Second Department Finds Proposed Amendment to Complaint Patently Devoid of Merit Because Pleading a Cause of Action for Breach of Contract “precludes” a Cause of Action for Anticipatory Breach of the Same Contract
Print Article- Posted on: Mar 1 2024
People and businesses enter into all kinds of contracts with the expectation that the other party will perform according to the respective promises of the parties. [This BLOG has discussed the basics of contract formation and breach, inter alia, [here], [here], [here], [here], [here], [here] and [here].]
It is well known that a party to a contract may be liable to another party to a contract for a breach. The elements of a cause of action for breach of contract are: (1) the existence of an enforceable contract; (2) performance of the agreement by one party; (3) breach by the other party; and, (4) damages resulting from the breach. See, e.g., Nassau Operating Co., LLC v. Desimone, 206 A.D.3d 920, 926 (2d Dep’t 2022). “A material breach is a failure to do something that is so fundamental to a contract that the failure to perform that obligation defeats the essential purpose of the contract.” Feldman v. Scepter Group, PTE. LTD, 185 A.D.3d 449, 450 (1st Dep’t 2020) (citation and internal quotation marks omitted). Put another way, a “breach is material if it strongly tends to defeat the object of the parties in making the contract.” Id. (Citation, internal quotation marks and brackets omitted.)
A party can also be deemed to have breached a contract prior to the time of performance – an anticipatory breach. “An anticipatory breach of contract by a promisor is a repudiation of a contractual duty before the time fixed in the contract for performance has arrived.” Costea v. Vemen Mgt. Corp., 213 A.D.3d 634, 637 (2nd Dep’t 2023) (citations, internal quotation marks, brackets and ellipses omitted). According to the Costea Court:
An anticipatory breach of a contract—also known as an anticipatory repudiation—can be either a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach or a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach. Under the doctrine of anticipatory repudiation, where one party repudiates its contractual obligations prior to the time designated for performance, the nonrepudiating party may immediately claim damages for total breach and be absolved from its obligations of future performance. For an anticipatory repudiation to be deemed to have occurred, the expression of intent not to perform by the repudiator must be positive and unequivocal.
Id. (Citations, internal quotation marks and brackets omitted.)
The party to a contract faced with a breach of a contract must elect its remedy. Under the election of remedies doctrine “when one party breaches a bilateral contract, the other party must make an election between declaring a breach and terminating the contract or, alternatively, ignoring the breach and continuing to perform under the contract.” Todd English Enterprises LLC v. Hudson Home Group, LLC, 206 A.D.3d 585, 587 (2022) (citation and internal quotation marks omitted). “On learning of the breach, the other party has a reasonable time to elect its remedy.” Id. (Citation and internal quotation marks omitted).
Also relevant to today’s BLOG is the amendment of pleadings. CPLR 3025(b) provides in pertinent part that “[a] party may amend his or her pleading … at any time by leave of court or by stipulation of all parties.” Importantly, CPLR 3025(b) provides that “[l]eave [to amend] shall be freely given.…” Thus, “unless the proposed amendment would unfairly prejudice or surprise the opposing party, or is palpably insufficient or patently devoid of merit,” the motion to for leave to amend should be granted. Cirillo v. Lang, 206 A.D.3d 611, 612 (2d Dept. 2022) (citations omitted). See also Greene v. Esplanade Venture P’ship, 36 N.Y.3d 513, 526 (2021); Toiny, LLC v. Rahim, 214 A.D.3d 1023, 1024 (2d Dept. 2023) (citations omitted).
These principles were addressed on February 28, 2024, by the Appellate Division, Second Department, in Contract Pharmacal Corp. v. Air Industries Group, a breach of contract action. The plaintiff in Contract Pharmacal moved for leave to amend its complaint to interpose a cause of action for anticipatory breach of contract. The motion was denied. On the plaintiff’s motion for reargument, the motion court granted reargument and adhered to its original decision denying the motion.
On the Plaintiff’s appeal, the Second Department affirmed. Asserting claims for breach and anticipatory breach of contract, the Court noted, is “barred”. Therefore, the Court found the proposed amendment was “patently devoid of merit.” In so doing, the Court stated:
Although leave to amend a pleading should be freely given in the absence of prejudice or surprise to the opposing party (see CPLR 3025[b]), the motion should be denied where the proposed amendment is palpably insufficient or patently devoid of merit. When one party to a contract commits an anticipatory breach, the nonbreaching party must choose one of two options: either treat the contract as terminated and seek damages, or ignore the breach and wait for the breaching party to perform. The nonbreaching party must make an election and cannot at the same time treat the contract as broken and subsisting. One course of action excludes the other. In determining which election the nonbreaching party has made, the operative factor is whether the non-breaching party has taken an action (or failed to take an action) that indicated to the breaching party that it had made an election. Once the nonbreaching party has chosen a remedy, the choice becomes binding and cannot be altered. Accordingly, asserting a cause of action alleging breach of contract precludes pleading a cause of action alleging anticipatory breach of contract.
Here, the plaintiff, in the complaint, asserted a cause of action to recover damages for breach of contract. In doing so, the plaintiff elected its remedy and communicated that choice to the defendant. Inasmuch as simultaneous prosecution of causes of action alleging breach of contract and alleging anticipatory breach of contract is barred, the proposed amendment to add a cause of action alleging anticipatory breach of contract was patently devoid of merit. Accordingly, upon reargument, the Supreme Court properly adhered to the prior determination denying that branch of the plaintiff’s motion which was for leave to amend the complaint to add such a cause of action.
(Citations, internal quotation marks, brackets and ellipses omitted.)
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be and should not be taken as legal advice.
