Consolidated Service Group, LLC—“The shingles looked like skunks ….”

The so-called right to cure can arise in a few contexts. It’s better not to conflate them. But that seems on the agenda in Consolidated Service Group, LLC v. Maxey, No. S.D. 33061 (Mo. Ct. App., S.D.). The below blog post analyzes the briefs. The case was the subject of a subsequent decision, 2015 WL 268866.

The basics of the case are as follows:

A contractor, engaged to replace a roof, received defective shingles. The defects were patent.

One may summarize circumstances as presented in the client’s brief (2014 WL 4659565):

“The shingles looked like skunks, in that they were dark shingles with a white stripe running horizontally the length of the shingle.” After the first day, one Benz, agent for the contractor, instructed the workmen not to install defective shingles during the second day of the work. This instruction the workmen failed to follow.

Benz first offered to replace defective shingles individually. That, evidently, would compromise the other shingles, not resulting in the contemplated 30-year roof. The homeowner’s brief reports Benz, in a deposition, admitted that type of repair would damage the surrounding shingles. Some months later, Benz offered to replace the whole roof.

On Benz’s request, the manufacturer sent vouchers to the homeowners’ agent (a relative), in an amount for enough shingles to replace the entire roof and pay up to $4,100 toward labor to install the replacement roof. Benz’s offer to replace the roof was conditioned payment of the initial contract price plus relinquishment to CSG of the vouchers.

The homeowners, evidently having had enough of Benz and CSG, declined to allow Benz to remedy the defect. They ultimately had another firm replace the roof, incurring expenses of almost $3,000 that were not covered by the vouchers.

The trial court was faced with the following question: Is the contractor entitled to recover for a stinky job? It granted summary judgment to the contractor on a breach of contract action.

More after the break …

Cure—Two Contexts

Right to Be the Person Mitigating. Let us refresh our recollection of principles governing “cure”. An issue of cure may arise in connection with a default. The obligee may wish not to have any mitigation performed by someone other than the obligor in default. The obligor has, after all, already failed once. Does the defaulting obligor have the right to compel that acts in mitigation be rendered by the obligor, if the obligor in default so chooses?

Cardozo answered that question long ago—No. He wrote, “The law did not charge it[, the obligee,] with a duty to make such an experiment again.” Canadian Industrial Alcohol Co. v. Dunbar Molasses Co., 179 N.E. 383, 385 (N.Y. 1932) (Cardozo, C.J.).

An obligor can, of course, up-front expressly bargain for the right to have a first crack at fixing defective performance. In a moment we will examine whether the parties did—the answer would appear to be, No.

Constructive Conditions of Exchange.  Of course, issues of cure can arise in another, perhaps a more familiar context—whether an obligor has materially breached. Under the default constructive conditions of exchange, an obligor’s material breach entitles the other party to suspend performance and, perhaps with a pause allowing the obligor to cure, sue for total breach.

As Murray on Contracts, § 108[B][2] (5th ed. 2011) notes, the Second Restatement borrows the concept of cure from the U.C.C.:

When a breach is material, the RESTATEMENT 2d views the breaching party’s performance as the non-occurrence of a constructive condition that prevents the activation of the innocent party’s duty, temporarily, or permanently when the constructive condition can no longer occur…. The concept of cure is borrowed from the Uniform Commercial Code.

So, issues of a “right” to cure can arise when one is considering constructive conditions of exchange (if one is hewing to the Restatement (Second)), or when one is examining who controls mitigation of damages. They are separate issues.

The Claimed Right-to-Cure provision

Here the parties seem not to focus on the distinction. The contractor’s brief references a “right-to-cure” provision. Stating “[t]here is no dispute that there is a ‘right-to-cure’ provision”, the brief notes:

[t]he contractor warrants all workmanship for period per front of contract from date of completion and will remedy defects with written or verbal notice from the customer(s) within that time period.

The quoted provision is not a “right-to-cure” provision. It is hornbook law that:

Where … there is no express or implied limitation in the contract making the stated remedy exclusive, the prevailing view is that a party may pursue either the prescribed remedy or any other remedy the law provides, although there is authority to the contrary.

17A Am. Jur. 2d Contracts § 710 (updated Nov. 2014).

The cited contrary authority includes four cases—from the 4th Circuit in 1914, California in 1929, Kentucky in 1906 and Texas in 1915. A brief search for cases addressing this issue indicates California and Texas are currently in the modern camp. I’ll leave to anyone interested investigating the other two stragglers.

So, the highlighted language typically would not limit the remedies otherwise available to a homeowner who has received defective performance. This is not a right-to-cure provision. Rather, it involves an express promise to mitigate on request, and limits the scope of the obligation to defects of which the contractor receives notice as of the specified date. It does not expressly eliminate any other right the homeowner had as a result of a breach.

Note this language, as literally construed, adds meaning. The principle of construction to avoid surplusage is a tedious principle in any case. But, it does not compel an alternative outcome. The language expresses a limitation on the warranty. Not only must the defect be observable within the time period. But, in addition, the contractor must have received notice of the defect within that period if it is to be covered. So, that language, which literally provides conditions to the warranty coverage, is not surplusage if the homeowner is entitled to have mitigation rendered by a third party.

Second Issue in Subsequent Post

So, we have concluded there is not a “right to cure” of the first type—one limiting the obligee’s ability to have mitigation rendered by a third party. In a later post we will address constructive conditions of exchange—the circumstance in which the issue of cure is actually applicable.

A draft of this post was the subject of commentary by Wes Dagestad  and Robert Herz, students in a class styled Contracts in the Courts. The author wishes to acknowledge those helpful observations. The author, however, takes sole responsibility of any portion of this post that may prove controversial.