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National Farmers Organization v. Bartlett and Company, Grain

Court of Appeals for the Eighth Circuit
560 F.2d 1350 (1977)
ELI5:

Rule of Law:

A statement of intention not to perform on contracts except on conditions that go beyond the terms of those contracts constitutes an anticipatory repudiation. A party cannot refuse to perform one contract because the other party has breached a separate and distinct contract.


Facts:

  • Prior to January 1973, National Farmers Organization (Seller) and Bartlett and Company, Grain (Buyer) entered into fourteen contracts for the sale of grain.
  • By the end of December 1972, the Seller was late on grain deliveries for several of the contracts.
  • During December 1972 and January 1973, the Buyer began withholding some payments for grain that the Seller had already delivered, as protection against losses from the Seller's non-performance.
  • The Seller made several verbal demands for payment of the money the Buyer was withholding.
  • On or about January 26, 1973, the Seller notified the Buyer that it would not deliver any more grain under any of the 14 contracts unless and until the Buyer paid a substantial amount of money due on deliveries already made under four of the contracts.
  • Following this notification, the Seller suspended all performance and never tendered any more grain under any of the contracts.

Procedural Posture:

  • National Farmers Organization (Seller) brought a diversity action against Bartlett and Company, Grain (Buyer) in a federal district court to recover an alleged balance due on grain sales.
  • The Buyer admitted to withholding the payment but asserted a claim of setoff, alleging the Seller had anticipatorily repudiated the contracts.
  • The case was tried to the district court sitting without a jury.
  • The district court found that the Seller had anticipatorily repudiated the contracts and rendered a judgment for the Buyer.
  • The Seller, as appellant, appealed the judgment to the United States Court of Appeals for the Eighth Circuit.

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Issue:

Does a seller's statement that it will not perform on any of its outstanding contracts with a buyer unless the buyer first pays past-due amounts owed on some of those separate contracts constitute an anticipatory repudiation of the contracts for which performance is not yet due?


Opinions:

Majority - Van Oosterhout, Senior Circuit Judge

Yes, a seller's statement linking performance on future contracts to payment on separate past-due contracts is an anticipatory repudiation. The court found that the Seller's January 26 communication, which conditioned its future performance on a demand that went beyond the terms of the individual future contracts, constituted an anticipatory repudiation under UCC § 2-610. The court relied on Comment 2 to § 2-610, which states that a repudiation occurs when a party's statement 'amounts to a statement of intention not to perform except on conditions which go beyond the contract.' Here, each of the fourteen contracts was separate and distinct. The court affirmed the well-established principle that the breach of one contract does not justify the aggrieved party in refusing to perform another separate contract, citing Northwest Lumber Sales, Inc. v. Continental Forest Products, Inc. Although the Seller had a remedy under UCC § 2-609 to demand adequate assurance of performance in writing, it failed to use it and instead resorted to an improper self-help measure that amounted to a repudiation.



Analysis:

This decision clarifies the doctrine of anticipatory repudiation under UCC § 2-610, especially in situations involving multiple contracts between the same parties. It strongly reinforces the legal separateness of individual contracts, establishing that a breach on one does not create a right to suspend performance on another. The ruling emphasizes that the specific remedies provided by the UCC, such as a written demand for adequate assurance under § 2-609, are the proper channels for addressing insecurity about performance. This case serves as a precedent warning commercial parties that linking performance of one contract to a disputed claim on another can itself be a repudiation, exposing them to liability for breach.

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