Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 24

FACTS Marc and Bree Kohel agreed to buy a used 2009 Mazda from Bergen Auto Enterprises, LLC, doing business as Wayne Mazda, Inc. In the sales transaction, the Kohels were credited $7,000 for their 2005 Nissan, as a trade-in. The Kohels, however, still owed about $8,000 on the Nissan, which Wayne Mazda agreed to pay. The Kohels took possession of the Mazda with temporary plates.
Sometime later, Wayne Mazda discovered that the Nissan was missing a vehicle identification number (VIN) tag. The dealer therefore refused to make the payment for the Nissan and also refused to give the Kohels permanent plates for the Mazda. The Kohels applied and paid for a replacement VIN tag for the Nissan. Nevertheless, Wayne Mazda refused to take their calls on the matter and continued to refuse to supply permanent plates for the Mazda. The Kohels filed a complaint against the dealer in a New Jersey state court, alleging breach of contract. The court ruled in their favor, and Wayne Mazda appealed.
ISSUE Was it a material breach of the contract for Wayne Mazda to refuse to go through with the sales agreement because the trade-in vehicle was missing a VIN tag?
DECISION Yes. A state intermediate appellate court affirmed the judgment in the Kohels' favor.
REASON While both parties were arguably in breach of their contract, "there is a material distinction in plaintiffs' conduct,"which was unintentional, "and defendant's refusal to release the permanent plates for which the plaintiffs had paid." After all, the Kohels were not aware that their trade-in Nissan lacked a vehicle identification number (VIN) tag. Moreover, "defendant's representatives examined the car twice before accepting it in trade and did not notice the missing VIN tag until they took the car to an auction where they tried to sell it." The reviewing court found that Wayne Mazda acted only to maintain "leverage." The Kohels applied and paid for a replacement VIN tag in an attempt to remedy the problem, but the owner of Wayne Mazda would not even take their calls to discuss the matter. Thus, the court concluded that Wayne Mazda had acted in an unreasonable manner, which was a material breach of the contract.
FOR CRITICAL ANALYS IS-Legal Environment Consideration What is a material breach of contract? When a material breach occurs, what are the nonbreaching party's options?