Contracts

Fact pattern

Manufacturer produces and sells replica car parts, providing both bulk orders of standard parts and custom orders of specialized items. One of the standard parts Manufacturer sells is Whitewall tires, a style of car tire that was popular in the mid-twentieth century. Manufacturer’s website advertises the Whitewall tires with a photo highlighting the tires’ distinctive feature: a wide, white rubber band around the tire encircling the hubcap. The website describes these tires as “perfectly suited for authentic vintage car replicas.” 

One day, Manufacturer received an order from Replica Store, a shop that services classic cars. The order was for 40 sets of replica Whitewall tires, priced at $400 per set. The same day, Manufacturer received an order from Collector, seeking a custom-built engine for a 1963 Corvette. Manufacturer was to construct the engine in-house. Collector agreed to pay $10,000 for the engine, which Manufacturer would deliver in three months. 

Later, when Replica Store received Manufacturer’s shipment of Whitewall tires, its employees discovered a problem. Namely, instead of white bands on the sides, these tires featured light blue bands. Replica Store’s manager called Manufacturer, who acknowledged that the light blue bands were not accurate to the relevant time period. However, Manufacturer insisted that the blue bands really complemented vintage cars, so they would be just as good as tires with white bands. 

Replica Store shipped the tires back to Manufacturer. The shipment included a curt note telling Manufacturer that Replica Store was very unhappy with the product, because Replica Store needed tires with white bands to lend an authentic look to the classic cars it serviced. Two weeks later, Replica Store purchased another 40 sets of replica Whitewall tires from another company, at a cost of $500 per set. 

That same week, Collector canceled his order for the Corvette engine. Manufacturer objected strenuously, contending that its profit on the sale of each custom engine was $2,000. Accordingly, the cancellation would greatly harm Manufacturer’s bottom line, particularly as Manufacturer had, of late, sold fewer than its average rate of one custom engine each month. However, Manufacturer was unable to convince Collector to honor the contract. 

The next month, though, Manufacturer found someone else to buy the engine at the same price of $10,000. Even so, Manufacturer sued Collector for breach of contract—at about the same time Replica Store sued Manufacturer for breach of contract. Manufacturer countersued Replica Store, seeking to enforce its contract for the sale of the Whitewall tires.

Assume that both agreements are contracts for the sale of goods, such that Article 2 of the Uniform Commercial Code (UCC) applies here, as supplemented by the common law of contracts.

Questions

1. Does Replica Store have a valid defense to liability for breach of contract under applicable common-law principles? Explain, without discussing rejection under the UCC.
2. Under the UCC, did Manufacturer breach the contract with Replica Store by sending “Whitewall” tires with blue sides? Explain.
3. Assume that Manufacturer is found in breach of the contract with Replica Store. What damages will be awarded, if any? Explain.
4. Assume that Collector is found to have breached his contract with Manufacturer. What damages will likely be awarded? Explain.