Opinion ID: 658254
Heading Depth: 2
Heading Rank: 1

Heading: Breach of Contract and Breach of Duty of Good Faith

Text: 7 The magistrate judge held that plaintiffs' claims for breach of contract and breach of the duty of good faith were waived because Panoco failed to give notice of the breaches to Shell in the manner required by the Jobber Contract.
8 The Jobber Contract does not expressly state what Panoco must do when it believes that the price charged by Shell violates the Contract. However, the Jobber Contract is subject to the Oregon Commercial Code. See Or.Rev.Stat. Sec. 72.1020. The Commercial Code contains a general requirement of notice when goods have been accepted. Id. Sec. 72.6070(3)(a). This notice requirement is from the Uniform Commercial Code. That provision has been held applicable when a buyer claims that the price charged is inconsistent with the contract price. Roth Steel Prod. v. Sharon Steel Corp., 705 F.2d 134, 151-53 (6th Cir.1983). Section Sec. 72.6070(3)(a) refers to any breach, not simply to a defect in the goods, and bars any remedy if notice is not given. See Eastern Air Lines, Inc. v. McDonnell Douglas Corp., 532 F.2d 957, 970-73 (5th Cir.1976) (Sec. 2-607 applied to delivery delays). The purposes of notice are to enable the seller to investigate, to correct the problem and to minimize damages. See Metro Inv. Corp. v. Portland Road Lumber Yard, Inc., 501 P.2d 312, 314 (Or.1972); 1 James J. White & Robert S. Summers, Uniform Commercial Code Sec. 11-10 at 554-59 (3d ed. 1988). These purposes are just as well served by requiring notice when the buyer claims that the price is nonconforming as when the buyer claims that the quality or quantity of the goods is nonconforming. Similarly, notice is also required when the buyer asserts that the seller has breached the duty of good faith. See Chaney v. Shell Oil Co., 827 P.2d 196, 199 (Or.Ct.App.), review denied, 832 P.2d 455 (Or.1992). The magistrate judge did not err in holding that Or.Rev.Stat. Sec. 72.6070(3)(a) required that Panoco give notice to Shell of its claims that the price violated the contract and that Shell breached its duty of good faith.
9 Plaintiffs contend that if notice of a price breach is required by the Oregon Commercial Code, then the sufficiency of notice must be judged under the Code, rather than by the standard in the notice provision of the Jobber Contract, section 21. 10 However, parties may modify the requirements of the Commercial Code. Or.Rev.Stat. Sec. 71.1020(3). The notice provision in the Jobber Contract indicates that the parties intended that every notice would be sent by certified mail, telegram or telex, except when the Jobber Contract expressly provided otherwise. 1 That is the sensible reading of the Contract. It helps distinguish grumbling from claims of breach and is just the kind of provision that parties often adopt to avoid the difficulties caused by ambiguous actions. 11 Next, plaintiffs contend that Sec. 21 is ambiguous. A contract is ambiguous when the writing is not so clear as to preclude doubt by a reasonable man of its meaning. Bartlam v. Tikka, 622 P.2d 1133, 1135 (Or.Ct.App.), review denied, 642 P.2d 307 (Or.1981) (internal quotation omitted). Section 21 governs every notice hereunder (except when otherwise specified and subject to any requirements of law). Plaintiffs claim that hereunder refers only to notices expressly required by the Jobber Contract. That would be a peculiar reading. Any reasonable person would understand that when notice must be given of alleged problems or issues arising under the Jobber Contract, Sec. 21 must be followed unless another provision of the Contract or the law requires otherwise. In other words, hereunder means under this Contract. Because it is undisputed that Panoco did not give notice in the form required by Sec. 21, the magistrate judge properly entered judgment for Shell on plaintiffs' breach of contract and breach of good faith claims. 2
12 Plaintiffs argue that even if they failed to comply with the notice provision of the Jobber Contract, Shell's actual knowledge of Panoco's dissatisfaction with the price excuses that failure. Plaintiffs first raised this legal theory in their motion for reconsideration. The magistrate judge did not abuse his discretion in refusing to consider it because it was untimely. See Northwest Acceptance Corp. v. Lynnwood Equip., Inc., 841 F.2d 918, 925-26 (9th Cir.1988).