Opinion ID: 202130
Heading Depth: 3
Heading Rank: 1

Heading: ScreamingMedia's Cross-Appeal

Text: 36 ScreamingMedia argues on its cross-appeal, as well as in its defense to Teragram's successful claim, that summary judgment should have been granted in its favor with respect to the Summarization Software because the district court erred in concluding that it had not provided timely notice of Teragram's alleged prior material breach. Moreover, ScreamingMedia argues that even if its notice were untimely, its withholding of payment was no more than an immaterial breach of the Agreement, and so Teragram was still obligated to perform. Neither argument is persuasive. 37 ScreamingMedia alleges that Teragram committed a breach of warranty by failing to provide specification-compliant software and ongoing support, and that ScreamingMedia gave timely notice of the breach to Teragram. It cites to Section 6 of the Agreement, which required Teragram to provide to Licensee the maintenance and support services set forth in Exhibit B. It further relies on Section 7, which warrant[ed] that the Teragram [Software], for a period of thirty (30) days after delivery to Licensee, shall perform substantially in accordance with the Documentation and also required Teragram to correct any material failure of the Teragram [Software] to perform as warranted, but only so long as such failure is reported to Teragram within the warranty period of thirty days. ScreamingMedia argues, and Teragram does not dispute, that its receipt of specification-compliant software and support is an essential and inducing feature of the contract[ ], Bucholz v. Green Bros. Co., 272 Mass. 49, 172 N.E. 101, 102 (1930), the failure of which would release it from further performance under the Agreement, see Ward v. Am. Mut. Liab. Ins. Co., 15 Mass.App.Ct. 98, 443 N.E.2d 1342, 1343 (Mass. 1983). 38 The parties agree, for the purpose of construing the warranty provision of the Agreement, that the last delivery of the Summarization Software occurred on December 10, 2001 and that ScreamingMedia had to give notice to Teragram within thirty days of that date — that is, by January 9, 2002 — if it wished to invoke the warranty. ScreamingMedia claims that it complied with Section 7 because, beginning as early as November 1, 2001, it sent numerous e-mails to Teragram, purportedly apprising the latter of problems it was having with the Summarization Software. The argument fails for two reasons: the notice required was not notice by e-mail, and the e-mails ScreamingMedia sent did not, in any event, provide adequate notice. 39 Section 7 specified that an allegation of material failure of the software must be reported to Teragram within the warranty period. It did not permit report[ing] by e-mail. Although Section 7 did not itself describe the medium by which reporting was to have been effected, subsection 12(a) of the Agreement mandated that [a]ll notices shall be in writing and given by personal delivery, certified mail, return receipt requested, or by commercial overnight courier for next business day delivery, to the recipient's address set forth above. E-mail plainly was not among the recognized forms of notice. 40 ScreamingMedia argues that Section 7 did not require notice, but merely report[ing], and thus subsection 12(a) did not apply. Nothing in the Agreement, however, indicated that the term report in Section 7 was a term of art, used only, as ScreamingMedia asserts, in connection with efforts to deal with Software problems that cause the Software to fail to perform substantially in accordance with Documentation. Rather, because the formal notification procedures were set forth under Section 12, which was entitled General, those procedures applied to any type of situation in which notice to the other party was required, unless otherwise specified. Indeed, only Exhibit B of the Agreement, which detailed Teragram's annual support obligations, provided for e-mail reporting, and it did so solely with respect to minor maintenance problems (bugs), not to material failures of the software. See G.M. Abodeely Ins. v. Commerce Ins., 41 Mass.App.Ct. 274, 669 N.E.2d 787, 789 (1996) (Every phrase and clause must be presumed to have been designedly employed, and must be given meaning and effect, whenever practicable, when construed with all the other phraseology contained in the instrument, which must be considered as a workable and harmonious means for carrying out and effectuating the intent of the parties. (quoting J.A. Sullivan Corp. v. Commonwealth, 397 Mass. 789, 494 N.E.2d 374, 378 (1986)) (internal quotation marks omitted)). Moreover, since subsection 12(a) notice is required when one party seeks to notify the other of material breach under Section 4 of the Agreement, it would make little sense to construe Section 7 differently. 41 In any event, as the district court correctly noted, ScreamingMedia never once alleged in the course of its e-mail correspondence that there had been a material failure of the software or that the software was not performing substantially in accordance with the Documentation. Consequently, the e-mails could not have put Teragram on fair notice. Finally, that ScreamingMedia requested from Teragram an invoice for the first year's fees as late as December 18, 2001 — at least a week after it had sent the very last of its e-mails to Teragram regarding the Summarization Software — shows that ScreamingMedia did not, as a matter of fact, intend for its e-mails to serve as notices of material failures of the software. 9 42 It was not until February 20, 2002 that Teragram received from ScreamingMedia a notice of breach in a form recognized by subsection 12(a) of the Agreement. By that date, the warranty period for the Summarization Software had expired, and Teragram was no longer under obligation to correct any material failure of [that software] to perform as warranted. 10 43 Since Teragram could not have been in prior material breach of the warranty with respect to the Summarization Software, ScreamingMedia was obligated to fulfill its obligations under the Agreement, namely, to pay the applicable annual license and support fees. On appeal, as before the district court, ScreamingMedia does not argue that it had, in fact, fulfilled its end of the bargain. Rather, it argues that the breach, if not excused by Teragram's breach, was immaterial. See Lease-It, Inc. v. Mass. Port Auth., 33 Mass.App.Ct. 391, 600 N.E.2d 599, 602 (1992) (When a party to an agreement commits an immaterial breach of that agreement, the injured party ... may not stop performing its obligations under the agreement.). Alternatively, it argues that the materiality of the breach should have been left to the trier of fact. We disagree. 44 A material breach of an agreement occurs when there is a breach of `an essential and inducing feature of the contract[].' Id. (alteration in original) (quoting Bucholz, 172 N.E. at 102). [A] material breach by one party excuses the other party from further performance under the contract, id. (quoting Ward, 443 N.E.2d at 1343), and [o]nce relieved from performance, the injured party is not liable for further damages incurred by the party in material breach, id. 45 ScreamingMedia relies heavily on the rule that the materiality of a breach of contract is generally a question for the trier of fact to decide. See id. Nevertheless, [a]s is true of virtually any factual question, if the materiality question in a given case admits of only one reasonable answer (because the evidence on the point is either undisputed or sufficiently lopsided), then the court must intervene and address what is ordinarily a factual question as a question of law. Gibson v. City of Cranston, 37 F.3d 731, 736 (1st Cir. 1994); see also Lease-It, 600 N.E.2d at 602 (noting that the materiality of breach normally is a question for the jury to decide, but that [o]n this record, ... we may decide the matter on our own). 46 Here, the district court correctly concluded that as a matter of law, the breach was material. Under the Agreement, payment was due 30 days following the Delivery Date of [the] Software, with Delivery Date being defined as the date [the particular] Teragram Product is delivered to Licensee. ScreamingMedia admitted that it never made any payment to Teragram at any time during the course of their contractual relationship. ScreamingMedia's failure to pay, the only obligation it had under the contract, constitutes a material breach. See Lease-It, 600 N.E.2d at 602 (holding that where a party's sole obligation [under a contract] was to pay, its failure to do so is a substantial breach going to the root of the contract that releases the other party from further performance (quoting Aerostatic Eng'g Corp. v. Szczawinski, 1 Mass.App.Ct. 141, 294 N.E.2d 521, 523 (1973))).