Running head: CASES 14.2 & 20.3 – BREACH OF CONTRACT
Analysis of Cases Involving a Breach of Contract
Whitney Milford
MACC511 – Legal Aspects of Financial and Commercial Transactions
March 31, 2013
Professor Steve Adams
Southwestern College Professional Studies
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Abstract
The first case discussed in this paper includes a car dealership, Scoggin-Dickey, selling a
pick-truck to Romero in exchange for two trade-in vehicles, factory rebates, and cash payment.
Once Romero had ownership of the new pick-up truck, he informed the dealership of the location
of his two trade-in vehicles. After inspection of these vehicles, the dealership found that they
were worth little to no value and they proceeded to repossess the truck they had sold to Romero.
They offered him a refund of his down payment but he refused and took them to court based on
his argument that they were not allowed to inspect the vehicles once the contract was signed and
accepted. He must have been unaware that in order for a contract to be completed, the buyer
must accept the goods that are being sold to them as satisfactory before they remit a payment. In
this case, the dealership did not accept the vehicles that were being traded in and therefore the
contract could be voided.
The second case that discusses breach of contract is between a company looking to buy
an industrial tank, Les Enterprises, and the company they purchased it from, Dinsick Equipment.
This breach of contract is different than the one from the prior case. In this case, Les Enterprises
had submitted the payment in full to Dinsick Equipment for the tank they purchased. Dinsick
Equipment then notified Les Enterprises where they could pick the tank up from. Once Les
Enterprises hired and paid a delivery service to pick up the tank, they found that the tank was
never at the specified location. Dinsick Equipment owned up to their breach and agreed to pay
Les Enterprises back the money they had spent. Dinsick Equipment ended up never paying them
back, as promised. Because of this, they were ordered to pay back the amount owed and also to
pay for the shipping charges that were paid by Les Enterprises because they were incurred due to
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the tank not being at the pickup location. If Dinsick Equipment would have made sure that their
materials were in the correct locations they could have avoided this suit. It is important in a
company to have accurate communication.
In each of these cases, it was the seller that breached the contract (although Romero was
considered a buyer and a seller). The buyer and the seller both have obligations that they are
required to uphold and when they fail to do so, they have breached the contract at hand. Even if
the breach happened by mistake, there will be consequences and compensation will be required.
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Analysis of Cases Involving a Breach of Contract
In this final paper, I have decided to take the discussion of a case and expand on it. I want
to look at two different cases and see how they relate and how the ruling in each one differs. The
cases that I have chosen are from the chapter fourteen case sheets over performance and breach
of sales and lease contracts. I have studied the cases and will provide a summary of each, I will
discuss the literature that the cases cover, and I will supply a thought out and well argued point
of view on the cases.
Summary of Case 14.2 – Romero vs. Scoggin-Dickey
Jessie Romero seems to be a very simplistic person who thinks he can get away with little
white lies; this is said in regards to his purchase of a 2006 Silverado pickup from ScogginDickey Chevrolet-Buick in Lubbock, Texas. The initial meeting and negotiations for the
purchase of the pickup were on December 23, 2006. Romero went to the dealership and
“proposed to purchase the pickup by assigning the dealership the factory rebates, supplying two
trade-in vehicles (a 2003 Mitsubishi Montero SP and a 2002 Chevrolet Silverado pickup), and
paying the cash difference” (Case Sheets).
At the time of his appearance, he did not have the vehicles with him nor did he have any
proof of their value. In the negotiations for the contract, “Dickey agreed to sell Romero the 2006
Silverado pickup for $21,888. In return, Romero agreed to trade in two vehicles having a
combined net value of $15,000, assign factory rebates totaling $3,000, and pay $4,333.52 in
cash” (Case Sheets). After this was all said and done, Romero had possession of the pickup but
the dealership had not transferred the title to him. The transfer of title would take place after the
inspection of the trade-in vehicles.
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Romero let the dealership know where they could find the Montero and eventually, after
many weeks, he informed them that the 2002 Silverado was in repair at a shop. “The pickup was
not in running condition and was eventually towed to Scoggin-Dickey” (Case Sheets). After the
dealership was finally able to inspect the vehicles, they came to the conclusion that they were
worth basically nothing. The dealership repossessed the 2006 Silverado and “made two
settlement offers to Romero pertaining to a partial refund of his down payment”, which he
denied (Case Sheets). His argument was that the dealership had no right to inspect the vehicles
after the contract was already signed.
The counter argument to this was that, according to the Texas UCC, all motor vehicles
are included in the term “goods” and that the purchaser has the right to inspect their purchased
goods before payment or acceptance of those goods takes place. This gave Scoggin-Dickey full
rights to inspect and reject the trade-in vehicles. It was also found that the contract was never
completed because the right of ownership, the title of the vehicle, was never transferred to
Romero.
The court concluded that Scoggin-Dickey had to repay Romero for his initial down
payment and court costs while Romero had to remove the so called “trade-in vehicles” from the
Scoggin-Dickey lot.
