318 Conn. 737
Conn.2015Background
- Plaintiffs (RBC Nice Bearings, et al.) sold the Nice ball bearings product line to SKF USA (defendant) and entered a 1997 exclusive distribution agreement with a $9M annual minimum; a 2000 agreement superseded it with a $6M annual minimum and adjustment clauses.
- SKF repeatedly failed to meet the minimums in multiple contract years; plaintiffs often accepted performance, negotiated lower annual targets, invoiced some shortfalls, and continued performance rather than sue immediately.
- Plaintiffs decided in 2005 to pursue direct distribution (secretly) and, while signaling reservation of claims internally, continued to transact with SKF through February 2006 and then terminated the agreement in June 2006.
- Plaintiffs sued for breach (shortfalls and anticipatory breach); SKF counterclaimed for various contract and tort claims. The trial court found plaintiffs waived enforcement of the minimums by their course of performance and ruled for SKF on plaintiffs’ breach claims.
- The Appellate Court reversed, holding course-of-performance evidence could not modify a contract with a no-oral-modification clause and finding no continuing waiver as to the sixth year; the Connecticut Supreme Court granted limited certification and addressed whether the Appellate Court substituted its judgment for the trial court on waiver.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs waived the minimum-purchase requirement by course of performance, continuing into the sixth year and executory portion | Plaintiffs argued they never intended a continuing waiver beyond certain years and that accommodation should not become permanent waiver absent clear proof | SKF argued plaintiffs’ repeated acceptance of shortfalls over many years created a continuing waiver that bound later years unless retracted | Court held trial court’s finding of continuing waiver was supported: repeated acquiescence over multiple years created a continuing waiver extending into sixth year and executory portion |
| Whether course of performance can operate as waiver despite a written no-oral-modification clause | Plaintiffs contended the clause barred oral modification by conduct; thus evidence of course of performance cannot effectuate modification | SKF maintained waiver (unilateral) differs from modification and course of performance can constitute waiver even if oral modification would be barred | Court distinguished waiver from modification: waiver is unilateral and course of performance can evidence waiver despite a no-oral-modification clause |
| Whether the Appellate Court improperly substituted its judgment for the trial court on factual waiver findings | Plaintiffs urged appellate reversal because trial court’s credibility findings lacked support | SKF defended trial court’s credibility determinations and factual findings on course of performance | Court concluded Appellate Court improperly substituted its view; there was sufficient record support for trial court’s continuing-waiver finding |
| Whether plaintiffs effectively retracted any prior waiver before the sixth year (retraction issue) | Plaintiffs raised retraction below but conceded on certification that retraction issue is not properly before the Court | SKF asserted no effective retraction was communicated and retraction burden rests on obligee | Court declined to decide retraction (issue not before it) but explained UCC §1-308 principles for effective reservation of rights |
Key Cases Cited
- AFSCME, Council 4, Local 704 v. Dept. of Public Health, 272 Conn. 617 (waiver is factual and appellate review limited)
- MacKay v. Aetna Life Ins. Co., 118 Conn. 538 (waiver defined as voluntary relinquishment of a known right)
- Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775 (continuing waiver requires repeated occasions for performance and opportunity for objection)
- Apex Pool Equipment Corp. v. Lee, 419 F.2d 556 (course of conduct can create continuing waiver requiring retraction)
- Bradford Novelty Co. v. Technomatic, Inc., 142 Conn. 166 (repeated acquiescence can waive right to insist on strict compliance)
- Remington Arms Union Metallic Cartridge Co. v. Gaynor Mfg. Co., 98 Conn. 721 (must give reasonable notice before insisting on strict future performance)
- Getty Terminals Corp. v. Coastal Oil New England, Inc., 995 F.2d 372 (small or repeated forbearances can establish waiver)
- Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280 (discussion of failed oral modification vs waiver distinctions)