that the agreement may not be terminated unless the breaching party receives written notice of the breach and such breach is not cured more than 30 days after the receipt of such notice. New York law states, "[a] person receives a notice or notification when (a) it comes to his attention; or (b) it is duly delivered to [his] place of business ..." N.Y.U.C.C. § 1-201(26) (emphasis in the original). In this case, there was inadequate evidence to prove that ELO received either the April 27th or May 7th letter. Accordingly, ELO did not have notice of the breach.
Multi-State's claim that N.Y.U.C.C. § 2-607 does not require notice of a contract breach be received, is inapplicable to this case. While Multi-State accurately states the provision of § 2-607, it ignores the fact that in this case there was a specific provision requiring receipt of written notice of a breach. It is recognized within the Code itself that parties may vary the terms of the statute and determine the standards by which performance of obligation is to be measured under the code, as long as the variations do not disclaim the obligations of good faith, diligence, reasonableness, care and the standards are not manifestly unreasonable. N.Y.U.C.C. § 1-102; see also, Prompt Elec. Supply Co. v. Allen-Bradley Co., 492 F. Supp. 344, 347-48 (E.D.N.Y. 1980); Dulman v. Martin Fein & Co., 66 A.D.2d 809, 810, 411 N.Y.S.2d 358, 359 (2d Dept. 1978) (the code is to be interpreted "to allow businessmen to make the terms of their own contracts and to allow them to arrange their own affairs among themselves within the bounds of reason and fair play"). It cannot be said that the written receipt of notice requirement is unreasonable. Moreover, the court concludes that the clear and unambiguous language of the agreement, manifests the intentions of the parties. "The primary objective in contract interpretation is to give effect to the intent of the contracting parties as revealed by the language they chose to use". Sayers v. Rochester Telephone Corp., 7 F.3d 1091, 1094 (2d Cir. 1993); Nicholas Laboratories Ltd. v. Almay, Inc., 900 F.2d 19, 21 (2d Cir. 1990) (Under N.Y. law, the parties' intent will be determined by looking to the written agreement). "There is a heavy presumption that a deliberately prepared and executed written instrument manifests the true intentions of the parties". Backer Mgt. Corp. v. Acme Quilting Co., 46 N.Y.2d 211, 219, 413 N.Y.S.2d 135, 142, 385 N.E.2d 1062 (1986); Quantum Chemical Corp. v. Reliance Group Inc., 180 A.D.2d 548, 548-49, 580 N.Y.S.2d 275, 276 (1st Dept. 1992).
Multi-State offered no proof to demonstrate that the specific provision mandating written notice of a breach be received by the breaching party was not intended to be read in any way but its plain meaning. Nothing put forward indicated that Multi-State was dissatisfied or wanted to change the contract provision requiring the notice of a breach to be received. Certainly if Multi-State did not want the notice provision to apply to a breach regarding the May 1 deadline, obviously it could have so provided within the contract. In the absence of any proof demonstrating contrary intent, the court holds the provision is applicable to any claim of breach regarding the May 1 deadline. Since no notice of a breach was received by ELO prior to its performance on June 3, this Court finds that ELO cured any breach within the guidelines of the agreement. Hence, Multi-State presents no valid basis to justify non-performance of the contract.
Even if the Court were to agree that there was an uncured breach of contract by ELO, Multi-State's right to be relieved of its obligations requires a demonstration of substantial impairment of the whole contract. Inasmuch as this contract requires the delivery of goods in separate lots to be separately accepted, it is an installment contract as defined by N.Y.U.C.C. § 2-612(1). Under § 2-612(3), Multi-State's right to cancel the entire agreement required a showing of substantial impairment of the whole contract. Whether a breach constitutes "substantial impairment" is a question of fact. Stinnes Interoil v. Apex Oil Co., 604 F. Supp. 978, 981 (1985). When there is no predicate for finding that the breach substantially impaired the value of the contract, there is no basis for the buyer to repudiate the contract. "[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." Trans Works Metals, Inc. v. Southwire Co., 769 F.2d 902, 907 (2d Cir. 1985) (citing N.Y.U.C.C. § 2-612(3)). Here, there is no evidence to support Multi-States argument that failure to have the supplements ready by May 1, 1993 substantially impaired the entire contract.
Multi-State's only contention with regard to damages is that the company received oral complaints from students enrolled in the course. This claim is tenuous at best, considering that Multi-State offered no proof of any written complaints, nor did it provide any written records of the complaints, and it failed to show that it had to refund any tuition money to students. Moreover, Multi-State's students did in fact receive eight of the nine promised outline on time and subsequently received the supplement more than a month prior to the bar exam.
