Contract – Boat Construction – Breach – Anticipatory Repudiation

D.G. II, LLC v. Nix. (Lawyers Weekly No. 11-07-0398, 19 pp.) (Ann Marie Calabria J.) Appealed from Dare County Superior Court. (Alma L. Hinton, J.) N.C. App. Click here for the full text of the opinion.

Holding: Even though the plaintiff-buyer objected and said it intended to sue when the defendant-boat builder announced the boat would not be ready on time, since the plaintiff never indicated that it no longer wished to buy the boat, the plaintiff did not breach the boat construction contract by anticipatory repudiation.

We affirm the grant of summary judgment to the plaintiff.

Background

On May 11, 2006, John Floyd, on the plaintiff’s behalf, entered into a contract with defendants for the construction of a 57-foot sport fishing boat to be used in a charter-for-hire fishing business.

Under the terms of the contract, the plaintiff was required to pay a deposit in the amount of $100,000 to the defendants, and to pay the balance of the purchase price of $1.25 million within five days of receipt of notice from the defendants that the boat was completed.

Furthermore, the defendants agreed to build and deliver the boat in accordance with the specifications stated in the contract. The contract required the defendants to transfer the boat’s title and deliver possession of the boat to the plaintiff on or before July 31, 2006.

On May 11, 2006, plaintiff deposited $100,000 with the defendants.

Prior to July 12, 2006, the defendants informed Floyd that the boat would not be completed until Sept. 7, 2006, rather than July 31, 2006. On July 14, 2006, plaintiff delivered a letter to defendants explaining the reasons that defendants’ delay for completion of the boat until Sept. 7, 2006, was “unacceptable” and “disastrous.” Plaintiff also proposed a counteroffer in the July 14, 2006, letter to defendants and offered defendants one of three options.

Prior to receiving a response to the July 14, 2006 letter, plaintiff notified defendants on July 31, 2006 that it was “ready, willing and able” to perform under the contract. However, defendants did not deliver the boat to plaintiff on July 31, 2006, or at any other time.

On Aug. 3, 2006, Floyd informed defendants again that plaintiff desired to have the boat. On Aug. 9, 2006, defendants informed plaintiff that Floyd “made direct threats toward [defendants] concerning litigation that he intends to file and the damages he plans to seek.

On Aug. 10, 2006, defendants informed plaintiff, in writing, that defendants “will be terminating the contract based on [plaintiff’s] anticipatory breach. …”

On Aug. 11, 2006, plaintiff sent a letter to defendants stating that the boat “must be completed and delivered no later than Oct. 13, 2006” and proposed another counteroffer. Defendants did not respond to the proposal.

On Aug. 18, 2006, defendants informed plaintiff that it was their “understanding” that plaintiff would not be purchasing the boat. Defendants mailed a draft of an agreement which would “terminate the relationship” between the parties, and offered to refund the deposit if plaintiff released all claims it may have had against defendants under the contract.

Also on Aug. 18, 2006, defendants signed a contract to sell the boat to another buyer named Christopher Schultz for $1.475 million. The sale price to Schultz was $125,000 more than the price of the boat in the contract between defendants and plaintiff.

On Sept. 6, 2006, plaintiff sued defendants seeking specific performance of the contract, damages in an amount in excess of $10,000, and a restraining order prohibiting defendants from “selling, assigning, or in any way encumbering, damaging or misusing” the boat.

In the Oct. 2, 2009 order, the trial court granted plaintiff’s motion for partial summary judgment on its breach of contract claim. The trial court also held open for further adjudication the issue of damages on plaintiff’s breach of contract claim.

On Nov. 30, 2009, the trial court entered an order awarding plaintiff damages against defendants, jointly and severally, in the amount of $100,000, representing plaintiff’s deposit toward the purchase price of the boat, together with interest at the rate of eight percent from Aug. 10, 2006, until paid. The trial court denied plaintiff’s motion for summary judgment regarding other damages.

On April 27, 2010, the jury returned a verdict finding that plaintiff was not entitled to any additional damages from defendants. The defendants appeal.

Discussion

Defendants contend that plaintiff breached the contract by anticipatory repudiation. There is nothing in the record showing that plaintiff engaged in anticipatory repudiation. Defendants have failed to show how plaintiff indicated a refusal to perform. To the contrary, the record indicates that plaintiff was ready, willing, and able to perform under the contract, even after defendants unilaterally terminated the contract and sold the boat to Schultz.

Defendants argue that plaintiff engaged in anticipatory repudiation by notifying defendants that it would seek damages caused by the delay in the completion and delivery of the boat. However, plaintiff did not repudiate the contract, nor did plaintiff excuse or waive defendants’ delay in completing the boat. Instead, plaintiff notified defendants that it planned to pursue a lawful remedy even though it still desired to perform under the contract.

Therefore, plaintiff’s pursuit of damages was not anticipatory repudiation because when defendants failed to perform within a specified time, they became liable in damages for the delay. The only repudiation in this case was by defendants for notifying plaintiff on Aug. 10, 2006, in writing, that they were “terminating the contract based on [plaintiff’s] anticipatory breach….”

Since plaintiff did not breach the contract through anticipatory repudiation, defendants were not discharged from their duties to render performance. Defendants failed to show that plaintiff refused to perform in any way under the contract. Therefore, plaintiff was entitled to judgment as a matter of law, and the trial court properly granted summary judgment for plaintiff.

Affirmed.