Carnes Company v. Stone Creek Mechanic

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-1244
CARNES COMPANY,
Plaintiff-Appellee,
v.
STONE CREEK MECHANICAL,
INCORPORATED,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 02 C 208—Barbara B. Crabb, Chief Judge.
____________
ARGUED NOVEMBER 5, 2004—DECIDED JULY 5, 2005
____________
Before EASTERBROOK, MANION, and SYKES, Circuit Judges.
SYKES, Circuit Judge. Carnes Company, a Wisconsin-
based manufacturer of heating, ventilation, and air-condi-
tioning (“HVAC”) equipment, entered into an agreement to
sell “energy recovery units” to Stone Creek Mechanical for
use in a Pennsylvania HVAC project on which Stone Creek
was the general mechanical contractor. When the parties’
relationship unraveled, Carnes commenced this breach of
contract action alleging nonpayment on the part of
Stone Creek, and Stone Creek counterclaimed for damages
caused by Carnes’ alleged nonperformance. After a bench
2 No. 04-1244
trial the district court found that Stone Creek had breached
the contract and awarded Carnes $401,922 in contract
damages and $219,614.74 in attorney fees, as provided in
the agreement. Stone Creek appeals. We affirm.
I. Background
In their appellate briefing the parties present very differ-
ent versions of the pertinent events that combined to doom
their contractual relationship. Carnes’ statement of facts
traces the district court’s factual findings; Stone Creek
essentially ignores the district court findings and tells a
very different story of the parties’ relationship and course
of dealing. We view Stone Creek’s approach as largely an
attempt to retry the case on appeal. This is improper. Find-
ings of fact entered after trial to the court are reviewed
under the clearly erroneous standard of review, FED. R. CIV.
P. 52(a), and an appellate court oversteps its bounds if it
attempts to duplicate the role of the trial court. Anderson v.
Bessemer City, 470 U.S. 564, 573 (1985). The party alleging
error bears the burden of demonstrating that particular
factual findings were clearly erroneous. Brunswick Leasing
Corp. v. Wis. Cent., Ltd., 136 F.3d 521, 526 (7th Cir. 1998).
In other words, it is entirely improper for us to “try the case
de novo on the record.” United States v. Oregon State Med.
Soc’y, 343 U.S. 326, 332 (1952); see also Zenith Radio Corp.
v. Hazeltine Research, Inc., 395 U.S. 100, 123 (1969) (“In
applying the clearly erroneous standard to the findings of
a district court sitting without a jury, appellate courts must
constantly have in mind that their function is not to decide
factual issues de novo.”).
A finding of fact is clearly erroneous only when the
reviewing court is left with the definite and firm conviction
that a mistake has been committed. United States v. United
States Gypsum Co., 333 U.S. 364, 395 (1948); Bowles v.
Quantum Chemical Co., 266 F.3d 622, 630 (7th Cir. 2001).
No. 04-1244 3
If there are two permissible views of the evidence, the trial
court’s choice between them cannot be clearly erroneous.
Anderson, 470 U.S. at 574. Where the district court’s
account of the facts is “plausible in light of the record,” we
may not reverse it even if we would have decided the case
differently, and any reasonable doubts we may harbor
should be resolved in favor of the district court’s ruling “in
light of its greater immersion in the case.” Cent. States, S.E.
& S.W. Areas Pension Fund v. Kroger Co., 226 F.3d 903, 910
(7th Cir. 2000). We also afford great deference to the trial
court’s assessment of witness credibility; indeed, we have
stated that a trial court’s credibility determination “can
virtually never amount to clear error.” Lac du Flambeau v.
Stop Treaty Abuse-Wisconsin, Inc., 41 F.3d 1190, 1194 (7th
Cir. 1994).
