Nelson v. Spence

Decision Date07 July 1960
Citation182 Cal.App.2d 493,6 Cal.Rptr. 312
CourtCalifornia Court of Appeals Court of Appeals
PartiesOrval W. NELSON, Plaintiff and Appellant, v. Darrel SPENCE and Dean Swiden, Defendants and Respondents. Civ. 24270.

John L. Mace, Los Angeles, for appellant.

Barker & Miller, Montebello, for respondents.

KINCAID, Justice pro tem.

The plaintiff brought this action to recover damages for alleged breaches of warranty on a contract between plaintiff as buyer and defendants as sellers, dated August 24, 1956, the pertinent portions of which are set forth in the margin. 1 The defendants counterclaimed for the purchase price on the contract. The court awarded the plaintiff damages of $3,053.37 for breach of warranty of covenant not to compete and awarded the defendants judgment on their counterclaim in the amount of $3,117.44, together with interest and costs. The parties have not challenged either of these amounts excepting the interest and costs allowed defendants.

The plaintiff directs his primary attack against the court's conclusion that he waived his right to sue for damages for breach of the defendants' warranty regarding the exclusive nature of the defendants' right to a certain unique type of peat moss. Plaintiff secondarily challenges the trial court's award of interest on the counterclaim and costs to the defendants.

The evidence, viewed in the light most favorable to the defendants, can be briefly summarized as follows: In the early summer of 1956 the plaintiff, who was engaged in the business of packaging and selling fertilizer, had several meetings with the defendants concerning the sale of their peat moss business to him. These meetings culminated in the contract of August 24, 1956.

The court found that the defendants represented to the plaintiff that they had the exclusive right to sell the peat produced by one Peter Gambetta. The contract contained a warranty to this effect and gave the plaintiff the right to rescind the contract within one year and recover his purchase price if the facts were not as warranted. The court further found that the plaintiff relied upon the defendants' representations and the rescission clause when he executed the agreement. Plaintiff commenced ordering peat through the defendants at the contract price. At a time thereafter plaintiff discovered that defendants did not have the exclusive right to Gambetta's peat. Relying on this breach of warranty, plaintiff did not make any of the weekly payments called for by the contract, excepting that in January 1957, he made a payment of $175. The exclusive right to sell Gambetta's peat was never obtained by defendants.

In February 1957, plaintiff commenced selling peat in large quantities to Coast Fertilizer Company. On April 19, 1957, defendants, in violation of their covenant not to compete, commenced selling peat directly to Coast and sent the plaintiff a letter telling him of their action. The defendants continued selling the peat directly to Coast until May 5, 1957, when Coast began buying the product directly from Gambetta. The plaintiff replied to the April 19th letter on April 30th, stating that he was holding defendants liable for damages for breach of warranty in that they had no exclusive contractual right with Gambetta. Thereafter, on May 13, 1957, defendants notified plaintiff that they considered him in default on the contract by virtue of his failure to pay the purchase price. Defendants did not tender to plaintiff the $175 which he had paid them.

Plaintiff's primary contention is that the court below erred in concluding that he had limited his rights to those of rescission by virtue of that portion of the contract which states: 'Should any of the warranties herein expressed by not as warranted, then Buyer at his option may rescind this agreement and recover the purchase price paid to Sellers; said option to cancel, however, shall expire within one year of the date of this agreement.' (Emphasis added.)

Where a contract expressly provides a remedy for a breach thereof, the language used in the contract must clearly indicate an intent to make the remedy exclusive. Inner Shoe Tire Co. v. Tondro, 83 Cal.App. 689, 695, 257 P. 211; Pratt-Low Preserving Co. v. Evans, 55 Cal.App. 724, 731, 204 P. 241, 244. In Pratt-Low, supra, the court said: 'It is significant, however, that the parties have used the term 'may,' instead of 'shall' or 'must,' and ordinarily this word implies permission, and not a mandate. If the parties had intended to make it exclusive, it would have been a simple task to so provide.' In contracts which have been held to contain exclusive remedies, the language used by the parties indicated, expressly, an intent to make the remedy exclusive. Wheeler v. Oppenheimer, 140 Cal.App.2d 497, 499, 295 P.2d 128, 129, 'SELLER ONLY TO BE LIABLE FOR SUCh cOsts aNd expenses' (emphasis supplied); Artukovich v. Pacific States, etc., Co., 78 Cal.App.2d 1, 4, 176 P.2d 962, 964: 'The measure of damages is the price of defective material only' (emphasis supplied); United Iron Works v. Standard Brass Casting Co., 98 Cal.App. 517, 519, 277 P. 183, 184: 'All defective castings will be replaced and foundry shall not be responsible for any * * * contingent damages caused by reason of defective castings' (emphasis supplied).

In the instant case the words used are not in the imperative, but are 'option' and 'may' and thereby clearly indicate that the plaintiff's remedy was not exclusive.

Since the defendants have breached this warranty, plaintiff has the right to elect to pursue any of three remedies. He may treat the contract as rescinded and may recover upon a quantum meruit so far as he has performed; or he may keep the contract alive, for the benefit of both parties, being at all times ready and able to perform; or, third, he may treat the repudiation as putting an end to the contract for all purposes of performance and sue for the profits he would have realized if he had not been prevented from performing. Alder v. Drudis, 30 Cal.2d 372, 381-382, 182 P.2d 195; 12 Cal.Jur.2d (Contracts) § 253, p. 481; Witkin, 'Summary of California Law' (Contracts) § 4, p. 296.

Having elected to treat the breach of warranty as putting an end to the contract so far as any future performance thereof was concerned, plaintiff was under no further obligation to make the specified weekly payments to defendants. The trial court, having found that the defendants did breach their express warranty of possessing the exclusive right to sell the Gambetta produced peat, erred in concluding that plaintiff waived his right to recover damages for breach thereof because of his election not to rescind. The finding that the plaintiff's failure to pay the purchase price was without cause was therefore likewise incorrect.

The defendants contend that plaintiff is barred from recovery by section 1769 of the Civil Code, which states, inter alia, that '* * * if, after acceptance of the goods, the buyer fails to give notice to the seller of...

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    ...56 Cal.Rptr. 435; Conderback, Inc. v. Standard Oil Co. (1966) 239 Cal.App.2d 664, 689-691, 48 Cal.Rptr. 901; Nelson v. Spence (1960) 182 Cal.App.2d 493, 499-500, 6 Cal.Rptr. 312; Gerard v. Salter (1956) 146 Cal.App.2d 840, 847, 304 P.2d 237; Rose v. Hecht (1949) 94 Cal.App.2d 662, 666, 211 ......
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    ...thereof, the language used in the contract must clearly indicate an intent to make the remedy exclusive.” Nelson v. Spence, 182 Cal.App.2d 493, 497, 6 Cal.Rptr. 312 (1960). “When a contract describes a remedy for breach without an express or implied limitation making that remedy exclusive, ......
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    ...performance. The net result of the clause was to make a breach of contract action the subcontractor's exclusive remedy. ( Nelson v. Spence, 182 Cal.App.2d 493, 497 ...; 5A Corbin on Contracts, § 1227; 17A C.J.S., Contracts, § 422[1], p. 521, fn. 62.). Having committed itself to complete per......
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