Cosden Oil & Chemical Co. v. Karl O. Helm Aktiengesellschaft
736 F.2d 1064 (1984)
Rule of Law:
In a case of anticipatory repudiation where the buyer does not cover, the buyer's damages under U.C.C. § 2-713 are measured by the difference between the contract price and the market price at a commercially reasonable time after the buyer learned of the repudiation, not at the exact moment of repudiation or the time of performance.
Facts:
- In January 1979, during a period of rising polystyrene prices, Karl O. Helm Aktiengesellschaft (Helm) entered into an agreement with Cosden Oil & Chemical Company (Cosden) to purchase large quantities of polystyrene.
- The agreement involved four purchase orders for delivery in January, February, and March 1979.
- Cosden delivered a partial shipment under the first order, which Helm paid for.
- In late January, Cosden experienced production problems at two of its plants, one due to a frozen river blocking supply barges and the other due to a defective reactor.
- On February 6, 1979, Cosden telephoned Helm and cancelled three of the four purchase orders, citing its production difficulties.
- Cosden delivered a second partial shipment under the first order in mid-February.
- Around the end of March, Cosden informed Helm that it was cancelling the remaining balance of the first purchase order.
Procedural Posture:
- Cosden Oil & Chemical Company sued Karl O. Helm Aktiengesellschaft in federal district court for failure to pay for delivered polystyrene.
- Helm filed a counterclaim against Cosden for breach of contract based on Cosden's failure to deliver the full quantity of polystyrene as agreed.
- A jury returned a special verdict, finding that Cosden had repudiated three of the four contracts and had cancelled the fourth before Helm breached its duty to pay.
- The jury determined the market price of polystyrene at three points in time: when Helm learned of the repudiation, a commercially reasonable time thereafter, and at the time for delivery.
- The district court entered judgment for Helm, calculating damages based on the market price at a commercially reasonable time after repudiation and granting Cosden an offset for the goods Helm had received but not paid for.
- Both parties appealed the district court's judgment to the U.S. Court of Appeals for the Fifth Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Under U.C.C. § 2-713, are a buyer's damages for a seller's anticipatory repudiation measured at a commercially reasonable time after the buyer learns of the repudiation?
Opinions:
Majority - Judge Reavley
Yes. When a seller anticipatorily repudiates a contract, the buyer's damages under U.C.C. § 2-713 are measured at a commercially reasonable time after the buyer learns of the repudiation. The court reasoned that U.C.C. § 2-713, which measures damages at the time the buyer 'learned of the breach,' must be read in conjunction with U.C.C. § 2-610, which allows an aggrieved buyer to 'for a commercially reasonable time await performance.' To measure damages at the moment of repudiation would negate the buyer's right under § 2-610 to wait and assess the market. This interpretation harmonizes the sections and aligns with the Code's overarching principles of commercial reasonableness and its preference for cover as a remedy, as it allows the buyer time to investigate cover possibilities without being penalized.
Analysis:
This decision addresses and resolves a significant ambiguity within the Uniform Commercial Code concerning the calculation of damages for anticipatory repudiation. By interpreting 'learned of the breach' in § 2-713 to mean a 'commercially reasonable time' after learning of the repudiation, the court creates a middle-ground rule between the time of repudiation and the time of performance. This ruling provides clarity for commercial actors in volatile markets, balancing the seller's potential liability with the buyer's need to make a reasoned decision about cover. It establishes a key precedent within the Fifth Circuit for handling one of the UCC's most difficult 'legal thickets' and influences how similar disputes are litigated.
Gunnerbot
AI-powered case assistant
Loaded: Cosden Oil & Chemical Co. v. Karl O. Helm Aktiengesellschaft (1984)
Try: "What was the holding?" or "Explain the dissent"