Selland Pontiac-GMC, Inc. v. King
384 N.W.2d 490 (1986)
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Rule of Law:
Under U.C.C. § 2-615, a seller's non-delivery is not a breach of contract if performance has been made impracticable by the failure of a specific, named source of supply, as the continued existence of that source is a basic assumption on which the contract was made.
Facts:
- In April 1983, Selland Pontiac-GMC, Inc. (Selland) contracted with George King (King) to purchase four school bus bodies.
- A written agreement dated May 12, 1983, specified that the bus bodies would be manufactured by a particular company, Superior Manufacturing.
- The contract did not contain an escape clause excusing King's performance if his supplier failed.
- King was aware that Selland's customer needed the completed buses by late August for the start of the school year.
- On July 7, 1983, before the bus bodies were manufactured, Superior Manufacturing went into receivership and ceased operations.
- King learned of the receivership on July 8 and informed Selland on August 12.
- Superior Manufacturing never produced the bus bodies and ultimately went out of business.
- In December 1983, Selland's customer cancelled their order, causing Selland to sell the unused bus chassis at a loss.
Procedural Posture:
- Selland Pontiac-GMC, Inc. sued George King for breach of contract in a Minnesota trial court.
- Following a bench trial, the court of first instance entered judgment in favor of the seller, King.
- The trial court denied Selland's post-trial motion for a new trial or amended findings of fact and conclusions of law.
- Selland, as the appellant, appealed the judgment to the Minnesota Court of Appeals, with King as the appellee.
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Issue:
Does a seller's failure to deliver goods constitute a breach of contract when performance becomes impracticable because the specific, named supplier, whose continued existence was a basic assumption of the contract, ceases operations, and the seller provides seasonable notice?
Opinions:
Majority - Randall, J.
No. The seller's duty to perform was discharged under the doctrine of commercial impracticability. The contract specifically identified Superior Manufacturing as the sole source for the bus bodies, making Superior's continued operation a basic assumption on which the contract was founded. When Superior ceased manufacturing, King's performance became impracticable. This situation is distinguishable from cases like Barbarossa & Sons, where the supplier was not named in the contract, and thus the risk of supply failure remained with the seller. Here, since both parties contracted with the understanding that the goods would come from Superior, and neither assumed the risk of Superior's failure, King's non-performance was excused. Furthermore, the court found that King provided seasonable notice of the delay and eventual non-delivery by informing Selland of the receivership and providing continuous updates as the situation unfolded.
Analysis:
This decision clarifies the application of the commercial impracticability doctrine under U.C.C. § 2-615 in cases involving a sole, specified source of supply. It establishes that naming a specific supplier in a contract elevates that supplier's continued existence to a 'basic assumption' of the agreement. Consequently, the unforeseen failure of that named supplier can excuse the seller's performance, shifting the risk of such a failure away from the seller. This precedent is crucial for distinguishing between a general failure of a seller's source, which is a foreseeable business risk allocated to the seller, and the failure of a specific, mutually agreed-upon source, which is treated as an excusable contingency.
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