Finally, Multi-State's own actions demonstrate the minor nature of any breach. When ELO shipped the goods in June, Multi-State made no effort to expedite delivery. Because it was responsible for the cost of shipping, it could have utilized any delivery method it desired, including overnight mail. Instead, Multi-State opted for UPS delivery, which is far from the fastest method. Inasmuch as Multi-State's actions do not indicate significant urgency, it would be very difficult for the court to so find.
Nor can it be said that the June delivery of the supplements had any effect on future enrollment in Multi-State's course. After the 1993 course, Multi-State no longer offered the full service California bar review course. It is undisputed that Multi-State's decision was unrelated to the instant action. Since Multi-State no longer offered the full service course, ELO's breach could not have had any damaging effect whatsoever for subsequent years.
The very purpose of the substantial impairment requirement of N.Y.U.C.C. § 2-612(3) is to preclude a party from canceling the contract for trivial defects. Multi-State has failed to demonstrate any substantial or lingering harm incurred from ELO's failure to have the supplement ready by May 1, 1993. Accordingly, Multi-State had no legal justification for not performing on the contract.
ELO seeks an award of $ 60,000 in damages as measured by the minimum contract price, less the cost of performance, which ELO asserts is zero. It is undisputed that Multi-State's minimum obligation for the second and third years of the contract is $ 60,000. Since the outlines were already prepared during the first installment year, ELO's obligation, for years two and three of the agreement was limited to updating the outlines. No proof was put forward by Multi-State indicating that ELO would have incurred additional expenses. Accordingly, the court credits ELO's contention and determines the cost of performance amounts to zero. Moreover, outside costs for printing and shipping were to be borne by Multi-State, and therefore, ELO's damages incurred by Multi-State's breach amounts to $ 60,000.
Repudiation of a contract occurs when "there has been an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance." Teachers INS. & Annuity v. Coaxial Communication, 807 F. Supp. 1155, 1159 (S.D.N.Y. 1992); 200 East 87th Street Associates v. MTS, Inc., 793 F. Supp. 1237, 1253 (S.D.N.Y. 1992); see also, N.Y.U.C.C. § 2-610. Here, there can be no doubt that Multi-State's fax sent to ELO on August 23, 1993 unequivocally repudiated the contract. It is equally clear that "a wrongful repudiation of the contract by one party before the time for performance entitles the nonrepudiating party to immediately claim damages for a total breach." American List v. U.S. News, 75 N.Y.2d 38, 40, 550 N.Y.S.2d 590, 593, 549 N.E.2d 1161 (1989) (New York Court of Appeals holding that after buyers agreed to a 10 year contract but canceled after one year, damages in the amount of the entire contract price was proper). Appropriate damages are those "general damages which are the natural and probable consequence of the breach." Kenford Co. Inc. v. County of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3, 537 N.E.2d 176 (1989). The natural and probable consequence of the breach by Multi-State would be the $ 60,000 ELO was still to receive for the second and third years.
ELO's failure to sell the prepared outlines elsewhere in order to mitigate damage is of no moment. There appears to have been no realistic possibility that ELO would have been able to resell the outlines at a reasonable price. In an action to recover the balance due on an installment contract, the seller may recover "the price of goods identified in the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing". N.Y.U.C.C. § 2-709(1)(b). The evidence clearly demonstrates that the outlines prepared to Multi-State's specifications have no value to other buyers. As both parties agreed, Multi-State's only competitors in the California bar review market, BAR-BRI and BarPassers, already possessed their own materials. Indeed, Multi-State presented evidence that the reason it approached ELO was to increase the number of its materials to approach the amount of materials the other courses already offered to their students. Accordingly, ELO is entitled to damages in the amount of $ 60,000.
Multi-State is not entitled to any damages on its counterclaim. As previously discussed, Multi-State has failed to prove that it incurred any significant damage. Although it claims that ELO caused "irreparable damage to its reputation", Multi-State did not present evidence to support this assertion. The short of the matter is that Multi-State failed to submit any proof of damages other than Feinberg's bald testimony that some students complained. Multi-State failed to show any declining enrollment, withdrawals from the course, written complaints from students, or even memoranda it kept regarding the complaints. Hence, Multi-State has not demonstrated irreparable damage to its reputation. Without more, the court dismisses out of hand Multi-State's counter claim.
With regard to ELO's claim, the court determines that while ELO's delay in delivering the supplement breached the agreement it was cured under the terms of the contract. Moreover, the delay in delivery did not substantially impair the value of the instant contract with Multi-State. Accordingly, Multi-State was not entitled to cancel its performance thereof. Therefore, ELO shall recover the sum of $ 60,000 plus prejudgment interest at the New York statutory rate accruing from August 23, 1993, which represents the date when Multi-State repudiated the contract. Further, Multi-State's counterclaim is hereby dismissed. Each party shall bear its own expenses.
The Clerk of the Court is directed to enter judgment accordingly.
IT IS SO ORDERED
Dated: August 31, 1995
New York, New York
Bernard Newman, U.S.D.J. by designation