Trinidad Bean and Elevator Co. v. Frosh
1 Neb. Ct. App. 281, 20 U.C.C. Rep. Serv. 2d (West) 462, 494 N.W.2d 347 (1992)
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Rule of Law:
Under U.C.C. § 2-713(1), when a seller anticipatorily repudiates a contract for the sale of goods, the buyer's damages are measured by the difference between the market price at the time the buyer learned of the repudiation and the contract price.
Facts:
- On April 26, 1988, Elmo Frosh, a farmer, signed a written contract to sell 1,875 hundredweight of navy beans to Trinidad Bean and Elevator Company (Trinidad) at a set price, with delivery due after the 1988 harvest.
- A Trinidad employee made an error on the contract by filling out two conflicting payment options.
- Around May 1, 1988, Frosh told Trinidad's elevator manager to 'tear up the contract.' At this time, the market price for beans was identical to the contract price.
- Due to a severe drought during the growing season, the market price for navy beans rose dramatically from approximately $16 per hundredweight in April to $36 per hundredweight by late September.
- On August 31, 1988, Frosh inquired if the contract had been torn up, and on September 8, he sent a letter to Trinidad stating he considered the contract void.
- After the harvest was completed in mid-October, Frosh failed to deliver any beans to Trinidad.
Procedural Posture:
- Trinidad Bean and Elevator Company sued Elmo Frosh in a Nebraska district court (trial court) for breach of contract.
- The trial court instructed the jury to measure damages at the time of performance (harvest time) but also allowed for defenses of mitigation and failure to cover within a reasonable time.
- A jury returned a general verdict in favor of Elmo Frosh.
- The trial court overruled Trinidad's motion for judgment notwithstanding the verdict or, in the alternative, for a new trial.
- Trinidad, as appellant, appealed the judgment to the Nebraska Court of Appeals.
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Issue:
For the purpose of calculating a buyer's damages under U.C.C. § 2-713(1), does the phrase 'at the time when the buyer learned of the breach' refer to the date of the seller's anticipatory repudiation or the later date when performance was contractually due?
Opinions:
Majority - Connolly, Judge
It refers to the date of the seller's anticipatory repudiation. The measure of damages for a buyer following a seller's anticipatory repudiation is the difference between the contract price and the market price on the date the buyer learned of the repudiation. This interpretation best harmonizes U.C.C. § 2-713 with § 2-610, which allows an aggrieved party to await performance for only a 'commercially reasonable time.' Measuring damages at the time of performance would improperly encourage speculative behavior by the buyer in a rising market and would conflict with the U.C.C.'s policy of encouraging cover. The Code's adoption of a 'commercially reasonable' standard displaced pre-Code law that allowed a buyer to wait until the performance date. Therefore, when Frosh repudiated in May, and the market price was the same as the contract price, Trinidad suffered no damages.
Analysis:
This decision solidifies the majority view on calculating damages for anticipatory repudiation under the U.C.C., favoring the 'time of repudiation' rule over the 'time of performance' rule. It effectively places a duty on the aggrieved buyer to act reasonably and promptly to mitigate potential losses by seeking cover, rather than waiting and speculating on market fluctuations at the repudiating seller's expense. The ruling clarifies that the common law doctrine of mitigation is not a separate defense under the U.C.C. in this context, but is incorporated into the Code's specific remedies like cover. This precedent provides certainty for commercial transactions by discouraging passivity and promoting efficient market behavior after a breach.
