Anticipatory Repudiation Case Study

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MEMORANDUM

TO: Nancy Francisco
FROM: Jessica Palm
DATE: September 9, 2017
RE: Sheila Clownfish - Anticipatory Repudiation

FACTS Sheila Clownfish entered into an agreement with Robert Anemone in September 2016, whereby Robert agreed to serve as the exclusive marketer-distributor for Sheila’s business for five years. Two weeks ago, Robert told Sheila, “I am experiencing financial troubles, and unfortunately can no longer market or distribute your products.” When Sheila reminded him of their agreement, he replied, “I regret that our agreement did not work out as planned.” Sheila then negotiated a new marketer-distributor contract with a company called Aquamarine to replace her agreement with Robert. A few days ago Shelia received a letter
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Yes. Robert’s statements constituted an anticipatory repudiation of the exclusivity agreement because his refusal to perform was distinct, unequivocal, and absolute.
II. Yes. Sheila elected to treat the repudiation as final when she materially changed position. Therefore, Robert’s anticipatory repudiation was effective.
DISCUSSION
In Guerrieri v. Severini, the California Supreme Court held that a clear repudiation of a contract by one party would justify the other party treating the repudiation as final, making the repudiation an effective breach of the contract. 51 Cal. 2d 12, 19 (1958).
I. Robert’s Statements Constituted Anticipatory Repudiation of the Exclusivity Agreement Because His Refusal to Perform Was Distinct, Unequivocal, and Absolute. For statements to constitute anticipatory repudiation of a contract, they must amount to a “distinct, unequivocal, and absolute” refusal to perform the entire contract. Salot v. Wershow, 157 Cal. App. 2d 352, 357 (1958) (quoting Atkinson v. Dist. Bond Co., 5 Cal. App. 2d 738, 743 (1935)). In Taylor v. Johnston, after signing an agreement with the plaintiff, the defendants wrote to inform him that he had been “released” from their contract. 15 Cal. 3d 130, 133 (1975). The court found that the letter constituted a “clear, positive, unequivocal” repudiation of the contract. Taylor, 15 Cal. 3d at
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App. 2d at 847. Until the aggrieved party elects to treat the repudiation as final, the breach does not become effective and the repudiating party may retract the repudiation. Id. In Howard S. Wright Constr. Co. v. BBIC Investors, LLC, the repudiating party attempted to retract its repudiation of a contract. 136 Cal. App. 4th 228, 242-43 (2006). However, the court held that the retraction was ineffective because the aggrieved party had already treated the repudiation as final when it materially changed position and “pulled the laborers and trades people from the construction site.” Id. Once the aggrieved party treated the repudiation as final, it became an effective breach.

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