Gretchen buys a tractor from Haulers Equipment Company, 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 Gretchen to make a payment on or before the first of each

Question

month, beginning March 1 . During the first six months, Haulers receives a $200 payment before the first of each month. Starting in September, however, and continuing for the subsequent five months, Gretchen's payment is never made until the fifth of the month. Haulers accepts and cashes the payment check each time. Before the next payment is due, Haulers decides that it is no longer willing to accept late payments. Can Haulers sue Gretchen immediately for breach? Can Gretchen continue to make late payments without liability? Explain.

Answer 1

The dispute between these parties turns on whether Haulers's acceptance of six late payments consti-tutes a waiver of Gretchen'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. Haulers's acceptance of six late payments not only consti-tutes a waiver but also constitutes a pattern of conduct of waiver, and thus the waiver ex-tends to the thirteenth and future payments—until such time as Haulers gives no-tice to Gretchen that full compliance with the contract will be required in the fu-ture. Haulers cannot immediately hold liable Gretchen for breach on the late thirteenth payment but can notify Gretchen that any further tender of late payments will constitute a breach. In other words, on notice from Haulers, Gretchen can no longer make late payments without liability.