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11.12 Business Ethics Contract Sales and Lease Contracts: Performance and Breach

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525 N.E.2d 1185 Page 1
171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878, 7 UCC Rep.Serv.2d 1106
(Cite as: 171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878)

Sales 343 182(1)

Appellate Court of Illinois, 343 Sales

Fourth District. 343IV Performance of Contract
343IV(C) Delivery and Acceptance of Goods
ALLSOPP SAND & GRAVEL, INC., an Illinois 343k182 Questions for Jury
Corporation, Plaintiff-Appellee, 343k182(1) k. In General. Most Cited
v. Cases
LINCOLN SAND & GRAVEL CO., an Iowa Cor- It is a question of fact whether a contract for sale of
poration, Defendant-Appellant. goods has been performed according to its terms
No. 4-87-0731. and trial court's determination will not be disturbed
unless it is against the manifest weight of the evid-
June 30, 1988.
ence.
Seller of sand brought suit for breach of contract
[2] Sales 343 384(1)
for the sale of goods against buyer. The Circuit
Court, Logan County, Gerald G. Dehner, J., found 343 Sales
for seller. On appeal, the Appellate Court, Knecht, 343VII Remedies of Seller
J., held that: (1) damage award did not properly 343VII(F) Actions for Damages
consider amounts that seller would save by not hav- 343k384 Damages
ing to perform under contracts; (2) seller, not buyer, 343k384(1) k. In General. Most Cited
breached contract by refusing to make special ar- Cases
rangements as provided in contract; and (3) buyer's Breach of contract damage award for buyer's breach
request for more sand after normal operating season of contract for sale of goods was to consider
of seller had ended was not commercially unreason- amount seller saved by not having to perform rest
able in light of contract between parties. of contract, and whether seller profited by buyer's
breach by being able to sell its goods on open mar-
Reversed.
ket. S.H.A. ch. 26, ¶¶ 2-708, 2-708(1).
West Headnotes
[3] Contracts 95 320
[1] Appeal and Error 30 1012.1(8)
95 Contracts
30 Appeal and Error 95V Performance or Breach
30XVI Review 95k320 k. Rights and Liabilities on Defective
30XVI(I) Questions of Fact, Verdicts, and Performance. Most Cited Cases
Findings Party suing for breach of contract must prove he
30XVI(I)3 Findings of Court substantially complied with material terms of the
30k1012 Against Weight of Evidence agreement which were attributable to him.
30k1012.1 In General
[4] Sales 343 153
30k1012.1(7) Particular Cases
and Issues 343 Sales
30k1012.1(8) k. Contracts in 343IV Performance of Contract
General; Insurance; Sales. Most Cited Cases 343IV(C) Delivery and Acceptance of Goods
343k153 k. Tender or Offer by Seller.

