William B. Tanner Co., Inc., and Pepper & Tanner, Inc. v. Wioo, Inc.
528 F.2d 262, 18 U.C.C. Rep. Serv. (West) 106, 1975 U.S. App. LEXIS 11751 (1975)
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Rule of Law:
A principal is bound by a contract under the doctrine of apparent authority if its conduct causes a third party to reasonably believe the agent has authority. An absolute and unequivocal refusal to perform constitutes an anticipatory breach, for which the aggrieved party may sue without formally accepting the repudiation, but damages for lost profits must be proven with reasonable certainty.
Facts:
- F. Eugene Waite, an employee of radio station WIOO, Inc. (WIOO), signed five contracts with the William B. Tanner Company (Tanner) for promotional jingles.
- In the contracts, Waite identified himself as WIOO's 'general manager.'
- The owners of WIOO knew Waite used the title 'general manager' and was listed as such in industry publications, but they did not object.
- Under the agreements, Tanner provided promotional materials in exchange for cash and a large number of one-minute advertising spots that were designated as 'valid until used.'
- The owners of WIOO signed numerous checks payable to Tanner for services related to these contracts without inquiring about the underlying agreements.
- On February 23, 1971, Harold Swidler, an officer of WIOO, informed Tanner's credit manager that WIOO disavowed the contracts and would not run any of the promised advertising spots.
Procedural Posture:
- William B. Tanner Company (Tanner) filed a diversity action against WIOO, Inc. (WIOO) in the U.S. District Court for the Middle District of Pennsylvania, alleging breach of contract.
- Following a non-jury trial, the district court found in favor of Tanner on one of the five contracts (Contract No. 5).
- The district court concluded that WIOO's employee had apparent authority to bind the company and that WIOO had committed an anticipatory breach.
- A judgment was entered for Tanner in the amount of $12,628, representing an unpaid cash balance and the value of 1,560 one-minute advertising spots.
- WIOO's post-trial motion to vacate the judgment or for a new trial was denied by the district court.
- WIOO (as appellant) appealed the judgment to the United States Court of Appeals for the Third Circuit.
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Issue:
Is a radio station liable for breach of contract when its employee, whom it allowed to use the title 'general manager,' signs contracts for promotional services, and if so, can the other party recover the value of unused advertising spots without proving its lost profits with reasonable certainty?
Opinions:
Majority - Garth, J.
Yes, the radio station is liable for breach of contract, but No, the other party cannot recover the value of the spots without proving its lost profits with reasonable certainty. WIOO created apparent authority in Waite by knowingly permitting him to hold himself out as general manager through his use of the title and his listing in industry publications, and by acquiescing in this conduct. Tanner reasonably relied on this authority when entering the contracts, making them binding on WIOO. WIOO's unequivocal statement that it would not run the spots constituted an anticipatory breach. The court rejects the outdated Pennsylvania doctrine requiring 'acceptance' of a repudiation, holding that modern contract law, as reflected in the UCC, allows the aggrieved party to sue immediately. However, the district court's damage award was error. Damages must compensate for loss sustained, which for Tanner was lost profits from the potential sale of the spots. Tanner failed to prove these damages with reasonable certainty, as it presented no evidence of potential customers or the price at which it could have sold the spots. Awarding damages based on WIOO's own rate card is pure speculation and fails to meet the required standard of proof.
Concurring-in-part-and-dissenting-in-part - Seitz, C.J.
Yes, the radio station is liable for breach of contract, and Yes, the other party provided sufficient evidence to recover damages for the value of the spots. I concur that WIOO is liable for anticipatory breach, although I would find that Tanner accepted the repudiation by filing suit, making it unnecessary to overturn prior state law. I dissent on the issue of damages. The majority incorrectly characterizes the spots solely as a source of future profits. The contract language identifies the spots as 'partial payment' for services rendered. Therefore, Tanner was entitled to their reasonable value as part of its compensation. The spots had value beyond resale, such as for Tanner's own advertising use or as a charitable donation. The defendant's own published rate card provided a sufficient, non-speculative basis for estimating this value with 'reasonable certainty,' especially since WIOO's own breach made it impossible for Tanner to prove resale profits.
Analysis:
This decision modernized Pennsylvania's common law of contracts by aligning the doctrine of anticipatory breach with the principles of the Uniform Commercial Code, specifically by eliminating the requirement that a non-breaching party must 'accept' a repudiation to have a valid claim. The case also serves as a strong precedent on the limits of damage recovery, reinforcing the principle that a plaintiff must prove lost profits with reasonable certainty through concrete evidence, not just by pointing to the breacher's own market prices. Finally, it provides a clear application of the apparent authority doctrine, illustrating how a principal's inaction or acquiescence can bind it to an agent's unauthorized agreements.
