1Pursuant to 5TH CIR. R. 47.5, the Court has determined that

this opinion should not be published and is not precedent except

under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 97-11140

LARRY MAHAN, INC.; LARRY MAHAN,

Plaintiffs - Counter Defendants -Appellees,

VERSUS

MAHAN WESTERN INDUSTRIES, INC ET AL.,

Defendants,

 TEXAS WESTERN INDUSTRIES, formerly known as

Mahan Western Industries, Inc.

Defendant - Counter Claimant - Appellant.

Appeal from the United States District Court

for the Northern District of Texas

(3:95-CV-409-H)

February 17, 1999

Before JOLLY, DUHÉ, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:1

BACKGROUND

Larry Mahan and Larry Mahan, Inc. (“Appellees”) entered into

a license agreement (“Agreement”) with Texas Western Industries’

(“TWI”) predecessor-in-interest, which granted TWI the exclusive

right to manufacture and sell western-wear using Appellees’

endorsement. The Agreement required TWI: (1) to obtain and

maintain products liability insurance; (2) to name Appellees as
2

additional insureds in the policy; and (3) to have the policy

provide that the insurer would not terminate or materially modify

the policy without thirty days advance notice to Appellees. The

Agreement declared that TWI’s failure to maintain the proper

insurance coverage constituted a material breach. The Agreement

also provided that “[Appellees] shall have a right to terminate

this Agreement upon the material breach by [TWI] which is not cured

within thirty days following the giving of written notice to the

breaching party of the intent to terminate.” 

In December 1994, Appellees notified TWI that they intended to

terminate the Agreement if TWI did not provide evidence of

insurance and comply with various other provisions of the

Agreement. TWI’s insurance policies did not name Appellees as

additional insureds or require the insurer to give them thirty days

notice of termination or material modification. 

In the Spring of 1995, Appellees sued to terminate the

Agreement. The district court granted summary judgment in favor of

Appellees. The district court concluded that TWI materially

breached the License Agreement because its insurance policies (1)

did not name Appellees as additional insureds and (2) failed to

require its insurer to give Appellees thirty days advance notice of

termination or material modification. The district court also

granted summary judgment for Appellees on TWI’s counterclaims and

awarded attorneys fees to Appellees. TWI appeals. We affirm.

DISCUSSION

I. Termination of the Agreement
3

We review summary judgment decisions de novo. Nowlin v. RTC,

33 F.3d 498, 502 (5th Cir. 1994). Summary judgment is proper if

“the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that the

moving party is entitled to judgment as a matter of law.” Fed. R.

Civ. P. 56(c). We conclude that the district court correctly

decided that there is no genuine issue as to any material fact and

Appellees are entitled to judgment as a matter of law. 

A. Compliance with the Termination Provision

TWI contends that Appellees failed to strictly comply with the

termination provision of the Agreement. This provision states that

“[Appellees] shall have a right to terminate this Agreement upon

the material breach by [TWI] which is not cured within thirty days

following the giving of written notice to the breaching party of

the intent to terminate.” TWI argues that Appellees’ notice letter

did not state that TWI had breached the Agreement by failing to

provide the requisite insurance and, thus, Appellees’ request for

evidence of insurance should not be construed as notice of a

breach. TWI argues that it did not receive the protection

bargained for in the Agreement--notice of a breach and thirty days

to rectify it. Further, TWI notes that Texas law requires strict

compliance with the Agreement’s notice requirement. See Stretcher

v. Gregg, 542 S.W.2d 954, 957 (Tex.Civ.App.--Texarkana 1976, no

writ).

We conclude that the notice letter was adequate. It demanded
4

that TWI “submit evidence that [Appellees] are additional insureds

on the requisite products liability insurance.” The letter also

stated that Appellees intended to terminate the Agreement if TWI

failed to comply.

B. Materiality of the Breach

TWI argues that there is an issue of fact about whether its

insurance policies covered Appellees as additional insureds. The

Agreement provided that “[TWI] shall . . . name [Appellees] as

additional insureds” on its products liability insurance policy.

By its plain language the Agreement required TWI to name Appellees

as additional insureds. It is undisputed that Appellees’ were not

so named. 

First, TWI maintains that it substantially performed its

insurance coverage obligations because the terms of its Underlying

and Umbrella policies covered Appellees in the requisite amounts

even though the policies did not name Appellees as additional

insureds. See Cranetex, Inc. v. Precision Crane & Rigging of

Houston, Inc., 760 S.W.2d 298, 302 (Tex.App.--Texarkana 1988, writ

denied) (stating that “substantial performance . . . is the legal

equivalent of full compliance”). TWI maintains that section IV,

paragraph c(5) of its Umbrella Policy covered “any person or

organization for whom [TWI had] agreed in writing prior to injury

to provide insurance” and, therefore, the policy unambiguously

covered Appellees.

Further, TWI maintains that its failure to require the insurer

to give Appellees thirty days notice of any cancellation or
5

material modification of the policy was merely a technical

deficiency which should be excused by the substantial compliance

doctrine. See In the Interest of Doe, 917 S.W.2d 139, 142

(Tex.App.--Amarillo 1996, writ denied). TWI explains that the

policies were in force without interruption and that its insurance

company would have given Appellees notice of cancellation even

though the policies did not require it.

The district court properly declined to rewrite the Agreement

by substituting TWI’s substantial performance theory for the

express terms of the contract. See Varibus Corp. v. South Hampton

Co., 623 S.W.2d 157, 160 (Tex.App.--Beaumont 1981, writ ref’d

n.r.e.) (holding that the trial court erred by “den[ying] the right

to termination granted by the contract” and “substitut[ing]

plaintiff’s theory of substantial performance.”); cf. Wood Motor

Co., Inc. v. Nebel, 238 S.W.2d 181, 185 (Tex. 1951) (holding that

the lower courts erred by requiring a just cause for terminating a

contract which unambiguously allowed termination at will). 

