United States v. Seacoast Gas Co.
204 F.2d 709 (1953)
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Rule of Law:
A party that has anticipatorily repudiated a contract cannot retract its repudiation after the non-breaching party has taken definite action indicating the breach has been accepted as final, such as by accepting a bid for a replacement contract.
Facts:
- Seacoast Gas Company had a contract to supply gas to a federal housing project from April 1947 to June 1948.
- On October 7, 1947, Seacoast sent a letter to the housing authority stating its intent to cancel the contract effective November 15, 1947.
- In response, the housing authority advertised for new bids to secure a replacement gas supply.
- On November 6, 1947, after Trion Company submitted the lowest bid, the housing authority notified Seacoast that it had three days to retract its repudiation or Trion's bid would be accepted.
- The president of Seacoast, Mr. Zell, who was also the president of Trion Company, was present at the bid opening and refused to retract Seacoast's repudiation.
- After the three-day period expired without a retraction, the housing authority accepted Trion's bid on November 10, 1947.
- On November 13, 1947, Seacoast attempted to retract its repudiation and rescind its notice of cancellation.
- The formal written contract with Trion was signed on November 17, 1947, after Trion had furnished its required performance bond.
Procedural Posture:
- The plaintiff (the federal Public Housing Authority) sued Seacoast Gas Company and its surety in a federal district court (court of first instance) for damages from an anticipatory breach of contract.
- The case was tried to the court without a jury.
- The district court found that Seacoast had timely withdrawn its repudiation and entered a judgment for the defendants.
- The plaintiff, as appellant, appealed the judgment to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does a party's retraction of an anticipatory repudiation of a contract effectively heal the breach if it occurs after the non-breaching party has accepted another's bid for performance but before a formal contract with the new bidder is signed?
Opinions:
Majority - Hutcheson, Chief Judge
No. A party's retraction of an anticipatory repudiation is ineffective once the non-breaching party has materially changed its position or taken definite action accepting the breach as final. The court reasoned that the opportunity to retract the repudiation, known as the locus poenitentiae, ends when the non-breaching party takes such definite action. In this case, that action occurred when the housing authority, after giving Seacoast a three-day ultimatum, accepted Trion Company's bid on November 10. The court rejected the argument that the retraction was timely because it occurred before the formal signing of the new contract, holding that the acceptance of the bid was the dispositive event that closed the door to retraction.
Analysis:
This decision clarifies the point at which an anticipatory repudiation becomes irreversible. It establishes that the non-breaching party's right to cover and seek damages solidifies when it takes definite action in reliance on the repudiation, not necessarily upon the final execution of a replacement contract. This provides commercial certainty for non-breaching parties, allowing them to mitigate damages promptly without being subject to the whims of a repudiating party who might attempt to retract at the last minute. The ruling underscores that accepting a new bid is a sufficient change of position to make the original repudiation final.
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