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525 N.E.2d 1185
171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878, 7 UCC Rep.Serv.2d 1106
(Cite as: 171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878)
Most Cited Cases
Seller's refusal to make “special arrangements” for
sale of sand at contract price, following close of its
operating season, was not commercially reasonable
in light of specific contractual terms between
parties requiring “special arrangements” to be
made, the large quantities of sand already stock-
piled by seller, and contract's duration which went
beyond normal operating season.
[5] Sales 343 152
343 Sales
343IV Performance of Contract
343IV(C) Delivery and Acceptance of Goods
343k152 k. Demand or Notice by Buyer.
Most Cited Cases
Request of buyer for more sand under contract for
sale of sand was not untimely even though sand pits
of seller had been closed due to expiration of oper-
ating season, where request was made well within
duration of contract between the two parties.
**1186 *533 ***879 Harris & Harris, Lincoln, for
defendant-appellant.
William O. Martin, Jr., Darrell A. Woolums, Martin
D. Hoke, Samuels, Miller, Schroeder, Jackson &
Sly, Decatur, for plaintiff-appellee.
Justice KNECHT delivered the opinion of the
court:
Plaintiff Allsopp Sand and Gravel, Inc. (Allsopp),
filed suit in the circuit court of Logan County al-
leging defendant, Lincoln Sand and Gravel Com-
pany (Lincoln), failed to pay for the balance of sand
due under an existing contract. The trial court
rendered a verdict for Allsopp and entered judg-
ment against Lincoln in the amount of $45,240.36.
Lincoln appeals and we reverse.
The two parties in this action are competitors in the
sand and gravel business. John and Jay Owensby,
father and son, own and operate Allsopp. In the
spring of 1986, when Lincoln's dredge became in-
operable, one of Lincoln's owners, Paul Robert Orr
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 2
(Orr), approached the Owensbys and offered to pur-
chase sand from Allsopp so Lincoln could meet its
customer's needs for the upcoming construction
season.
The parties entered into a contract in March of 1986
wherein Allsopp agreed to supply and Lincoln
agreed to purchase 50,000 tons of FA-1 specifica-
tion sand for $1.20 per ton. The contract stipulated
the *534 volume requirement would be waived if
the sand was not of FA-1 quality. Lincoln agreed to
pay the balance due under the contract by Decem-
ber 31, 1986, and to take delivery of the remaining
tonnage of sand by the spring of 1987. The sand
was to be loaded out to Lincoln's trucks during All-
sopp's regular business hours (7:30 a.m. to 3:30
p.m., Monday through Friday) and during the regu-
lar operating season (March through November).
Loading out at other times was to be by “special ar-
rangements.”
During March and April of 1986, Lincoln took de-
livery and paid $14,759.64 for 12,299.7 tons of All-
sopp sand. The balance due under the agreement,
$45,240.36, was not paid by December 31, 1986.
On February 19, 1987, Allsopp filed its complaint
in the circuit court of Logan County for breach of
contract and asked for judgment against Lincoln in
the amount of the contract balance.
Lincoln filed an answer containing general denials
and affirmative defenses. Lincoln alleged Allsopp
(1) did not supply sand of the quality specified in
the contract and (2) wrongfully refused to make
“special arrangements” to load out sand at the ori-
ginal contract price before the contract expired, but
at a time outside Allsopp's regular operating season.
The evidence presented at the bench trial was as
follows:
**1187 ***880 Lincoln returned six loads of sand
to Allsopp on March 31, 1986, because the sand
contained mud. Allsopp gave Lincoln credit for the
loads and paid for the cost of the return trucking.
Lincoln continued to take deliveries from April 1
525 N.E.2d 1185
171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878, 7 UCC Rep.Serv.2d 1106
(Cite as: 171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878)
through April 18, 1986, without complaint. All-
sopp's sand pit closed for the season on November
26, 1986.
Jay Owensby testified that Orr contacted him the
second week in December of 1986 and requested to
load out the remaining sand due under the contract.
Jay told him the pit was closed and he did not have
the manpower to load out at that time. Jay said Lin-
coln would have to pay 25 to 30 cents more per ton
to load the sand in December.
Orr then called the elder partner, John Owensby,
and the two attempted to negotiate a special ar-
rangement. John testified he told Orr they would
have to charge Lincoln extra for a load out in
December because Allsopp would have to recall
employees and pay them at union wage. Orr offered
to pay five cents more per ton and to supply one of
Lincoln's employees to facilitate the loading pro-
cess. The Owensbys refused the offer. During a
subsequent conversation in the latter part of Janu-
ary 1987, Orr told Owensby Lincoln did not intend
to pay for the balance of the sand due under the
contract.
Allsopp's expert, Loren Bloome, from the Illinois
Highway Department,*535 testified he tested All-
sopp's sand on 47 different occasions during 1986.
Each test result showed the sand met FA-1 specific-
ations.
The trial court found Allsopp had acted in a com-
mercially reasonable manner and had performed all
conditions required of it under the contract. Lincoln
was found to have waived rejection of the parties'
agreement when it took delivery of Allsopp's sand
after discovering certain loads were contaminated.
The court held the evidence sufficiently established
Allsopp had supplied FA-1 specification sand and
that Lincoln's request to load out sand in December,
outside Allsopp's regular operating season, was
commercially unreasonable. Allsopp's damages
were computed at $45,240.36.
[1] It is a question of fact whether a contract has
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 3
been performed according to its terms and the trial
court's determination will not be disturbed unless it
is against the manifest weight of the evidence. (
Ralph v. Karr Manufacturing Co. (1974), 20 Ill.
App. 3d 450, 314 N.E.2d 219.) From the record and
oral argument before us, we find not only did the
trial court miscalculate the damages, but it's entire
judgment in favor of Allsopp was against the mani-
fest weight of the evidence.
[2] We first address the issue of damages. Section
2-708 of the Uniform Commercial Code contains
the formula to compute a seller's damages caused
by a buyer's nonacceptance or repudiation. Section
2-708(1) provides:
“(1) * * * [T]he measure of damages for non-
acceptance or repudiation by the buyer is the dif-
ference between the market price at the time and
place for tender and the unpaid contract price to-
gether with any incidental damages * * *, but less
expenses saved in consequence of the buyer's
breach.” (Emphasis added.) Ill.Rev.Stat.1985, ch.
26, par. 2-708(1).
The statute clearly directs that the trial court, when
it computed damages, should have subtracted from
the unpaid contract price the amount Allsopp saved
in loading expenses as a result of the severed agree-
ment. Failure to utilize the above formula put All-
sopp in a better position than it would have occu-
pied had there been no breach of contract. Central
Information Financial Services, Ltd. v. First Na-
tional Bank of Decatur (1984), 128 Ill. App. 3d
1052, 84 Ill.Dec. 226, 471 N.E.2d 992.
In addition, we are unable to determine from the re-
cord the market price of the sand. We are also un-
able to determine whether the trial court's order
contemplates that Allsopp not only recovers dam-
ages but also retains the sand. The trial court's order
appears to require Lincoln to pay damages based on
the contract price for the *536 sand, but gives no
credit for any **1188 ***881 expenses saved by
Allsopp nor for Allsopp's ability to sell the sand to
another buyer at market price.
525 N.E.2d 1185 Page 4
171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878, 7 UCC Rep.Serv.2d 1106
(Cite as: 171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878)

