue” instead of “ocean blue” →
breach, even if barely noticeable.
2. Repudiation
 Definition: A definite, unequivocal refusal to perform
a material duty before performance is due.
 Two Forms:
1. Statement: Clear refusal to perform.
2. Action: Voluntary act making performance impossible.
 Examples:
o 9.2: Builder abandons job for higher-paying one → repudiation.
o 9.3: Builder says “I’m not sure I’ll finish” → not repudiation
(uncertain).
 o 9.4: Builder asks for more money due to costs → not repudiation
(request).
o 9.5: Builder says “I will not do job unless paid more” →
repudiation (refusal).
o 9.6: Landowner sells property to third party before closing →
repudiation.
2.1 Distinctions Between Breach and Repudiation
 Repudiation occurs before performance is due; breach occurs at or
after.
 Minor or immaterial breaches are not repudiations.
 Example 9.7: Carpenter delays one day when time is not essential →
breach, not repudiation.
 Example 9.8: Painter refuses to paint unless color is changed →
repudiation (refusal to perform unless terms modified).
2.2 Aggrieved Party’s Options Upon Repudiation
 Duties discharged.
 May:
1. Sue immediately (anticipatory breach).
2. Wait and sue after actual breach.
3. Urge performance without losing right to sue later.
 Example 9.9: Landowner may sue builder immediately upon
repudiation.
 Exception: If aggrieved party has already fully performed, must
wait until performance due to sue (Example 9.10).
 Installment Contracts: Without acceleration clause, can only sue for
breached installments (Example 9.11).
2.3 Nullification of Repudiation
 Repudiation can be retracted if:
o Before aggrieved party materially relies on it.
o Before aggrieved party declares repudiation final.
 Example 9.12: Builder retracts refusal before landowner relies →
repudiation nullified.
2.4 Demand for Adequate Assurance
 If reasonable grounds for insecurity, party may demand
adequate assurance.
 Failure to provide within reasonable time = repudiation (U.C.C.) or
may be treated as repudiation (common law).
 Example 9.13: Music hall owner may demand assurance from quartet
with conflicting booking.
 Insolvency: Promisee may suspend performance if promisor is
insolvent until receiving performance, offer, or security (Example 9.14).

Chapter 10: Identifying Contract Duties

Duty-to-Read Rule
 Party is bound by all terms in a written contract, even if unread
(“blanket assent”).
  Exceptions:
1. Terms in unexpected places (e.g., back of coat check, hidden
sign).
2. Misrepresentation or failure to correct mistake.
 Examples:
o 10.1 & 10.2: Hidden terms on ticket or sign → not part of
contract.
o 10.3–10.6: Conspicuous terms online, in box, or on ticket → part
of contract if reason to know.

Key Takeaways
1. Breach = any failure to perform exactly as promised.
2. Repudiation = clear refusal to perform materially before due.
3. Anticipatory breach allows immediate suit.
4. Duty-to-read binds parties to written terms, unless hidden or
misrepresented.