Opinion ID: 218339
Heading Depth: 3
Heading Rank: 1

Heading: Breach of an Installment Contract

Text: Sunrich first argues that the district court committed reversible error by failing to give Sunrich's proposed jury instructions regarding the breach of an installment contract and instead giving general instructions regarding the breach of a delivery contract. Sunrich states that an installment contract can be breached in two different ways: (1) a single installment, but not the whole contract, can be breached by a nonconforming delivery; and (2) the entire installment contract can be breached if the nonconformity substantially impairs the value of the whole contract. Sunrich contends that, at most, it breached a single installment of the Agreement by failing to deliver Purchase Order 267 by Nutrisoya's requested delivery date. An appropriate jury instruction, it maintains, would have allowed the jury to differentiate between a breach of a single installment and a breach of the entire installment contract. Sunrich contends that the court's erroneous jury instruction prejudiced it because Nutrisoya did not produce evidence that the entire installment contract was substantially impaired and therefore breached. Nutrisoya counters that the district court's failure to give Sunrich's proposed jury instructions on an installment contract does not warrant a new trial. First, Nutrisoya argues that the court properly instructed the jury to find that Sunrich had failed to perform an important part of the contract before it find in Nutrisoya's favor. Second, Nutrisoya contends that, even if the instruction was incorrect, Sunrich was not prejudiced because it still could have argued to the jury that it should calculate Nutrisoya's damages based on the breach of only a single installment. In a diversity action such as this, we apply Minnesota substantive law to resolve the dispute. Vargo-Schaper v. Weyerhaeuser Co., 619 F.3d 845, 848 (8th Cir. 2010). The district court concluded, and the parties do not dispute, that the Agreement was an installment contract. Under the Minnesota UCC, [2] [a]n `installment contract' is one which requires or authorizes the delivery of goods in separate lots to be separately accepted. Minn.Stat. § 336.2-612(1). This statute indicates that a seller may breach an installment contract in two different respects. First, a buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment. Id. § 336.2-612(2). Second, [w]henever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. Id. § 336.2-612(3). Thus, in order to find a breach of an entire installment contract, a nonconformity or default with respect to one or more installments must substantially impair the value of the entire installment contract. The Minnesota UCC does not define the term substantial impairment, but the term is used in other parts of the statute. See, e.g., Minn.Stat. §§ 336.2-608(1), 336.2-610. Construing the term as it appears elsewhere in the Minnesota UCC, the Minnesota Supreme Court has stated, the test ultimately rests on a commonsense perception of substantial impairment, akin to the determination of a material breach under traditional contract law. Durfee v. Rod Baxter Imps., Inc., 262 N.W.2d 349, 353 (Minn.1977) (discussing Minn.Stat. § 336.2-608). In turn, a material breach is `[a] breach of contract that is significant enough to permit the aggrieved party to elect to treat the breach as total (rather than partial), thus excusing that party from further performance and affording it the right to sue for damages.' Sitek v. Striker, 764 N.W.2d 585, 593 (Minn.Ct.App.2009) (quoting Black's Law Dictionary 200 (8th ed. 2004)). Under Minnesota law, unlike many other states, while [t]he determination of substantial impairment necessarily involves factual findings, the ultimate conclusion is legal in character. Durfee, 262 N.W.2d at 354; accord Erling v. Homera, Inc., 298 N.W.2d 478, 481-82 (N.D.1980) (citing Durfee and noting that Minnesota appears to be among a minority of jurisdictions which deem substantial impairment to be a conclusion of law). Accordingly, the district court did not err by excluding a jury instruction that would have required the jury to make a legal conclusion. Even without the substantial impairment language in Sunrich's proposed jury instruction, the district court's jury instruction properly instructed the jury on the question of whether Sunrich breached the Agreement. Sunrich argues that the jury should have been allowed to differentiate between a breach of a single installment (Purchase Order 267) or a breach of the entire installment contract (the Agreement). Nutrisoya sued for a breach of the entire contractnot merely to recover damages for a single nonconforming installment. The district court's jury instruction clearly asked the jury to find whether the failure to fill Purchase Order 267 amounted to a breach of the whole Agreement, as opposed to the a single installment. The instruction asked whether Sunrich had breached the contract, and it specifically identified the Agreement as the contract in question. Further, it stated that a breach of the contract occurs when there is a failure to perform an important part of a contract. Although substantial impairment is a legal conclusion, this language approximates the standards for a material breach or substantial impairment under Minnesota law. While the proposed instructions would have provided additional language instructing the jury about a breach of a single installment, the instructions given did not hinder Sunrich from arguing that Nutrisoya's damages should be limited to the value of only one installment. [3] Sunrich did, in fact, make this argument; it simply contends that the jury instructions made this task more difficult. Considering the complete set of jury instructions and the circumstances of this case, the district court did not abuse its discretion by declining to give an instruction clarifying the distinction between a breach of a single installment and a breach of the entire contract. See Fed. Enters., Inc. v. Greyhound Leasing & Fin. Corp., 849 F.2d 1059, 1061 (8th Cir.1988) (We will not find error in instructions simply because they are technically imperfect or are not a model of clarity.). Instead, we find that the court's instructions, taken together, fairly and adequately submitted the breach-of-contract issue to the jury.