Ralston Purina Co. v. McNabb - 381 F. Supp. 181 (W.D. Tenn. 1974)

Rule:

The standard for interpreting the actions of parties in a contract action is the reasonable man standard. Thus any course of performance accepted or acquiesced in without objection shall be relevant to determining the meaning of the agreement and such course of performance shall be relevant to show a waiver or modification. Tenn. Code Ann. § 47-2-208(1), (3) and § 47-2-209 (1964). The code attempts to give effect to all necessary and desirable modifications of sales contracts without regard to technicalities. Tenn. Code Ann. § 47-2-209 cmt. 1 (1964). Underlying the code policy favoring preservation of contracts and the allowance of modifications is the strict requirement that all actions of parties must be in good faith, thus in order to have a valid contract modification, especially when that modification may favor a merchant, the modification must be made in demonstrable good faith. Tenn. Code Ann. § 47-2-209 cmt. 2 (1964).

Facts:

Plaintiff, Ralston Purina Company, sued defendant, F. R. McNabb, a West Tennessee farmer, for breach of contract, alleging that defendant failed to deliver 3,771 bushels of the 8,000 bushels of soybeans due under two contracts entered into by the parties in early September, 1972. Defendant made only one delivery to plaintiff prior to the deadline. Plaintiff sent and defendant received one-month letters of extension for both contracts for the months of December, January and February. Defendant farmer defendant on two grounds: (1) that the severe weather made performance of his contract impossible (Tenn. Code Ann. § 47-2-615) and (2) in the alternative, any damages (Tenn. Code Ann. § 47-2-713) that the company was entitled to should have been calculated as of the last date for performance under the contracts.

Issue:

1. Was the plaintiff entitled to damages for the defendant’s alleged breach of contract? 
2. Should the damages be calculated as of the defendant’s last delivery date? 

Answer:

1) Yes. 2) Yes.

Conclusion:

The court held that the defense of impossibility was unavailable to the defendant since there has been no showing that the contract was to sell a crop from specified land, and therefore no such issue was submitted to the jury. With respect to the defendant’s second defense, the court found that the objective facts all pointed to valid extensions of the contracts. Each time the company offered to extend the contract deadline to the end of the month, the farmer objectively indicated acceptance of the extension by delivering soybeans after the date of the offer and accepted the contract price although the market price was then higher. Thus, the final date for delivery was mutually extended and, absent bad faith, damages normally would have had to be calculated at some point after the final delivery date. However, the court found that the company possessed certain knowledge that it could not, in good faith, have modified its contracts with the farmer in such a way. The court based its award of damages in favor of the company on the last delivery date instead of the extensions as argued by the company.