[3][4] A party suing for breach of contract must the rate of $1.20 per ton and take the sand in the
prove he substantially complied with the material spring of 1987.
terms of the agreement attributable to him. (
George F. Mueller & Sons, Inc. v. Northern Illinois
Allsopp Sand & Gravel, Inc. shall load out
Gas Co. (1975), 32 Ill. App. 3d 249, 336 N.E.2d
sand during regular business hours (7:30 a.m. to
185.) After careful consideration of the contract
3:30 p.m.-Monday thru Friday) and during the
language and the contents of the record, we con-
regular operation season (March thru November).
clude Allsopp was the breaching party in this case,
Special arrangements can be made for load outs
and is not entitled to any damages.
at other times.”
The dispositive issue on review is whether All-
First, we must determine whether a price increase is
sopp's refusal to make special arrangements to load
inherent *537 in the term special arrangements. A
out sand in December at the original contract price
contract for goods will not be held invalid for in-
was commercially reasonable. The trial court is the
definiteness just because certain details of perform-
initial determiner of commercial reasonableness.
ance are not spelled out in the contract.
(Ill.Rev.Stat.1985, ch. 26, par. 1-204(2); GNP Com-
(Ill.Rev.Stat.1985, ch. 26, par. 2-311(1); Ill.
modities, Inc. v. Walsh Heffernan Co. (1981), 95
Ann.Stat., ch. 26, par. 2-311, Uniform Commercial
Ill.App.3d 966, 51 Ill.Dec. 245, 420 N.E.2d 659.)
Code Comment, at 209 (Smith-Hurd 1963).) Sec-
However, a reviewing court may overturn the trier
tion 2-311(1) applies only when the sales contract
of fact's finding if, after viewing the evidence in the
is “otherwise sufficiently definite.”
aspect most favorable to the prevailing party, it ap-
Ill.Rev.Stat.1985, ch. 26, par. 2-311(1).
pears the determination was clearly improper.
Ceres Illinois, Inc. v. Illinois Scrap Processing, Inc. Lincoln maintains the contract is indefinite and am-
(1986), 114 Ill.2d 133, 102 Ill.Dec. 379, 500 biguous due to the special arrangements language.
N.E.2d 1. Accordingly, Lincoln argues this court should con-
strue the problem term in the context of the preced-
The trial court found it was commercially reason-
ing language referring only to time, not price.
able for Allsopp to refuse to make special arrange-
ments with Lincoln in December absent an increase [5] Due to the clearly divergent positions of the
in price. Lincoln's request to load out at that time parties, the trial court's, and our own reading of the
and at the original contract price was held to be contract, we are compelled to conclude that the spe-
both unreasonable and untimely. Our interpretation cial arrangements language is ambiguous. When in-
of the term “special arrangements” leads us to the terpreting contractual ambiguity, this court “[must]
conclusion the trial court's finding was against the attempt to give a reasonable effect to all of the con-
manifest weight of the evidence, even as viewed in tract's parts and, if necessary, resolve any ambigu-
a light most favorable to Allsopp. ity most strongly against its author.” KFK Corp. v.
American Continental Homes, Inc. (1979), 71 Ill.
In pertinent part the contract provides:
App. 3d 304, 27 Ill.Dec. 420, 311, 389 N.E.2d 232,
“The volume requirement shall be waived 237 cert. denied (1980), 445 U.S. 904, 100 S. Ct.
should Allsopp Sand & Gravel, Inc. captures [sic] 1081, 63 L.Ed.2d 320.
Lincoln Sand & Gravel Co.'s major customers or
The distinction between Allsopp's seasonal operat-
if sand does not meet the FA-1 specification. If
ing hours and its load out hours is critical to our in-
Lincoln Sand & Gravel Co. does not take the
terpretation of the contract. Seasonal hours are gov-
50,000 tons by 31 December 1986, they agree to
erned by the calendar (March through November)
pay Allsopp Sand & Gravel, Inc. the balance at

