IN THE COURT OF APPEALS OF IOWA

No. 15-0105

Filed October 14, 2015

VIRGIL JOHNSON and VIRGIL JOHNSON TRUCKING,

Plaintiffs-Appellants,

vs.

ASSOCIATED MILK PRODUCERS, INC.,

Defendant-Appellee.

________________________________________________________________

Appeal from the Iowa District Court for Allamakee County, Margaret L. 

Lingreen, Judge.

Plaintiffs appeal a district court decision granting summary judgment to 

defendant on their action for breach of contract. REVERSED AND REMANDED.

John S. Anderson and Stephen J. Belay of Anderson, Wilmarth, Van Der 

Maaten, Belay, Fretheim, Gipp & Zahasky, Decorah, for appellants.

Matthew C. Berger of Gislason & Hunter, L.L.P., New Ulm, Minnesota, for 

appellee.

Heard by Doyle, P.J., Eisenhauer, S.J., and Goodhue, S.J.*

*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2015).
2

GOODHUE, Senior Judge.

Virgil Johnson and Virgil Johnson Trucking filed a petition claiming a sum 

due, alleging that Associated Milk Products, Inc. (Associated) had breached its 

contract to pay specific sums for delivering milk to Associated’s Arlington plant. 

Associated filed a motion for summary judgment alleging that the contract had 

been modified or replaced beginning September 1, 2013, and that all sums due 

had been paid in full. The motion was granted. Johnson has appealed.

I. Background Facts

In September 2001, Johnson and Associated entered into an oral 

agreement whereby Johnson was to pick up milk from dairy farms and deliver it 

to Associated’s plant in Arlington. Johnson was paid so many cents per gallon 

for the milk delivered and $100 a trip for each load delivered. 

In a letter dated July 31, 2013, Associated advised Johnson that it was 

reducing the trip charge by twenty-five dollars per month beginning September 1, 

and twenty-five dollars more for each succeeding month until December 1, 2013, 

when the trip charge would be totally eliminated. There was no specific 

agreement in the original contract as to its duration or the method by which it 

could be amended or terminated. 

Neither party expressly or formally terminated the contract. Instead, 

Johnson continued to deliver the milk and Associated continued to accept it. 

Johnson protested the amendment by continuing to bill Associated for the trip 

charge as well as the gallonage charge. Associated paid in accordance with its 

July 31 letter. This arrangement continued until a formal written notice of 

termination was given by Associated on November 12, 2014, which terminated 
3

the agreement effective December 2, 2014. However, in January of 2014, 

Johnson had filed a petition claiming sums due as provided by the original 

contract. Associated filed a motion for summary judgment and it was granted.

II. Scope of Review

Summary judgments are reviewed for errors of law. Phillips v. Covenant 

Clinic, 625 N.W.2d 714, 717 (Iowa 2001). 

III. Error Preservation

Issues must be raised in district court and ruled on before they will be 

considered on appeal. Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). 

Johnson filed a resistance to the motion, thereby preserving error. See Bill 

Grunder’s Sons Constr., Inc. v. Ganzer, 686 N.W.2d 193, 197-98 (Iowa 2004). 

IV. Discussion

When a motion for summary judgment is filed the burden is on the moving 

party to demonstrate he is entitled to judgment. Sabin v. Ackerman, 846 N.W.2d 

835, 839 (Iowa 2014). On appeal the record is reviewed in the most favorable 

light to the nonmoving party. Id. Even if facts are undisputed, summary 

judgment is not appropriate if reasonable minds could reach different conclusions 

based on inferences that can be drawn from the undisputed facts. Id. 

Generally, a modification to an existing contract requires a new 

consideration, while a revision or termination of an existing contract and a 

replacement with a new contract does not require a new consideration. Recker 

v. Gustafson, 279 N.W.2d 744, 755-56 (Iowa 1979). The problem is determining

whether there has been a revision and a new contract formed or an ineffective

attempt to modify a contract without consideration. 
4

If a contract does not contain an express or implied period of duration the 

court will generally construe the contract to be a contract terminable at will. 

Shelby Cnty. Cookers, L.L.C. v. Util. Consultants Int’l, Inc., 857 N.W.2d 186, 191 

(Iowa 2014). The parties do not dispute that the initial contract could be

terminated by either of them after providing a reasonable notice. Associated 

contends, and the district court agreed by granting the motion for summary 

judgment, that the contract between Johnson and Associated was terminated by 

the July 31 letter. Johnson, by continuing to deliver the milk, in effect consented

to the termination and to a new contract that deleted the trip charges in 

accordance with the July 31 letter. There is no contention that any consideration 

supported the change in the payment schedule or that either party specifically 

referenced revision or termination, either orally or in writing, until the letter of 

December 12. 

A very similar situation was addressed by our Supreme Court in 

Davenport Osteopathic Hospital Ass’n v. Hospital Service, Inc., 154 N.W.2d 153 

(Iowa 1967). Hospital had agreed to provide services to Blue Cross subscribers. 

