SACKETT v. SPINDLER, California Court of Appeal (1967)
Facts: Sheldon Sackett (Plaintiff) entered into a contract to buy stock from Paul Spindler (Defendant). The contract stipulated that Sackett was to make three payments due on specified dates. Sackett made the first payment on time and the second payment a few days after it was due. He rendered a check for the third payment prior to its due date, but this check was drawn on insufficient funds. Sackett informed Spindler that he would be able to pay the balance by September 22. Spindler notified Sackett that if he did not receive the funds by that date, he would not consider completing the sale and he would assess damages for Sackett’s breach of contract. Sackett failed to make the payment on September 22 and Spindler extended the due date until September 29. Again, Sackett failed to make the payment on time. On October 4, Sackett sent a telegram to Spindler stating that he was now “ready, eager and willing” to complete the transaction. On October 5, Spindler wrote a letter to Sackett stating that he was unwilling to complete the transaction due to Sackett’s delay in performing the contract. Sackett filed suit for breach of contract, claiming that Spindler’s October 5 letter constituted unlawful repudiation of the contract. Spindler filed a cross-complaint for breach of contract. The trial court held that Sackett’s refusal to pay the specified amounts by the specified dates constituted an unjustified breach of the agreement. The court entered judgment in Spindler's favor, and Sackett appealed to the California Court of Appeal.
Issue: Did Sackett's failure to tender the balance due under the contract by the agreed dates and subsequent delays constitute a total breach of contract, thereby justifying Spindler's termination of the agreement and entitlement to damages?
Rule: A breach of contract occurs when a party fails to perform any promise which forms the whole or part of the contract. For the injured party to terminate the contract and claim damages for a total breach, the breach must be material. Materiality depends on several factors, including the extent to which the injured party will be deprived of the benefit which they reasonably expected, the extent to which the injured party can be adequately compensated, and the likelihood that the breaching party will cure their failure to perform.
Application:
1. Materiality of the Breach: Sackett’s breach was deemed material due to his consistent failure to make the final payment despite multiple extensions. The court considered his breach as unjustified and a significant failure that deprived Spindler of the timely and complete purchase price.
2. Spindler’s Termination Justified: Given Sackett’s repeated delays and failure to provide the final payment, Spindler was justified in terminating the contract. The court found that Sackett's behavior and failure to perform were not due to uncontrollable circumstances but rather due to gross negligence or willful conduct.
3. Measure of Damages: The court calculated Spindler’s damages based on the difference between the contract price and the amount Spindler ultimately received from the resale of the stock, considering there was no available market for the stock at the time of breach. This approach was justified by the lack of a clear market price at the breach date.
4. Interest Award: The court removed the interest component from the judgment because the exact timing of Sackett’s breach was unclear, and the amount of damages was not certain until the court determined the stock's market value at the time of breach. Thus, calculating interest on an uncertain and undetermined amount would have been improper.
Conclusion: Sackett's failure to perform his obligations under the contract constituted a total breach, justifying Spindler's termination of the contract and entitlement to damages. The trial court's judgment was affirmed, except for the modification regarding the award of interest, which was deleted.
Feedback:
Breach of contract due to nonperformance of the duty
Once you determine the other party’s breach is material, you can repudiate; otherwise, you will be the party breaching the contract. You should be very careful.