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A material breach by either party to a bilateral contract excuses the other party from rendering any further contractual performance.
Plaintiff Magnet Resources, Inc. ("Magnet Resources") and defendant Summit MRI, Inc. ("Summit") each charged the other with a material breach of contract and sued for damages. Magnet Resources also sought damages from two officers of Summit, defendants Magdy Elamir, M.D., and Mohammed Hanafy, on the ground that they had induced Magnet Resources to continue performance of its agreements by fraudulent promises of payment. On pretrial motions for summary judgment, the claims against the individual defendants were dismissed and a partial summary judgment was entered in favor of Magnet Resources for $6,800. The parties' other breach of contract claims were tried to a jury. The jury found that both parties had breached, and it awarded $492,320 to Magnet Resources and $18,470 to Summit. Summit has appealed and Magnet Resources has cross-appealed. Summit did not object to the trial court's jury instructions. However, it argues to us that the instructions were incomplete and misleading because the jury was not told that one party's material breach relieves the other party of its duty to perform. It also contends that the charge was erroneous because the jury was not instructed that, in determining damages, it should consider that the parties might have agreed to terminate their contracts before the expiration of their terms, and that Magnet Resources had the burden of proving that its overhead was fixed. Magnet Resources contests the entry of summary judgment dismissing its fraud claims against Dr. Elamir and Mr. Hanafy. Without having moved for judgment notwithstanding the verdict or for a new trial on damages, Magnet Resources also argues that "as a matter of law, [its] damages should be increased from $492,370 to $611,863," the full amount of its damage claim.
Was Summit’s repudiation of the contract by arranging to have another firm service its installations the first material breach?
The court found that Summit’s failure to pay did not have to amount to a material breach in order for Magnet Resources to demand assurances and suspend performance. Consequently, the court held that Magnet Resources’ suspension of performance was not a breach. Summit’s repudiation of the contract by arranging to have another firm service its installations was the first material breach. Because Magnet Resources’ withholding service was not a material breach, Summit was not prejudiced by the trial court's instruction. There was therefore no legal basis for the verdict in favor of Summit. The court affirmed the judgment in favor of Magnet Resources.