The Importance of Understanding Your Contract’s Terms

1024px-PatatesIn an opinion released yesterday, the Washington Court of Appeals served up a nice reminder of how important it is to understand and be familiar with the terms of your contract.

The dispute was between Conagra Foods, a potato processor, and DC Farms, a potato producer that had some issues making satisfactory deliveries to the processor. Conagra Foods determined that DC Farms was not going to be able to complete delivery according to the terms of their contract and therefore delivered notice of termination, alleging that DC Farms had breached the contract.

DC Farms filed a lawsuit claiming that Conagra Foods breached the contract because there was a notice-and-cure provision in the contract and rather than giving DC Farms notice and a seven day window to cure their alleged breach, Conagra Foods simply delivered notice of termination. Conagra Foods made the argument that providing the opportunity to cure was not necessary because according to them it would have been impossible for DC Farms to cure the issues with their goods.

The trial court agreed with Conagra Foods and ruled that DC Farms’ claims were to be dismissed. But the Court of Appeals underlined the importance of following all the provisions in your contracts when it reversed the trial court and held that Conagra Foods actually breached the contract by not allowing the opportunity to cure: “A party who has bargained for a notice-and-cure provision to protect against forfeiture and litigation is entitled to have that bargained-for protection honored.” The case was sent back to the trial court to determine the extent of damages DC Farms incurred from Conagra Foods’ breach.

This case does an excellent job of illustrating the importance of knowing the terms of your contract. DC Farms was almost certainly going to be liable to Conagra Foods for extensive damages until Conagra Foods failed to follow the terms provided in the notice-and-cure provision. And because Conagra Foods failed to follow the terms of that provision, they are now liable to DC Farms.

If you have any questions about your contracts, feel free to contact us.

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