Selland Pontiac-GMC, Inc. v. King

George King (defendant) entered a contract with Selland Pontiac-GMC, Inc. (Selland) (plaintiff) under which King agreed to supply four school bus bodies to be built on bus chassis supplied by Selland. King knew that Selland needed the completed buses by the end of August for use in the new school year. The contract specified that the bus bodies would be built by Superior Manufacturing (Superior) The contract contained no escape clause in the event that King’s source, Superior, could not supply the bus bodies, and neither of the parties were aware at the time of contracting that Superior was in financial trouble. Around the time that Selland accepted delivery of four bus chassis that it had ordered in reliance on its contract with King, King learned that Superior had gone into receivership. King reported this to Selland approximately one month later and explained that production of the bus bodies would be delayed. Superior later went out of business, so the bus bodies were not manufactured. Selland cancelled its contract with King after its customer cancelled the order for the buses and Selland sold the chassis at a loss. Selland sued King for breach of contract. At trial, the parties disputed whether Selland acquiesced to the delay, and the trial court found that it had. The trial court also found that the contract contemplated that the bus bodies would be manufactured by Superior. Applying Minn.Stat Section 336.2-615–Section 2-615 of the Uniform Commercial Code (UCC) as enacted in Minnesota–the trial court ruled in favor of King. Selland appealed.