Selland Pontiac-GMC, Inc. v. King

Minnesota Court of Appeals · Contracts

ContractsUCC 2-615commercial impracticabilityspecified source of supplyseasonable noticenondeliverydelay in deliverybasic assumption

Facts

Selland orally agreed in April 1983 and then signed a May 12, 1983 writing to buy four school bus bodies from King for installation on chassis supplied by Selland. The writing indicated the bodies would be manufactured by Superior Manufacturing in Morris, Manitoba, but contained no completion date and no escape clause. Superior went into receivership on July 7, 1983, ceased manufacturing, and King informed Selland of the receivership on August 12 while continuing to relay information about Superior's status. The trial court found that after receiving notice, Selland acquiesced in the delay; the bodies were never made, Selland's customer later cancelled, and Selland sold the chassis at a loss.

Issue

Whether the trial court clearly erred in finding that the contract contemplated manufacture by Superior and that Selland acquiesced in the delay, and whether the trial court correctly applied Minn. Stat. § 336.2-615 to excuse King's nondelivery. Also at issue was whether King gave seasonable notice of delay or nondelivery under the statute.

Rule

Under Minn. Stat. § 336.2-615, a seller's delay or nondelivery is not a breach if performance as agreed has been made impracticable by the occurrence of a contingency whose nonoccurrence was a basic assumption of the contract, unless the seller assumed a greater obligation, and the seller must seasonably notify the buyer of delay or nondelivery. Where the contract specifies the seller's supplier as the source of the goods and that supplier ceases manufacturing, the supplier's continued production may be a basic assumption of the contract.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Omaha, Nebraska, Dana Ruiz agreed in writing to buy six custom refrigeration units from Prairie Line Equipment, a dealer. The contract stated that the units would be manufactured by North Valley Cooling in Winnipeg, Manitoba; before production began, North Valley permanently shut down without either party having known of impending closure.

If Dana sues Prairie Line for nondelivery, which is the strongest argument that Prairie Line is excused under UCC 2-615 as applied by the majority opinion?

Explanation. The majority treated the named supplier's continued manufacturing as a basic assumption where the contract itself identified that source. When that specified source ceased manufacturing, performance as agreed became impracticable unless the seller had assumed a greater obligation. The court did not hold that every supplier failure excuses performance, nor that omission of an escape clause or buyer reliance alone shifts the risk.