Opinion ID: 378296
Heading Depth: 1
Heading Rank: 2

Heading: The Issue of Repudiation

Text: 11 Appellant's major contention on appeal is that the trial court erred in finding that Zotos repudiated the contract. We disagree. After a careful review of the record, including the transcript of the 23-day trial, we have concluded that the District Court's findings are supported by substantial evidence and are not clearly erroneous. We also conclude that it applied the correct legal standard to the facts. In its Conclusions of Law the Court held: 12 The defendant's actions in refusing to honor its contractual obligations constitute a breach of the contract and a repudiation of the contract between the parties. 13 There is ample evidence that as early as September of 1974 Zotos had decided not to comply with the contract as written. In the ensuing months Zotos's actions bore out this intention. Ralph Evans, President of Zotos, refused to authorize the purchase of capping equipment necessary for filling the bottles of liquid fixative. Zotos's representatives communicated to Lilja Zotos's insistence upon a demonstration of the finished sample components, although this was not required by the contract. Whether these acts in early 1975 amount to a repudiation of the contract, we need not decide, because on July 25 and 26, 1975, and again on August 3, after a successful demonstration of the system, Zotos unequivocally refused to perform. At these meetings, Ralph Evans, President of Zotos, made it clear that Zotos would not set month one or agree to purchase any systems until an extensive market test could be conducted in the field. Zotos's obligation to continue with the contract would be conditioned upon its approval of the market-test results, a requirement found nowhere in the contract. 14 The rights of the aggrieved party after a repudiation are controlled by Minn.Stat. § 336.2-610. 1 Zotos argues that its actions do not amount to a repudiation of the contract. Anticipatory repudiation occurs only when one party expressly renounces a contract and announces an intention not to perform. Jurek v. Thompson, 308 Minn. 191, 241 N.W.2d 788 (1976). There must, at a minimum, be an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance. Official Comment to U.C.C. § 2-610(1), codified as Minn.Stat. § 336.2-610(1). A secret intention not to perform or a negative attitude does not rise to the level of repudiation. Teeman v. Jurek, 312 Minn. 292, 251 N.W.2d 698 (1977). If a party to a contract demands of the other party a performance to which he has no right under the contract and states definitely that, unless his demand is complied with, he will not render his promised performance, an anticipatory repudiation has been committed. 4 Corbin, Contracts § 973 (1951). When Zotos told Lilja in August of 1975 that it would not proceed until market tests were performed with results subject to Zotos's approval, Zotos repudiated the contract and was in total breach. No market tests were required by the contract, a fact that Zotos admits that it knew. 15 Zotos argues that even if these acts amount to a repudiation, Lilja had already breached the contract in the spring of 1975 by trying to vary the terms of the contract. A suggestion for modification of a contract does not amount to a repudiation unless the party makes it clear that he will not perform without the modification. No one has even suggested that Lilja threatened not to perform. On the contrary, up until Zotos's actions in August, the record is full of Lilja's attempts to set month one and get on with the contract. 2 16 Lilja was justified in refusing to go into full production until the setting of month one. With the setting of month one, the interdependent obligations of the contract would arise. Lilja would have to have the systems in inventory by the first day of that month, and Zotos would be obligated to pay for the systems fifteen days later, subject to warranty requirements. Zotos was aware from the beginning of negotiations with Lilja in 1973 that he did not have the financial resources to develop the system alone and then find a buyer. As the contract was finally drafted, it gave Lilja assurance that he would have a buyer for the systems soon after their completion. 3 In return Zotos received an exclusive distributorship for a product that it felt had great potential. We agree with the District Court that Lilja was never in breach of the contract. He made a good-faith effort to put it into effect up until the time of Zotos's repudiation in August of 1975.