Alaska Pacific Trading Co. v. Eagon Forest Products, Inc.

Citations: 933 P.2d 417; 85 Wash. App. 354Docket: 37581-4-I

Court: Court of Appeals of Washington; February 10, 1997; Washington; State Appellate Court

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Alaska Pacific Trading Company (ALPAC) and Eagon Forest Products, Inc. entered into a contract for the sale of raw logs, with a delivery period set between late July and late August 1993. As the delivery date approached, market conditions worsened, causing Eagon to hesitate on fulfilling the contract. Communications between the parties indicated Eagon’s reluctance to accept the logs, and ALPAC grew concerned about potential cancellation. Despite ongoing discussions, ALPAC ultimately canceled the shipping arrangements, believing Eagon would not accept the logs. Eagon subsequently canceled the contract, claiming ALPAC's failure to deliver constituted a breach. The trial court ruled that ALPAC's delay in delivery was a material breach and that no modification of the delivery date occurred. It found Eagon did not repudiate the contract and granted summary judgment in favor of Eagon. ALPAC's arguments—that the breach was not material and that Eagon had also breached by not providing assurances—were rejected. The court affirmed the trial court's decision, emphasizing ALPAC's failure to deliver on time as a significant breach of contract.

Eagon filed a motion for summary judgment, claiming that it did not breach the contract while alleging that ALPAC did breach by failing to deliver logs on time. The trial court granted Eagon's motion and dismissed ALPAC's claims, with ALPAC's request for reconsideration denied. On appeal, ALPAC challenges the trial court’s ruling, asserting that it did not breach the contract as the delivery time was not a material term. ALPAC cites common law to argue that late delivery does not constitute a material breach unless specified as such. However, the contract is governed by the Uniform Commercial Code (UCC), specifically Article II, which applies the 'perfect tender' rule. This rule states that any deviation from the contract terms permits the buyer to reject the goods. ALPAC acknowledges that the contract specified a delivery date, which was not met, thus constituting a breach.

Furthermore, ALPAC contends that any breach was waived or modified by Eagon. The UCC allows contract modifications without consideration but still requires mutual assent for validity. ALPAC claims Eagon’s silence during discussions implied agreement to modifications. However, mere silence does not satisfy the legal standard for mutual assent. Additionally, ALPAC argues that Eagon waived the shipping date by not objecting post-deadline, but waiver is a factual issue that can be resolved on summary judgment if the evidence only supports one reasonable conclusion.

If both parties to a contract do not raise concerns during a reasonable period for delivery, a court may conclude they have mutually extended the performance timeline. In this case, negotiations between Ahn and Kimura continued past the original shipment date of September 7, implying Eagon may have waived that date. However, by the end of September, ALPAC had still not shipped the logs, indicating a breach of duty to deliver within a reasonable timeframe, particularly as the market price for logs declined over an additional 20 days of delay.

ALPAC contends that summary judgment is inappropriate due to a factual dispute over whether it requested assurances from Eagon, which Eagon allegedly failed to provide. Under the UCC, a party may demand written assurances of performance if reasonable insecurities about the other party's performance arise. Washington courts have not definitively ruled on whether such requests must be in writing; however, other jurisdictions maintain that written demands are necessary unless there is a demonstrated understanding between the parties that performance would be suspended if concerns were not addressed. 

ALPAC argues that its interactions with Eagon did not require a written request for assurance, citing cases where the pattern of interaction made demands clear. However, the court found that Ahn's concerns about Eagon were not explicitly communicated as a withholding of performance, thus failing to meet the standard for a demand for assurances. Both parties operated under assumptions regarding each other's obligations without clearly expressing their need for confirmation, which undermines the purpose of the UCC provision regarding assurances.

A clear demand for assurances is required to notify all parties that, without such assurances, the demanding party will withhold performance; ambiguity in communication is insufficient. ALPAC asserts that it made a valid written request for assurances through a fax from Kimura to Eagon dated August 23, 1993, which proposed adjustments to volume and price for shipping logs. The adequacy of this written demand is a factual question but can be resolved on summary judgment if reasonable persons can only reach one conclusion. Written demands must be clear and unequivocal, though less clear statements may suffice if the context implies the demand for assurances. Previous cases illustrate that prior relationships and communications can establish sufficient demands for assurances. In this case, there is no evidence that Eagon intended not to perform or that ALPAC believed Eagon would not perform, as ALPAC's correspondence indicated a willingness to negotiate rather than a demand for assurance. Furthermore, ALPAC claims Eagon repudiated the contract before the delivery date due to concerns about log prices and approval processes. This claim of anticipatory repudiation is also a factual issue, resolvable only if reasonable minds can only conclude one way. Courts require a clear indication of intent to repudiate, which cannot be inferred from vague statements.

ALPAC contends that Kimura's refusal to visit Argentina and Ahn's comments regarding Eagon's potential financial loss indicate Eagon's repudiation of the contract. However, Kimura clarified that Ahn never explicitly rejected cargo acceptance; instead, Kimura inferred issues with home office approval as a refusal. Washington courts maintain that mere doubts about a party's performance do not amount to repudiation unless there is a clear denial, as established in Lovric v. Dunatov. Eagon's dissatisfaction with timber prices and contract execution issues do not legally constitute repudiation. 

ALPAC further cites RCW 62A.2-504 and various cases to argue that a seller's breach must result in material delay or loss to excuse buyer performance. This statute pertains to shipment contracts and does not undermine the perfect tender rule. Cases such as D.P. Technology Corp. v. Sherwood Tool, Inc. and Ramirez v. Autosport are mentioned to support ALPAC's stance but are found inapplicable due to differences in jurisdictional standards and the absence of any attempt by ALPAC to cure the breach.

ALPAC also alleges Eagon acted in bad faith, seeking to induce a breach without providing sufficient legal authority to support this claim. Ahn's testimony indicates that he believed the original contract confirmed Eagon's commitment to accept the logs, despite a lack of direct confirmation from Kimura. Finally, ALPAC's September 27 letter to Eagon, claiming repudiation of contractual obligations, was rendered moot since ALPAC had already breached the contract and was not entitled to demand compliance.