In installment contracts, a late shipment of one installment may be treated as a breach of the entire contract only if the default with respect to one or more installments substantially impairs the value of the whole contract.
Appellee seller and appellant buyer entered into an installment contract, whereby appellant was to purchase aluminum. The price of aluminum fell dramatically and repudiated the entire contract. Appellant stated it was repudiating the contract based on appellee's prior late delivery of materials. Appellee filed a breach of contract action in state court, and appellant removed the action to federal court. The jury and the district court found in favor of appellee. The appellate court affirmed.
Could late delivery of shipment constitute breach of an installment contract where there was no showing that the value of the whole contract was substantially impaired?
Appellant could not repudiate installment contract based on one late delivery because appellee had cured any potential default by completing all requested deliveries before the period for cure expired. Furthermore, as an installment contract, N.Y.U.C.C. Law § 2-612(1) provided that appellant could treat a late shipment of one installment as a breach of the entire contract only if the default substantially impaired the value of the whole contract, which it did not. Finally, the jury's measure of damages was accurate because no measure other than the contract/market price differential would award appellee the benefit of its bargain.