Opinion ID: 1640458
Heading Depth: 3
Heading Rank: 2

Heading: Validity of 10/10 contracts

Text: The district court ruled that VFBA, as a bailee in possession of the goods, never accepted delivery of the beans covered by the contracts because it failed to receive from the producers appropriate documents of title under § 41-02-51(4)(a)(2-503), N.D.C.C.:  41-02-51. (2-503) Manner of seller's tender of delivery. 4. Where goods are in the possession of a bailee and are to be delivered without being moved: a. Tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer's right to possession of the goods; ... We believe that subsection 4(a) of the statute involves a situation in which a bailee merely holds possession of the goods and the sales transaction occurs between a seller and buyer unrelated to the bailee. Where, as in the present case, the buyer is also the bailee who has physical possession of the goods when the contract is executed, delivery of a negotiable document of title as a form of tender is unnecessary, absent an express agreement to the contrary. Ordinarily, a proper tender is made if the seller puts and holds conforming goods at the buyer's disposition and gives the buyer any notification reasonably necessary to enable him to take delivery. See § 41-02-51(1)(2-503), N.D.C.C.; Sand Seed Service, Inc. v. Bainbridge, 246 N.W.2d 911 (Iowa 1976); 3 R. Anderson, Uniform Commercial Code § 2-503:4 (3d ed. 1983). In this case, VFBA had physical possession of the beans at the time the 10/10 contracts were executed. The beans covered by the 10/10 contracts were therefore at VFBA's disposition at the time the contracts were executed. The mechanics of tender were not set forth in the parties' agreement. Under the provisions of § 41-02-51(2-503), N.D.C.C., no further tender of a negotiable document of title was necessary to accomplish a proper tender of delivery. Alternatively, the district court ruled that the 10/10 contracts were executory in nature because VFBA never tendered payment for the beans. Section 41-02-59(1)(2-511), N.D.C.C., provides that [u]nless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery. The district court concluded that VFBA never tendered the cash or the promissory note and the failure to do so results in no delivery of the goods and results in an executory agreement. An executory contract has been defined as [a] contract the obligation (performance) of which relates to the future. Black's Law Dictionary 512 (5th ed. 1979). However, a contract is not executory merely because it has not been fully performed by payment, if all the acts necessary to give rise to the obligation to pay have been performed. Wagstaff v. Peters, 203 Kan. 108, 453 P.2d 120, 124 (1969). In this case, the beans had already been delivered to VFBA by the producers. This gave rise to VFBA's obligation to pay the producers under the terms of the 10/10 contracts. VFBA's failure to make the agreed payments may have resulted in a material breach of the 10/10 contracts giving rise to a cause of action on the part of the producers, but it did not automatically extinguish the contracts or convert them into executory agreements. The 10/10 contracts were valid, executed agreements.