A restaurant owner contracted with a pastry chef to bake 20 custom cakes for a special event on Saturday for $1,000. On Wednesday, the chef told the owner, 'I've decided I don't want to bake cakes anymore, so I won't be delivering them on Saturday.' The restaurant owner immediately hired another chef to make the cakes, but at a cost of $1,500. The original chef then called on Thursday to say, 'I apologize, I've reconsidered, and I will deliver the cakes as promised.' What is the legal status of the original contract?
- AThe restaurant owner must accept the original chef's performance and sue for the difference in cost if the replacement chef had already started.
- BThe original contract was discharged by the chef's repudiation, and the restaurant owner's hiring of a new chef was a proper response.
- CThe chef's repudiation was effectively retracted, making the original contract enforceable.
- DThe original contract is still enforceable, and the chef must deliver the cakes or be in breach.
Show answer & explanationAnswer & explanation
Correct answer: B. The original contract was discharged by the chef's repudiation, and the restaurant owner's hiring of a new chef was a proper response.
This scenario involves anticipatory repudiation and its retraction. When a party clearly and unequivocally repudiates a contract before performance is due, the non-breaching party can (1) treat the repudiation as a breach and sue immediately, (2) await performance, or (3) suspend performance. If the non-breaching party materially changes their position in reliance on the repudiation (e.g., by hiring a replacement), the repudiation becomes final and cannot be retracted. Here, the restaurant owner hired a new chef, changing their position, thus discharging the original contract.
Why the other options are wrong
- A. The restaurant owner was entitled to treat the contract as breached and mitigate damages by hiring a replacement. They are not required to accept the original chef's late retraction.
- C. Retraction is only possible if the non-breaching party has not materially changed their position in reliance on the repudiation.
- D. The contract was discharged by the repudiation and the owner's reliance.
Anticipatory Repudiation & Retraction
Anticipatory repudiation occurs when a party unequivocally communicates that they will not perform their contractual duties before performance is due. The non-repudiating party can treat it as a present breach. Repudiation can be retracted unless the non-repudiating party has materially changed their position in reliance on the repudiation.
- Must be a clear and unequivocal statement of non-performance.
- Non-repudiating party can sue immediately, await performance, or suspend performance.
- Repudiation can be retracted before the non-repudiating party materially changes position.
- Material change in position makes the repudiation final.
Memory trick: Early NO means GO, unless they retract before you show!