John v. United Advertising Inc.
439 P.2d 53 (1968)
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Rule of Law:
A contract is severable, not entire, if the parties' intent, as manifested by the contract's terms and surrounding circumstances, indicates that the promises are not a single whole. Key factors indicating severability include the apportionment of consideration among the different performances and the presence of a severability clause.
Facts:
- Dwight John, a motel owner, entered into a written contract with United Advertising, Inc. for advertising services.
- The contract required United Advertising to construct, install, and maintain seven distinct outdoor signs for a period of three years.
- John agreed to pay a total of $95 per month, but the contract apportioned the cost, specifying a rental price of $35 per month for one large sign and $10 per month for each of the six smaller signs.
- The agreement contained a clause stating that the termination or modification of one item in the agreement affects only that part and does not affect any other part of the agreement.
- United Advertising failed to erect one of the small signs (sign No. 4).
- United Advertising erected another small sign (sign No. 5) but not in the location specified in the contract.
- Over the course of the agreement, John paid United Advertising a total of $680.
Procedural Posture:
- Dwight John sued United Advertising, Inc. in a trial court for breach of contract, seeking damages for lost profits and monies paid.
- The matter was tried to the court without a jury.
- The trial court found that United Advertising breached the contract as to two of the seven signs but had substantially performed as to the other five.
- The trial court ruled that the contract was severable and that John had failed to prove any damages resulting from the partial breach.
- The trial court entered a judgment dismissing John's claim for relief.
- John, as plaintiff, sought review of the trial court's judgment by writ of error in the state's highest court.
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Issue:
Is a contract for multiple advertising signs, with apportioned consideration per sign and a clause stating modification of one item does not affect others, an entire contract such that a partial breach entitles the non-breaching party to recover all payments made?
Opinions:
Majority - Mr. Justice McWilliams
No. The contract is severable, not entire, because the parties' intent, as evidenced by the apportioned consideration and the severability clause, was to treat each sign as a distinct part of the agreement. Whether a contract is entire or severable depends on the intent of the contracting parties. This intent is ascertained by looking at the contract's terms, the surrounding circumstances, and especially whether the consideration is a single lump sum or is apportioned among the various promises. Here, the contract explicitly broke down the total monthly rent by assigning a specific price to each of the seven signs. Furthermore, the contract included a modification clause that expressly treated the items as separable. This evidence supports the trial court's finding that the contract was severable, meaning the defendant's failure to properly install two signs was a partial, not a total, breach. Therefore, the plaintiff is only entitled to recover the money paid for the two specific signs that were not installed correctly, not the entire amount paid under the contract.
Analysis:
This case clarifies the distinction between entire and severable contracts, establishing that the parties' intent is the paramount consideration. It reinforces that courts will look to objective evidence within the contract, such as the apportionment of consideration and the inclusion of a severability clause, as strong indicators of an intent to create a severable agreement. This precedent limits the remedies available for a partial breach of a severable contract, preventing the non-breaching party from rescinding the entire contract and confining damages to the specific, non-performed portions. The decision underscores the importance of careful contract drafting to reflect the parties' true intent regarding the interdependence of their promises.
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