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Where one party substantially breaches a contract, the other party to it has a defense and an excuse for nonperformance. The breaching party cannot claim damages for the nonperformance of a contract as to which he is in default.
Defendant buyer agreed to purchase a "book of business" from the plaintiff seller, an insurance agency. After problems arose between the parties, the buyer stopped making payments on the promissory note. The seller filed suit to enforce the contract of sale. The buyer filed a separate suit against the seller and the seller's owner, alleging breach of contract. The cases were consolidated and the trial court ruled that the contract was a nullity due to lack of a specific object and refused to award damages to either party. The seller appealed. The buyer answered the appeal, seeking damages.
On appeal, the court held that the trial court erred in ruling that the contract was void due to the lack of a specific object. The parties clearly understood what was being bought and sold. However, the seller was not entitled to relief because the seller's owner breached the contract by soliciting the business that he sold to the buyer. Because of the seller's breach, the buyer had an excuse for nonperformance. The buyer was not entitled to damages because there was no showing of bad faith on the part of the seller's owner and because any award for loss of business revenues would be speculative. However, the buyer was entitled to recoup the payments he made to the seller's owner after the time that the seller's owner actively breached the contract.