Associated Builders, Inc. v. Coggins
1999 Me. LEXIS 15, 1999 ME 12, 722 A.2d 1278 (1999)
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Rule of Law:
A minor, non-prejudicial delay in payment under an accord agreement does not constitute a material breach that would revive the original debt, and accepting the late payment serves as a waiver of the right to enforce a forfeiture clause.
Facts:
- Associated Builders, Inc. (Associated) provided labor and materials for a construction project for William and Benjamin Coggins.
- A dispute arose regarding compensation, with an outstanding balance of $70,005.54.
- The parties executed a settlement agreement providing that the Cogginses would make two payments of $25,000 each on or before specific dates.
- The agreement stipulated that if the payments were made as agreed, Associated would forfeit the remaining $20,005.54 balance.
- The Cogginses made the first payment on time.
- The Cogginses delivered the second and final payment on June 4, 1997, three days after the June 1, 1997 deadline.
- Associated accepted the late payment.
Procedural Posture:
- Associated Builders, Inc. filed a complaint against the Cogginses in the Superior Court of Hancock County, Maine (a trial court).
- The Cogginses raised the affirmative defenses of accord and satisfaction and waiver.
- Both parties filed motions for summary judgment.
- The trial court granted summary judgment in favor of the Cogginses.
- Associated Builders, Inc., as appellant, appealed the trial court's decision to the Supreme Judicial Court of Maine (the state's highest court).
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Issue:
Does a three-day delay in making the final payment under an accord and satisfaction agreement, which causes no prejudice to the creditor, constitute a material breach that revives the original, forfeited debt?
Opinions:
Majority - Dana, J.
No. A three-day delay in payment under an accord agreement does not constitute a material breach when it causes no prejudice to the obligee. A breach is only material if it is a non-performance so significant as to justify the injured party in treating the entire contract as terminated. Here, the slight delay was not a material breach because Associated was not deprived of the benefit it reasonably expected, it alleged no prejudice from the delay, the Cogginses did not act in bad faith, and the agreement did not state that time was of the essence. Furthermore, even if the breach had been material, Associated waived its right to enforce the forfeiture when it accepted the late payment, as acceptance of performance is inconsistent with an intention to rely on the breach.
Analysis:
This decision solidifies the principle that contract law favors substance over form, particularly when a forfeiture is at stake. It establishes that for a breach of an accord and satisfaction to revive the original debt, the breach must be material, meaning it must substantially deprive the non-breaching party of their expected benefit. The case serves as a strong precedent against creditors using trivial timing errors to trigger harsh forfeiture clauses. It also reinforces the doctrine of waiver, clarifying that a party cannot accept the benefit of a late performance and simultaneously claim the right to penalize that performance.