Second, TWI maintains that its alleged breaches were not

material. Because no product liability claims were made against

Appellees and the insurance was never canceled, TWI contends that

its failure to secure minor amendatory endorsements to its

insurance policies did not reasonably evidence an intent to

repudiate the Agreement. The essence of the promise in the

Agreement was that TWI would provide complete insurance protection

for Appellees. Because its insurance covered Appellees, TWI argues

that the Agreement’s termination provision should be construed
6

narrowly to avoid forfeiture. See Mayhew v. Vanway, 371 S.W.2d 90,

93 (Tex.Civ.App.--Houston 1963, no writ).

We disagree. The Agreement specifically provided that the

failure to maintain the requisite insurance coverage was a material

breach. “While forfeitures are not favored, they are not illegal.

When the parties in unambiguous language write into their agreement

a provision for forfeiture, the courts will enforce the provision.”

Pittman v. Sanditen, 611 S.W.2d 663, 668 (Tex.Civ.App.--San Antonio

1980), rev’d on other grounds, 626 S.W.2d 496 (Tex. 1982)

(citations omitted); see Maddox Motor Co. v. Ford Motor Co., 23

S.W.2d 333, 338 (Tex.Com.App. 1930, holding approved) (stating that

courts will enforce contractual termination provisions). The

termination provision gave Appellees the right to terminate the

Agreement upon TWI’s material breach and provided that the failure

to maintain the requisite insurance coverages was a material

breach. Undisputedly, TWI’s insurance policies did not name

Appellees as additional insureds or provide for thirty days notice

of termination or material modification. Therefore, Appellees had

the right to terminate the Agreement.

C. TWI’s Waiver, Estoppel, and Laches Defenses

Under Texas law, waiver is the intentional relinquishment of

a known right or conduct inconsistent with claiming that right.

See Tenneco, Inc. v. Enterprise Products Co., 925 S.W.2d 640, 643

(Tex. 1996). “A party’s express renunciation of a known right can

establish waiver. Silence or inaction, for so long a period as to

yield the known right, is also enough to prove waiver.” Id.
 

2Although TWI also contends that the district court erred by

rejecting its estoppel and laches defenses, it fails to explain how

the summary judgment evidence establishes the elements of these

defenses. Therefore, we conclude without discussion that the

district court did not err by granting summary judgment for

Appellees on the issues of estoppel and laches.

7

(citations omitted).

TWI maintains that Appellees waived the right to terminate the

Agreement for breaching its insurance provisions.2 It contends

that it provided evidence of insurance to Appellees shortly after

the execution of the Agreement. Thus, TWI argues that Appellees’

five year delay in asserting that TWI breached the Agreement’s

insurance provisions raises genuine issues of material fact

regarding whether their claims are barred by waiver. See Tenneco,

Inc. v. Enterprise Products Co., 925 S.W.2d at 643 (silently

accepting performance for an extended period proved a waiver of a

known right). Further, TWI contends that, under Texas law, the

non-waiver provision in the Agreement was not conclusive but,

rather, evidence that there was not a waiver. See Enserch Corp. v.

Rebich, 925 S.W.2d 75, 82 (Tex.App.--Tyler 1996, writ dism’d by

agr.).

To support its claim that it provided evidence of insurance to

Appellees, TWI introduced the testimony and affidavit of one of its

directors, Steven Hammond (“Hammond”). In the preliminary

injunction hearing, when asked if TWI provided Appellees with

evidence that they were named as additional insureds, Hammond

answered “I think we did way back then.” On cross-examination,

Hammond admitted that he believed Appellees received evidence of
8

insurance because they did not complain. Similarly, Hammond’s

affidavit states that “I have always believed” that TWI provided

Appellees with evidence of insurance within thirty days of the

Agreement’s execution.

A factual dispute does not necessarily foreclose summary

judgment. See Berry v. Armstrong Rubber Co., 989 F.2d 822, 824

(5th Cir. 1993). “The dispute must be genuine, with facts on both

sides of a material issue before a court must submit it to a jury.”

Id. Larry Mahan unequivocally stated that TWI never provided him

with evidence of insurance. In contrast, Hammond’s “belief” that

TWI provided evidence of insurance to Appellees is not based on

personal knowledge or business records. Instead, Hammond’s

“belief” arose solely from Appellees’ failure to complain.

Hammond’s testimony and affidavit fail to create a genuine issue of

material fact. 

II. TWI’s Counterclaims

Under Texas law, “a party to a contract who is himself in

default under the contract cannot maintain a suit for its breach.

Martin v. Xarin Real Estate, Inc., 703 F.2d 883, 889 (5th Cir.

1983). As shown above, TWI materially breached the Agreement.

TWI notes that “[a] party who elects to treat a contract as

continuing deprives himself of any excuse for ceasing performance

on his own part.” Hanks v. GAB Business Services, Inc., 644 S.W.2d

707, 708 (Tex. 1982). It contends that the district court erred by

granting summary judgment on its counterclaims because Appellees

elected to treat the contract as continuing by collecting advances
9

for almost five years before complaining about the breach.

We disagree. In Hanks, the counter claimant chose to treat

the contract as continuing during the dispute and subsequent

litigation. See id. at 708. In contrast, the summary judgment

evidence in this case fails to establish that Appellees elected to

treat the contract as continuing after discovering TWI’s breach.

See supra, II.C. Therefore, we conclude that the district court

did not err by granting summary judgment for Appellees on TWI’s

counterclaims.

CONCLUSION

We affirm the summary judgment in favor of Appellees.

AFFIRMED.