Reliance
Cooperage contracted to buy 300k oak bourbon staves (barrels) from Treat
for $450 per thousand, by December 31st.
By
August, the price for materials has risen significantly, and Treat wanted
to raise the price to $625 per thousand.Reliance refused and sued.
Reliance
wanted to recover the difference between the price in December ($625) and
the contract price ($450).
The
Trial Court found for Treat, and ruled the Reliance could have, upon
receiving Treat's refusal to perform, bought similar staves by reasonable
efforts and without undue risk or expense.Therefore, they were only due the difference between
the price at time of refusal and the contract price.
Appellate
Court reversed.Claiming that
the doctrine of anticipatory breach by repudiation is intended to aid the injured party, and any
effort to convert it into a benefit to the repudiator should be resisted.
Ordinarily
there is no duty to mitigate until there are damages to mitigate, and
this would not have occurred until Dec 31st.If Treat changed his mind and
decided to comply with the contract, Reliance would have had to accept
and pay for the staves.
An anticipatory
breach occurs on a clear repudiation
of a party's contract duties before the time has come for performance.
So,
what time should be used to determine damages?Measuring market price at the time of the seller's
repudiation gives the seller the ability to fix buyer's damages and may
induce the seller to repudiate rather than abide by the contract.On the other hand, measuring
damages at the time of performance will tend to dissuade the buyer from
covering, in hopes that the market with continue upward.Courts came up with the concept
of reasonable time as a
compromise.This means that
if the seller repudiates, the buyer's damages should be calculated by use
of the market price at the expiration of a commercially
reasonable time after the buyer has
learned of the repudiation.
