Opinion ID: 2674725
Heading Depth: 2
Heading Rank: 1

Heading: Purported Conditions Precedent

Text: Digital argues the district court should have granted summary judgment in favor of Digital based on various unfulfilled conditions precedent. “The law of Nebraska is consistent with the recognized definitions which hold that a condition precedent is either a condition which must be performed before a contract becomes binding upon the parties -8- to it or must be fulfilled before a duty arises to perform the obligations of an already existing contract.” Omaha Pub. Power Dist. v. Emp’rs’ Fire Ins. Co., 327 F.2d 912, 915 (8th Cir. 1964). Therefore, “[u]nder Nebraska law, ‘where a contract is executed but its effectiveness or fulfillment is dependent upon the doing of an agreed-upon condition before it shall become a binding contract, such contract cannot be enforced unless the condition is performed.’” AMISUB, Inc. v. Shalala, 12 F.3d 840, 844 (8th Cir. 1994) (quoting Metschke v. Marxsen, 125 N.W.2d 684, 687 (Neb. 1964)). “However, it is equally true that a condition is excused if the occurrence of the condition is prevented by the party whose [contractual obligations are] dependent upon the condition.” Chadd v. Midwest Franchise Corp., 412 N.W.2d 453, 457 (Neb. 1987). In other words, “if a promisor prevents or hinders the occurrence of a condition precedent, the condition is excused.” Id. In Chadd, as in this case, the breaching party in a contract case claimed the other party could not succeed on its breach of contract claim because of unfulfilled conditions precedent. The defendant in Chadd, Midwest Franchise Corp., argued the plaintiffs failed to fulfill several conditions precedent, since they “never submitted a bid as required, could not keep construction costs within the stated cost estimate, never attached a required addendum setting forth exact rental costs, and did not complete the building or deliver possession of such to Midwest for its acceptance.” Id. at 458. Midwest argued that because its own duties to perform were premised on these conditions precedent, the nonoccurence of these conditions prevented the plaintiffs from succeeding on a breach of -9- contract claim against Midwest. In turn, the plaintiffs argued in part “that they were unable to ever satisfy these conditions precedent due to the appellee’s repudiation of the contract.” Id. While the Nebraska Supreme Court noted there was a factual dispute as to whether an anticipatory repudiation had occurred, it agreed with the plaintiffs’ legal argument that the nonoccurrence of the conditions precedent would not bar their contract claim if Midwest had prevented the occurrence of these conditions by repudiating the contract. “In a case such as this where one party (Chadds) has not fulfilled certain conditions precedent to the other party’s (Midwest’s) duty to perform, a special rule of law applies. Where a party’s repudiation contributes materially to the nonoccurrence of a condition of one of his duties, the nonoccurence is excused.” Id. On appeal, Digital suggests that Chadd has been limited by the Nebraska Supreme Court’s subsequent statement in Lee Sapp Leasing, Inc. v. Catholic Archbishop of Omaha, 540 N.W.2d 101, 105 (Neb. 1995), that “[t]he nonoccurrence of a condition precedent cannot be excused if occurrence of the condition was a material part of the agreed exchange.” However, the Nebraska Supreme Court made this statement in discussing a different rule under which a court may excuse the nonoccurrence of a condition to avoid a disproportionate forfeiture. Nothing about the court’s discussion in Lee Sapp suggests that it was intended to affect the Chadd rule’s reach, limiting Chadd to non-material conditions and thus allowing breaching parties to escape liability for their breach so long as they successfully prevented or hindered material conditions from occurring. We conclude that Nebraska courts would continue to apply the reasoning from -10- Chadd to hold that the nonoccurence of a condition precedent is excused when the occurrence of the condition was prevented or hindered by the breaching party, regardless of whether this condition was material or not. After thoroughly reviewing the record and Digital’s arguments on appeal, we also conclude that the nonoccurrence of any of the conditions precedent identified by Digital in this case resulted from Digital’s unequivocal repudiation of the contract. Thus, the nonoccurence of any of these purported conditions precedent is excused and does not bar Z3 from successfully pursuing a breach of contract claim against Digital. Digital also raises the related argument that the purchase-or-royalty provisions in ¶ 14(b)(iii) and (iv) are unenforceable because these provisions gave only an estimated purchase price for the production modules and stated that the final price would not be agreed upon until after the final hardware design had been completed. Digital argues that the failure to state a specific price renders this provision unenforceable as a matter of law. For support, Digital cites to a case in which a Nebraska appellate court held that a contract was not enforceable at the time it was executed because it failed to define the quantity of goods to be sold under the contract, the price any goods would be sold for, or any type of method for determining the price. MBH, Inc. v. John Otte Oil & Propane, Inc., 727 N.W.2d 238, 248 (Neb. App. 2007). We are not persuaded that this case bars Z3’s recovery under ¶ 14(b)(iii) and (iv). In contrast to the contract at issue in MBH, the contract at issue in this case contained