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

525 N.E.2d 1185 Page 5
171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878, 7 UCC Rep.Serv.2d 1106
(Cite as: 171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec. 878)

and load out hours depend only on material **1189 McCULLOUGH and SPITZ, JJ., concur.
***882 availability. The record and oral argument Ill.App. 4 Dist.,1988.
revealed Allsopp had 30,000 tons of sand already Allsopp Sand & Gravel, Inc. v. Lincoln Sand &
stockpiled on its premises when Lincoln requested Gravel Co.
delivery in December. Allsopp argues that its sea- 171 Ill.App.3d 532, 525 N.E.2d 1185, 121 Ill.Dec.
son closed in November. This gives added import- 878, 7 UCC Rep.Serv.2d 1106
ance to “special arrangements” as Allsopp, by the
contract, agreed to deliver sand until December 31, END OF DOCUMENT
1986.

We do not believe the cost of load out in December

was such as to permit Allsopp to alter the terms of
the contract by increasing the price per ton. Since
the original price quoted to Lincoln included over-
head costs, it was commercially unreasonable for
Allsopp to charge more to make the special ar-
rangements requested by Lincoln.

Next, we consider whether Lincoln's request for

special arrangements was untimely because it was
made after Allsopp's 1986 operating season was
complete.

The contract itself was to expire on December 31,

1986, regardless of the operating season. Lincoln's
request for a special load out was made on Decem-
ber 5, 1986, a date well within the contract's life-
time. There is nothing in the contract language
which intimates that the making of such a request
was allowed only during the regular operating*538
season. Lincoln's request was not untimely given
the language of the contract.

We conclude it was against the manifest weight of

the evidence for the trial court to conclude Allsopp
had performed its contract with Lincoln according
to terms. Our holding releases Lincoln from all li-
ability on the contract.

Accordingly, we need not address the remaining

complained-of errors.

For the foregoing reasons, the order of the circuit

court of Logan County is reversed.

Reversed.

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