Summary of Case 20.3 – Les Enterprises vs. Dinsick Equipment Corporation
Sometimes in a business, everything doesn’t go as smoothly as planned. That doesn’t
give the parties any excuse not to fix the problems or compensate for their mistakes. In this case,
Les Enterprises was searching for the purchase of a “30,000-gallon industrial tank” (Case
Sheets). They found such tank at Dinsick Equipment and entered into an agreement (contract) for
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the sale of the tank for $70,000. Les Enterprises made two payments for the tank in the totals of
“$10,000 and $60,000, respectively” (Case Sheets).
Not long after the payments were sent, Dinsick Equipment notified Les Enterprises that
the tank was ready to be picked up at their location in Joplin, Missouri (Case Sheets). It was
noted on their invoice that no freight was included, meaning that the purchaser would either have
to pick up the tank or hire someone to do so. Due to this, Les Enterprises hired a hauling
company to deliver the tank from Joplin to their location in Quebec, Canada costing them
$7,459.38 (Case Sheets). When the hauling company showed up to deliver the tank, it was not
there so they were unable to deliver it with no refund to Les Enterprises.
Les Enterprises proceeded to inform Dinsick Equipment of their mistake. They agreed to
reimburse their $70,000 and failed to act on their promise. The court ruled in favor of Les
Enterprises and ordered Dinsick Equipment to pay, not only the cost of the tank but, the tank
plus the added shipping charges under incidental damages. “Under the Illinois Uniform
Commercial Code, ‘incidental damages resulting from a seller's breach include expenses
reasonably incurred in the inspection, receipt, transportation, and care and custody of the goods
rightfully rejected, any commercially reasonable charges, expenses or commissions in
connection with effecting cover and any other reasonable expenses incident to the delay or other
breach’ (Case Sheets).
Legal Literature
In each of these cases, there are buyers and sellers. In the first case, both parties are
considered to be buyers and sellers because Romero was selling his two trade-in vehicles to
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Scoggin-Dickey and in return, Scoggin-Dickey was selling Romero the 2006 Silverado. In the
second case, the buyer was Les Enterprises and the seller was Dinsick Equipment.
A seller has an obligation to uphold for its buyer. In order for a contract to be fulfilled,
the seller must deliver or “tender delivery” of the purchased goods to the buyer. The “tender of
delivery occurs when the seller makes conforming goods available to the buyer and gives the
buyer whatever notification is reasonably necessary to enable the buyer to take delivery” (Miller,
253). Due to this definition, we can see how Dinsick Equipment breached their contract with Les
Enterprises. They notified their buyer that the delivery was ready but it turned out to be a false
statement.
As stated earlier, the seller is obligated to deliver or tender goods and the buyer is then
obligated to pay for them. According to Miller, “the UCC preserves the perfect tender doctrine
by stating that if goods or tender of delivery fails in any respect to conform to the contract, the
buyer has the right to accept the goods, reject the entire shipment, or accept part and reject part”
(pg. 253). Looking back at the first case regarding the trade-in vehicles, the vehicles were
rejected by the dealership. They had the right to do so after receiving and inspecting their
purchased goods and realizing that they were not in a satisfactory condition.
In the same way that a seller has obligation to their buyer, so does a buyer to their seller.
A buyer’s obligation to a seller is to accept the goods that they purchased and to send payment.
In the cases discussed, sending a payment was never an issue between buyers and sellers. What
was discussed in the cases was the acceptance of the goods. In the first case discussed, the tradein vehicles provided by Romero turned out not as promised. The buyer, Scoggin-Dickey, had the
“right to inspect the goods before making payment. This right allows the buyer to verify, before
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making payment, that the goods tendered or delivered are what were contracted for or ordered”
(Miller, 257). This proves Romero’s argument, that the dealership had no right to inspect the
trade-in vehicles after the contract was formed, was false.
Along with this proof that Scoggin-Dickey did, in fact, have the right to refuse the
vehicles, the vehicles are considered nonconforming goods. This term is used when the “goods
by the seller fail to conform to the contract in any respect. If the buyer rejects the goods, she or
he may then obtain cover, cancel the contract, or sue for damages for breach of contract” (Miller,
262). Romero had the dealership believe that the vehicles that he was trading were in working
condition and had a specific value. When Scoggin-Dickey inspected the vehicles, it was proven
that they were nonconforming to the contract.
In the second case discussed, the term “incidental damages” was covered. These damages
are referred to as “the costs resulting from the breach” of a contract (Miller, 259). The shipping
charges that Les Enterprises had to pay fall into this category. Since Dinsick Equipment failed to
provide the 30,000-gallon tank that they said was available for pick-up, they were ordered to
repay Les Enterprises for the shipping charges that they incurred.
Argument for the Ruling
Case #1
In the first case, Romero vs. Scoggin-Dickey, I agree to the ruling provided by the court.
