Owen buys a used Prius from Quality Motors, Inc., paying $1,000 down and agreeing to pay off the balance in thirty-six monthly payments of $200 each. The terms of the agreement call for Owen to make a payment on or before the first of each month, beginning March 1. During the first six months, Quality receives a $200 payment before the first of each month. Starting in September, however, and continuing for the subsequent five months, Owen's payment is never made until the fifth of the month. Quality accepts and cashes the payment check each time. Before the next payment is due, Quality decides that it is no longer willing to accept late payments. Can Quality sue Owen immediately for breach? Can Owen continue to make late payments without liability? Explain.

Question

What will be an ideal response?

Answer 1

The dispute between these parties turns on whether Quality's acceptance of six late payments constitutes a waiver of Owen's agreement to pay on or before the first of each month. When a nonbreaching party waives the breach, he or she relinquishes the legal right to claim failure of full performance. Quality's acceptance of six late payments not only constitutes a waiver but also constitutes a pattern of conduct of waiver, and thus the waiver extends to the thirteenth and future payments¾until such time as Quality gives notice to Owen that full compliance with the contract will be required in the future. Quality cannot immediately hold liable Owen for breach on the late thirteenth payment but can notify Owen that any further tender of late payments will constitute a breach. In other words, on notice from Quality, Owen can no longer make late payments without liability.