Davenport Osteopathic Hosp. Ass’n, 154 N.W.2d at 156. The contract between 

the parties had a ninety-day termination clause. See id. A few years later Blue 

Cross advised Hospital it was changing its payment formula which reduced the 

charges payable to Hospital. See id. Hospital protested the new rate schedule 

but Blue Cross only reimbursed by the new schedule even though Hospital 

continued to charge in accordance with the original agreement. See id. Blue 

Cross contended that by failing to officially terminate or rescind the contract and 

instead accepting the reduced payment the hospital agreed to the modification. 
5

See id. at 158. The court noted that neither party elected to rescind and awarded 

Hospital recovery under the terms of the initial contract. See id. The court 

stated, “The law does not sanction breach of contract as a means of escape from 

its burdensome terms nor will it reward an offending party.” Id.

Tindell v. Apple Lines, Inc., 478 N.W.2d 428 (Iowa Ct. App. 1991), is 

another similar case. Tindell had an operating lease with Apple in which he was 

paid so many cents per mile for hauling Apple’s freight. Tindell, 478 N.W.2d at 

429. The agreement was subject to a thirty-day notice of termination. See id. at 

429-30. Apple prepared an addendum decreasing the rate but Tindell did not 

sign it and advised Apple he would not accept the rate change. See id. at 430. 

Tindell continued to haul and accept payments at the reduced rate. See id. The 

court found Apple owed Tindell for the period in which it unilaterally reduced the 

rate of pay. See id. at 431-32.

Associated contends that Davenport Osteopathic and Tindell can be 

differentiated on the grounds that both contracts had termination clauses that 

required a notice and a lapse of time before the actual termination. Associated

further contends in a case where an agreement requires a time lapse between 

the notice and the termination it is not a contract at will. Associated reasons that 

in a contract at will a request to change by either party is an automatic 

termination of the original contract. If the other party continues to perform, a new 

contract has been formed in accordance with the requested modification. 

It is true that both Davenport Osteopathic and Tindell have specific 

termination clauses, but all contracts at will can be terminated only after 

reasonable notice of termination. See Hess v. Iowa Light, Heat & Power Co., 
6

221 N.W. 194, 196-97 (Iowa 1928). There is no logical or rational reason that a 

contract that in effect allows either party to terminate at will, but contains an 

agreed upon reasonable termination notice should be treated as a contract for a 

specific term rather than a contract at will. Associated has not directed the court

to any Iowa case that has been based on that distinction. It is distinction without 

meaning as it relates to the factual situation under consideration. Associated 

provided a reasonable notice when it finally terminated the contract.

Associated and the district court liken the case under consideration to an 

employment at will contract. An employment contract is terminable at will and 

subject to modification at any time, leaving the other party with only the 

alternatives of accepting the modification or terminating the relationship. See 

Willits v. City of Creston, 433 N.W.2d 58, 62 (Iowa Ct. App. 1988); Moody v. 

Bogue, 310 N.W.2d 655, 661 (Iowa Ct. App. 1981). There has been a long 

standing legal distinction between employees and independent contractors. 

Harvey v. Care Initiatives, Inc., 634 N.W.2d 681, 683-84 (Iowa 2001). The 

concept of employment contracts as contracts at will is firmly rooted in Iowa law. 

Fogel v. Trustees of Iowa Coll., 446 N.W.2d 451, 455 (Iowa 1989). Employment 

contracts have been considered unilateral contracts where one party makes an 

express agreement and the other party makes no promise but accepts by 

rendering some performance. See Anderson v. Douglas & Lomason Co., 540 

N.W.2d 277, 282-83 (Iowa 1995); Drake v. Block 74 N.W.2d 577, 80 (Iowa 1956). 

Johnson entered into his relationship with Associated as an independent

subcontractor and not as an employee and that relationship continued. The 

contract between the two parties was a bilateral contract subject to modification 
7

by agreement. The fact that employment contracts and service contracts with an 

independent contractor are treated differently is exemplified by the cited cases. 

Assent to a modification may be implied from the acts of the other party 

when a bilateral contract exists but whether such a contract has been modified is 

ordinarily a question of fact. See Davenport Osteopathic Hosp. Ass’n, 154 

N.W.2d at 157. The district court applied the rules applicable to contracts 

between an employer and employee and concluded as a matter of law that 

Johnson accepted the terms of the proposed modified contract when he 

continued to haul milk after the proposal was made. The rule utilized is not 

appropriate when a service contractor as opposed to an employee is involved.

Although the facts are primarily undisputed, those facts do not support 

Johnson’s acceptance of Associated’s proposed modification as the only, or 

probable, conclusion that can be drawn from those facts. 

We therefore reverse and remand for further proceedings consistent with 

this opinion. 

REVERSED AND REMANDED.