In any agreement, whether it is in a business setting or between friends, it is common knowledge
that what is agreed upon should be received. In this case, Romero and Scoggin-Dickey agreed
that the sale of a 2006 Silverado would take place in exchange for two trade-in vehicles, rebates,
and a down payment.
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I stated above that I felt like Romero was acting very simplistically when he entered into
this contract. A valid contract, as stated in our text, has four elements: “an agreement (offer and
acceptance), supported by legally sufficient consideration, for a legal purpose, and made by
parties who have the legal capacity to enter into the contract” (Miller, 136). This contract, based
on these requirements, is valid. What this case lacks, is the execution.
As stated above, a buyer has the right to inspect their goods before paying for them. This
covers if something is undelivered, damaged during delivery, or in this case, not in the promised
condition upon delivery. I don’t see how Romero thought that he could get away with agreeing
to trade in two vehicles that don’t even run for a new one. If this were the case and, like Romero
claimed, the buyer was not allowed to inspect their goods before accepting them, there would be
little to no trust in business transactions. People would try to scam each other into a contract and
then once the buyer fulfills their end of the contract, the seller would deliver them something that
is not even close to what they had agreed on.
Especially in the automobile industry, there are ways of deciding on a products value. In
this case, the value of the trade-in vehicles wasn’t nearly what the contract stated and the seller
was right in repossessing the vehicle and filing a suit against Romero.
Case #2
In the second case discussed, Les Enterprises vs. Dinsick Equipment, I also agree with
the ruling. Again, in any contract, it is common knowledge that what is agreed upon in the
contract will be received. This case differs from the first in the fact that the goods agreed on were
never delivered at all; opposed to being delivered in a nonconforming condition.
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The goods being delivered in this contract consisted of a 30,000-gallon tank. Since the
invoice stated that the delivery of the good was not included, the buyer had to provide their own
means of delivery. Everything seemed to be going smoothly until the haul could not be found at
the location that was stated. The seller, Dinsick Equipment, even agreed that they breached their
contract and would repay Les Enterprises for their purchase.
In researching the terms in regards to this case, I also agree with the ruling that Dinsick
Equipment must repay Les Enterprises for their shipping fees. They were under the impression
that Dinsick Equipment had delivered their tank to a specific location. Due to incidental damages
covered under the UCC, the shipping charges incurred by Les Enterprises were a result of the
seller’s breach of contract. The court ruled that this charge must be repaid along with the cost of
the tank.
Conclusion
In concluding these two cases, it is easy to say that what is agreed upon in a contract
must be delivered as stated. There are many obligations that a buyer and a seller owe to each
other and if one side doesn’t hold up their end of the deal, they have breached the contract and
the other party has the right to sue them and/or to get their goods back. A buyer and seller have
many different rights that each should study before entering into a contract so that they are fully
aware of what standards that they are being held to and what they should expect from the other.
If expectations aren’t met, a lawsuit can be the result.
In each of these cases, one party of the contract didn’t hold up their end of the deal. In the
first, Romero overpriced his trade-in vehicles. It seems like, after the inspection results came
back, that he knowingly overpriced them. The pick-up was not running and was in the shop and
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the results of the inspection showed that neither vehicle was worth any commercial value.
Entering into an agreement like this seems, for lack of words, silly. Offering a car dealership two
piece of junk cars, that are worth nothing, in exchange for a brand new truck screams fraud to
me. I almost feel that the court should have given Romero a punishment for his actions. The only
reprimand that was made in the ruling was that the 2006 Silverado was to be returned to the
dealership and Romero was given his down payment back. I think that the dealership should
have been compensated for their time and resources that were wasted on Romero’s behalf.
In the second case, Dinsick Equipment failed to deliver the goods as promised. When
Dinsick Equipment notified Les Enterprises that their tank was ready to be picked up, Les
Enterprises took the next step in the process and hired a company to haul the tank to their
location. Upon arrival, the tank was not found and Les Enterprises was out the money spent on
the delivery. This case is somewhat confusing because Dinsick Equipment agreed to repay Lew
Enterprises. They had received payments for the tank and could have just returned the payment
and avoided a trial. It makes me wonder if they might have already spent the money on
something else and were trying to avoid making the payment until a later date. Since they failed
to repay Les Enterprises in a timely manner, they were sued and, in the process, were ordered to
compensate Les Enterprises for the amount of shipping that was paid due to breach of contract.
In a business transaction, parties enter into an agreement in confidence that they will
uphold their end of the deal and that they will receive what is promised. It is smart for each
party, the buyer and the seller, to state their exact desires in their contract so that there is no
confusion on what is to be delivered. If something is left out or if generic terminology is used,
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the court can find that the breach doesn’t necessarily exist. It is important to be thorough and
concise.
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References
Miller, R.L. (2013). Fundamentals of Business Law: Summarized Cases (9th Ed.). Mason, OH:
Wadsworth, Cengage Learning, Inc.
Miller, R.L. (2013). Fundamentals of Business Law: Summarized Cases (9th Ed.). Mason, OH:
Wadsworth, Cengage Learning, Inc. (Case Sheets).