both a quantity and an estimated price for the goods. A purported contract will usually be considered “too indefinite to form a contract -11- if the essential terms are left open or are so indefinite that a court could not determine whether a breach had occurred or provide a remedy,” Stitch Ranch, LLC v. Double BJ Farms, 837 N.W.2d 870, 883 (Neb. App. 2013), but “‘the actions of the parties may show conclusively that they have intended to conclude a binding agreement, even though one or more terms are missing or are left to be agreed upon,’” City of Scottsbluff v. Waste Connections of Neb., 809 N.W.2d 725, 740 (Neb. 2011) (quoting Restatement (Second) of Contracts § 33, cmt. a). Where a purported contract provides neither a quantity nor a price for the goods to be sold, as in MBH, the agreement is too indefinite to bind the parties absent other indications of the parties’ intent. See MBH, 727 N.W.2d at 249 (noting that an unenforceable agreement “may become enforceable when the missing term is subsequently supplied by the parties”). In this case, however, the 2009 contract and the parties’ actions demonstrated an intent to be bound, and the terms of the contract were sufficiently definite for a court both to determine whether a breach had occurred and to provide a remedy for the breach. Moreover, as we discuss in further detail below, we agree with the district court that the contract specified an alternative performance option—a minimum royalty of $7.50 per unit for the 36,000 modules Digital was otherwise obligated to purchase—that was not based in any way on the as-yet-unfinalized price for the modules, and we affirm the district court’s decision to award damages based on this alternative. For both of these reasons, we reject Digital’s argument that ¶ 14(b)(iii) and (iv) are too uncertain and indefinite to be enforced. -12- B. Vice President Haler’s Authority to Sign the Contract Next, Digital contends the 2009 contract was not binding on Digital because Vice President Haler’s authority to enter into this type of contract had been limited by an internal change to Digital’s policies in December 2008. However, we conclude that Vice President Haler clearly had at least apparent authority to sign the 2009 contract, and we thus need not resolve the dispute over whether Vice President Haler had actual authority to sign the contract on behalf of Digital. The parties assume that Nevada law applies to the question of apparent authority, due to the fact that Digital is incorporated under the laws of Nevada, and we will accordingly proceed under the same assumption. See Grynberg v. Total SA, 538 F.3d 1336, 1346 (10th Cir. 2008) (applying Colorado law because the parties assumed Colorado law applied). Under Nevada law, “[a] party claiming apparent authority of an agent as a basis for contract formation must prove (1) that he subjectively believed that the agent had authority to act for the principal and (2) that his subjective belief in the agent’s authority was objectively reasonable.” Great Am. Ins. Co. v. Gen. Builders, 934 P.2d 257, 261 (Nev. 1997). In this case, Digital contests only the second prong of this test, arguing that Z3’s subjective belief in Vice President Haler’s authority to sign the 2009 contract was not objectively reasonable because it was not based upon anything Digital had done. As Digital notes, the Nevada Supreme Court “has repeatedly ruled that apparent authority (when in excess of actual authority) proceeds on the theory of equitable -13- estoppel; it is in effect an estoppel against the alleged principal to deny agency when by his conduct he has clothed the agent with apparent authority to act.” Tsouras v. Sw. Plumbing & Heating, 587 P.2d 1321, 1323 (Nev. 1978) (internal quotation marks and brackets omitted). Accordingly, “‘[i]t is indispensable to keep in mind here that, as against the principal, there can be reliance only upon what the principal himself has said or done, or at least said or done through some other and authorized agent.’” Id. (quoting Ellis v. Nelson, 233 P.2d 1072, 1076 (Nev. 1951)). The agent’s acts alone are not sufficient to establish apparent authority; rather, if the agent’s acts, rather than the principal’s acts, are relied upon, there must be “‘evidence of the principal’s knowledge and acquiescence in them.’” Id. (quoting Ellis, 233 P.2d at 1076). Digital argues there is no evidence in this case that Digital or one of its other agents did or said anything which would suggest that Vice President Haler had the authority to enter into the 2009 contract. Digital contends the only actions suggestive of authority were taken by Vice President Haler himself, and Digital argues that this was insufficient as a matter of law to establish apparent authority. However, we are persuaded that Digital’s own actions established apparent authority. First, Digital took the action of bestowing upon Vice President Haler the title of Executive Vice President of Engineering and Production. This action in itself suggested that Vice President Haler might have the authority to enter into engineering and production contracts like the contracts at issue here. See Bucher & Willis Consulting Eng’rs v. Smith, 643 P.2d 1156, 1159 (Kan. App. 1982) (noting that a principal’s words or actions suggesting that an agent has authority are -14- sometimes “overt and explicit,” but that “[i]n other cases, the mere relationship between the agent and principal or the title conferred upon the agent by the principal is sufficient to constitute a representation of some authority”). Indeed, Digital’s corporate bylaws explicitly stated: “Except as otherwise required by law or by these Bylaws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by . . . any Vice President.” (Appellant’s App. at 1464.) Thus, under Digital’s own bylaws, Vice President Haler was explicitly vested with authority to execute contracts. Second, Digital indicated by both word and deed that Vice President Haler had validly exercised his contract-signing authority in November 2008 when he signed the 2008 contract on behalf of Digital. Digital has never contested the fact that Vice President Haler was fully authorized to enter into this contract, and its actions following the signing of the 2008 contract clearly signaled to Z3 that Vice President Haler was authorized to enter into this type of contract for the design, manufacture, and delivery of circuit board modules. Despite all of this undisputed evidence, Digital contends Vice President Haler lacked even apparent authority to enter into the 2009 contract because of an internal change to Digital’s signature policies (but not the company bylaws) in the intervening month between the signing of the two contracts. However, there is no evidence that Z3 was ever informed of this internal policy change, and we therefore conclude that this change did not affect Vice President Haler’s apparent authority to enter into this type of contract. Cf. Homes Sav. Ass’n v. Gen. Electric Credit Corp., 708 P.2d 280, 283 (Nev. -15- 1985) (“HSA, as principal, may be bound by the acts of its agent as to third parties who have no reason to know of the agent’s improper conduct.”). Digital also argues that a finding of apparent authority could only be premised on evidence that Digital made specific representations to Z3 regarding Vice President Haler’s authority to enter into this specific contract. Digital points to no cases suggesting that an objectively reasonable belief in an agent’s authority will only arise where the principal makes specific representations about the precise act in question in that case. Indeed, such a rule would vitiate the doctrine of apparent authority. In light of the undisputed evidence regarding Vice President Haler’s title, Digital’s bylaws, Digital’s prior dealings with Z3, and the substantial similarity between the valid 2008 contract and the contested 2009 contract, we are persuaded that Z3’s belief in Vice President Haler’s authority to enter into the 2009 contract was objectively reasonable. Nevada law does not require more. C. Substantial Performance Digital next argues that Z3’s breach of contract claim on the 2009 contract is barred by Z3’s failure to substantially perform its own obligations under the contract. Nebraska law generally holds that “[t]o successfully bring an action on a contract, a plaintiff must first establish that the plaintiff substantially performed the plaintiff’s obligations under the contract.” VRT, Inc. v. Dutton-Lainson Co., 530 N.W.2d 619, 623 (Neb. 1995). “Substantial performance is shown when the following circumstances are established by the evidence: (1) The party made an honest endeavor in good faith to perform its part of the contract, (2) the results of the endeavor are beneficial to the other -16- party, and (3) such benefits are retained by the other party.” Id. Here, because Digital repudiated the contract during the design period, Z3 never completed the modules, and thus Digital did not receive beneficial performance or retain any such benefits. Digital accordingly argues that Z3 cannot recover any damages for Digital’s breach. However, the Nebraska Supreme Court has made clear that a party’s failure to substantially perform its obligations under the contract will be excused if the party attempted to perform in good faith but was “substantially hindered and obstructed” by the other party. Brown v. Alron, Inc., 388 N.W.2d 67, 71 (Neb. 1986); see also In re Estate of Weinberger, 279 N.W.2d 849, 854 (Neb. 1979) (“Where a party bound by an executory contract repudiates his obligation before the time for performance, the promisee has an option to treat the contract as ended so far as further performance is concerned, and to maintain an action at once for the damages occasioned by such anticipatory breach.”). The undisputed evidence in this case demonstrates that Z3 attempted to perform its contractual obligations in good faith but was substantially hindered and obstructed by Digital’s anticipatory repudiation of the contract. We therefore reject this argument. D. Z3’s Lost-Profit Damages under ¶ 14(a) and (b)(i) Digital’s final argument on appeal is that the district court erred in concluding Z3 could recover lost profits for Digital’s failure to make the minimum pre-production and initial production orders under ¶ 14(a) and (b)(i) of the 2009 contract. Specifically, Digital contends Z3 could not recover lost profits because this contract was governed by the Nebraska Uniform Commercial Code, which does not provide for lost profits as a -17- remedy for breach of a contract for the sale of goods. The fundamental problem with this argument is that the 2009 contract was not a contract for the sale of goods. The 2009 contract explicitly stated it was a licensing agreement under which the modules would be “licensed, not sold to [Digital],” with Z3 retaining “title and ownership.” (Appellant’s App. at 52.) Accordingly, this contract was not governed by provisions regarding contracts for the sale of goods, and Digital has presented no convincing reason why the district court erred in permitting Z3 to recover lost-profit damages for Digital’s failure to purchase the pre-production and initial production orders.