We've talked at length in this course about contractual breaches. Indeed, the majority of the cases we've discussed does far have involved a breach or a claim of breach. Today, we're going to continue our discussion of anticipatory breach. We'll do so by examining a colorful case decided by the Supreme Court of California in 1975, Taylor v. Johnston. H. B. Taylor and his wife bread, raised and raised thoroughbred horses in Los Angeles. Two of those horses were mares named Sunday Slippers and Sandy Fork. Elizabeth and Ellwood Johnston operated Old English Rancho, a well-known horse farm that provided stallion stud services. The plaintiffs sought to have Sunday Slippers and Sandy Fork breed with the Johnston stallion, Fleet Nasrullah. In January of 1965, the Taylors and the Johnstons entered in to two contracts, one for each mare providing that Fleet Nasrullah would perform breeding services in the year 1966 for $3,500. If the mares failed to produce a life full, a return breeding would be provided the following year at no additional cost. However, in October of 1965, the Johnston sold the stallion to two men, A.G. Pressen and Leslie Combs II, horse breeders at Spendthrift Farm, in Kentucky for one million dollars. On the day of the sale, the Johnstons wrote to the Taylors advising them of the sale and telling them they were released from their reservations for the stallion. That letter seemed to have been a backhanded way of the Johnstons telling the Taylors that the Johnstons weren't going to perform their promises to provide stud services. After the Taylor's attorney wrote back demanding performance and threatening suit, the Johnstons changed their tune and they explained that they had made arrangements with the new owners to breed the Taylor's mare to Fleet Nasrullah in Kentucky. Sunday Slippers and Sandy Fork were subsequently shipped to a farm in Kentucky awaiting the opportunity to breed. Pressen and Combs upon purchasing Fleet Nasrullah had sold various individuals shares that entitled the holders to breed one mare each season to the stallion. Mares could only breed during a five day period when they were in heat. These periods occurred every three weeks. At several breeding opportunities, the Taylor's representative in Kentucky attempted to book breedings. But each time, Fleet Nasrullah was already booked. Eventually, both Sunday Slippers and Sandy Fork were bred to a former Kentucky Derby winner, Chateaugay. Both mares became pregnant, but with twins undesirable for thoroughbred racing. Because of this, the Taylors did not have to pay the fees for that stallion services. The Taylors ultimately sued the Johnstons for breach of contract. The Johnstons cross complained for stud fees. The California Supreme Court explained that because no actual breach could take place until the time specified for performance had arrived and because the mares had been bred to another horse before the time for the contractual term had ended, there had been no actual breach of contract. By contrast, anticipatory breach occurs when a party to a contract repudiates the contract in advance of performance being due. An express repudiation is a "clear, positive, unequivocal refusal to perform." An implied repudiation results from conduct where the promisor puts it out of his power to perform, so as to make substantial performance of his promise impossible. This parallels the two forms of repudiation we discussed in section 250 of the Second Restatement of Contracts. The trial court had found anticipatory breach by selling Fleet Nasrullah. The Johnston said, "Put it out of their power to perform properly their contracts." Further, the conduct of the Johnstons in the Kentucky breeders to whom they had sold Fleet Nasrullah constituted repudiation, but this court, the Supreme Court, disagreed. It explained that when a party repudiates, the other party has options. She can treat repudiation as anticipatory breach and seek damages immediately, or she can treat the contract as still in force until the time of performance arrives. And if actual breach occurs, seek remedy then. But if the party does the latter "the repudiation is nullified and the injured party is left with his remedies if any in vocable at the time of performance." We might think of a repudiation as analogous to an offer to cancel that the promisee can either accept, or reject, or that the offerer can retract. Can you identify specific moments when the Taylors repudiated the agreement based on the facts that you've learned? Well, looking at the facts, the court found two distinct potential repudiations. First, when the defendants penned their letter to the plaintiffs after selling Fleet Nasrullah and second, by virtue of the defendant's failure to provide a breeding opportunity for the mares to the stallion. The court determined that the letter was an express repudiation. But that because the Taylors had responded by demanding performance electing not to treat the repudiation as anticipatory breach, they nullified that repudiation. It's as if they had by rejecting the offer, blown up the offer to cancel the contract. Next, examining the defendants' conduct once the mares were shipped to Kentucky, the court denied that a second repudiation ever took place. There had been no express repudiation because neither the Johnstons nor their agents said they would not perform nor was there an implied repudiation. The defendants never put it out of their power to perform the contracts. They merely postponed the time of performance. Those postponements never went beyond the terms of the contract. There was thus, no anticipatory breach and the court reversed. As we studied, in the last class Restatement Section 250 defines repudiation in terms similar to those used by the California Supreme Court of repudiation is, "A statement by the obligor to the obligee indicating that the obligor will commit a breach that of itself give the obligee a claim for damages for total breach. Or B, a voluntary affirmative act, which renders the obligor unable or apparently unable to perform without such a breach." Comment B to this section explains that constitute a repudiation "a party's language must be sufficiently positive to be reasonably interpreted to mean that the party will not or cannot perform. Language that are under a fair reading, amounts to a statement of intention not to perform except on condition to which go beyond the contract. That constitutes a repudiation. We see in Taylor that the letter the Johnstons wrote upon sale of Fleet Nasrullah is a statement by the obligor that falls into Section 250 A. This is equivalent of express or repudiation. Did the defendants commit any voluntary affirmative act that would render them unable or apparently unable to perform without a breach? Well, probably not. It may have been the case that Fleet Nasrullah was booked every time the Taylor's representative tried to arrange a breeding appointment, but it's not at all evident that the defendants were unable or apparently unable to perform. The UCC Section 2-610 similarly treats anticipatory repudiation as a promisor's offered to cancel the contract, that the promisee can "For a commercially reasonable time await performance by the repudiating party, or resort to any remedy for breach, even though he's notified the repudiating party that he would await the latter's performance and has urged retraction, and in either case, suspend his own performance. One way that the UCC prods buyers not to wait too long before deciding whether to accept a seller's offered repudiation, is that the market measure of damages is limited under UCC Section 2-713 to the difference between the market price when the buyer learned of the breach and the contract price. If a buyer waits longer than is commercially reasonable, when the seller is jumping up and down telling the buyer that the seller is not going to perform, then the buyer might get less than full compensatory damages because the court may find that the buyer learned of the breach either earlier before a rise in the market price. So, what have we learned from Taylor v. Johnston? The case provided us a clear overview of the concept of anticipatory breach. We learned what constitutes both express and implied repudiation, and what options a party has if the other party to an agreement has repudiated the contract. We learned that a repudiation can be seen as an offer to cancel an agreement, which can be rejected or retracted by the repudiating party. We'll end this lesson with some historical trivia. Fleet Nasrullah's genealogical line went on to produce famous prize winning horses like the triple crown winner and Disney film subject, Secretariat. It's not surprising Fleet Nasrullah was in such high demand.
