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Vasaturo Brothers, Inc. v. Alimenta Trading-USA, LLC

2011 WL 3022440 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

AGREEMENTS; DEFAULTS — In contracts calling for delivery over a period of time, the test as to whether the selling party has breached the agreement, thereby allowing the buyer to suspend payments, is whether the non-conformity with respect to one or more installments substantially impairs the value of the whole contract.

A food wholesaler contracted to deliver 50 full container loads of tomatoes to a customer in five installments between September 2008 and December 2008. By the time the third payment was due, only five of 20 loads had been delivered. Therefore, the customer refused to pay the last installment. It sent the wholesaler an email stating that it had not received the shipment, and the wholesaler responded saying they would arrive within the next few days. By the end of November, the missing containers still had not been delivered and the wholesaler did not provide any further assurance that they would be delivered.

The customer sued for breach of contract, breach of express warranty, breach of implied warrant, breach of implied warranty for a particular purpose, unjust enrichment, breach of good faith and fair dealing, and misrepresentation. The wholesaler counterclaimed for nonpayment of the third installment, alleging breach of contract, unjust enrichment, breach of good faith and fair dealing, and quantum merit. The customer moved for summary judgment on the wholesaler’s breach of contract claim, unjust enrichment, and quantum merit claims. The wholesaler moved for summary judgment on the customer’s breach of contract claim and on the breach of the covenant of good faith and fair dealing claim.

The Court first addressed the breach of contract claim. The customer argued that the installment contract was breached when the wholesaler did not deliver the first two installments in their entirety. The wholesaler responded that its customer breached the contract by not paying the third installment. The Court first categorized the contract as an installment contract. Therefore, the test was whether nonconformity with respect to one or more installments substantially impaired the value of the whole contract. Here, the Court found that the wholesaler’s nonconformity as to the timing and quantity of its delivery of the first two installments of the contract did so. Hence, this resulted in a breach. The delivery of the tomatoes went to the essence of the contract. The wholesaler’s counterclaim that its customer breached the contract by refusing to make the last payment failed because the customer had reasonable grounds for insecurity with respect to the wholesaler’s performance since it had already prepaid an amount and only received 5 out of the 20 loads of tomatoes. After demanding and failing to receive adequate assurance of performance, the customer was entitled to suspend its performance and withhold final payment until it received such assurance.

The wholesaler’s claims for the quasi-contractual reliefs of unjust enrichment and quantum meruit were unavailable because there was a valid contract. As to its counterclaim that its customer’s failure to pay the third installment amounted to a breach of the covenant of good faith and fair dealing, the Court found no evidence of any malice or bad motive on the customer’s part. Bad motive is essential to a claim for breach of the implied covenant of good faith and fair dealing. Here, the customer was willing to pay the last installment if it had assurance of delivery of the tomatoes.


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