Cherwell-Ralli, Inc. v. Rytman Grain Co. - 180 Conn. 714, 433 A.2d 984 (1980)

Rule:

If there is reasonable doubt about whether a buyer's default is substantial, a seller may be well advised to temporize by suspending further performance until it can ascertain whether the buyer is able to offer adequate assurance of future payments. But if the buyer's conduct is sufficiently egregious, such conduct will, in and of itself, constitute substantial impairment of the value of the whole contract and a present breach of the contract as a whole.

Facts:

When the buyer became concerned that the seller would not complete an installment contract, the seller gave assurance that deliveries would continue if the buyer made outstanding payments. The buyer sent the seller a check to cover the prior shipments but stopped payment when he was informed by a third party that the shipment was the last load. The seller sued the buyer for the nonpayment of moneys due and owing for accepted deliveries of products. The buyer counterclaimed for damages arising out of the seller’s refusal to deliver remaining instalments under the contract. The district court entered a judgment for the seller. The buyer appealed, arguing that the seller was not permitted to terminate the contract despite repeated default in payment without invoking the insecurity methodology of Conn. Gen. Stat. § 42a-2-609.

Issue:

Did the buyer’s conduct constitute a breach of contract, thereby warranting the district court’s entry of judgment in favor of the seller?

Answer:

Yes.

Conclusion:

On appeal, the court concluded that the buyer's conduct, which was sufficiently egregious, constituted substantial impairment of the value of the whole contact and a represented a breach of the contract as a whole. The seller was expressly permitted by Conn. Gen. Stat. § 42a-2-703(f), upon breach of the contract as a whole, to cancel the remainder of the contract with respect to the undelivered balance. The seller's remedy to cancel was not waived by the lawsuit seeking recovery for payments due. While Conn. Gen. Stat. § 42a-2-612(3) stated that a contract was reinstated if the seller brought an action with respect only to past installments, the court found that the seller intended to bring to contract to an end because of the buyer's breach.