The following are the facts as found by the district court
after trial: Carnes is incorporated and based in Wisconsin
and manufactures HVAC equipment. Stone Creek is a
Pennsylvania mechanical contractor.1 In May 2000 Stone
Creek was awarded a contract for the installation of HVAC
equipment in three Pennsylvania schools. Stone Creek,
initially working through an “independent sales representa-
tive” called Chase & Associates, approached Carnes to de-
termine whether Carnes could provide 50 “energy recovery
units” for use in the project. In March 2001 Stone Creek
sent Carnes a purchase order concerning the manufacture,
sale, and delivery of the 50 units for a total price of
$640,000. Carnes did not immediately accept Stone Creek’s
purchase order. Negotiations continued, and Stone Creek
asked Carnes to provide warranty information concerning
the work Carnes was being asked to perform. On April 5,
2001, Carnes provided Chase with the warranty docu-
mentation, which in turn was forwarded to Stone Creek.
1
Jurisdiction is based upon diversity of citizenship, 28 U.S.C.
§ 1332(a), and the parties agree that Wisconsin law applies.
4 No. 04-1244
The warranty documentation was actually titled “Terms,
Conditions, and Warranty” and included Carnes’ payment
terms and conditions: payment must be made within thirty
days of invoicing; late payment charges and interest in the
amount of 1.5% per month would be assessed; and in the
event of nonpayment, Stone Creek would be responsible for
paying Carnes’ costs of collection, including reasonable
attorney fees. The documentation further provided that
these payment conditions would be deemed accepted by
Stone Creek if there was no objection within five days.
On June 27, 2001, negotiations between Carnes, Stone
Creek, and Chase culminated in a letter written that date
from Carnes to Stone Creek’s president indicating that
Carnes agreed to perform a portion of the purchase order
and that it was “assigning” another portion of the work to
Chase. The letter detailed the aspects of the work Carnes
would perform and the amount it would charge ($527,000),
and contained a similar breakdown of the work that Chase
would perform and the amount that Chase would bill di-
rectly to Stone Creek ($113,000). The letter asked Stone
Creek’s authorized representative to sign and return the
letter as an acknowledgment and acceptance of this ar-
rangement or, alternatively, to “please advise immediately
if the aforementioned assignment is not acceptable. . .”
(emphasis in original).
Stone Creek did not notify Carnes of any objection to the
proposed assignment of responsibilities between Carnes and
Chase. On July 16, 2001, Stone Creek’s president, Richard
Worth, signed the letter and faxed the signed document to
Carnes. However, unbeknownst to Carnes, Worth used
correction fluid to “white out” the dollar amounts allocated
to Carnes and Chase, respectively. The Carnes employee
who received the faxed document filed it without noticing
Worth’s “white-out” deletions.
The parties thereafter agreed on a production schedule
under which Carnes would deliver the first 19 units to
No. 04-1244 5
Stone Creek by August 24, 2001. Carnes’ agreement to this
delivery schedule was contingent upon Stone Creek’s pay-
ment of an additional expediting charge reflecting the fact
that initial negotiations had only contemplated the com-
pletion of nine units by this time.
Major stumbling blocks to the amicable completion of the
parties’ relationship arose almost immediately, and these
were resolved with a series of agreements that attempted to
keep the project on track. First, it became apparent early on
that Chase would be unable to perform all of the tasks it
had been assigned under the purchase order acknowledg-
ment. In an attempt to keep the manufacture and delivery
of the first 19 units on schedule, Worth assumed several of
Chase’s tasks himself, including ordering the “curbs, coils
and variable frequency fans” needed for production of
the units Carnes was manufacturing. Stone Creek also
assumed the role of guarantor of payments Chase owed to
component suppliers.
Second, several “Invensys controls” and “variable fre-
quency drives” necessary for Carnes to manufacture and
ship the 19 units by August 24 did not arrive at Carnes’
plant in a timely fashion. The parties agreed to resolve this
dilemma with an agreement that Carnes would ship the
units without the controls and that Stone Creek would in-
stall them itself upon delivery. In exchange Carnes agreed
to cancel the expediting charge that had been negotiated in
connection with the August 24 delivery date.
Carnes began shipping the units to Stone Creek on
August 21, 2001. Invoices sent with the units specified the
payment terms Carnes had earlier provided to Stone Creek:
payment due within thirty days; late payment interest
charges of 1.5% per month; and, in the event of nonpay-
ment, Stone Creek would be responsible for costs of col-
lection, including reasonable attorney fees. Each invoice al-
so contained the following language: “Buyer will be deemed
6 No. 04-1244
to have assented to these terms and conditions unless Seller
receives written notice of any objection within 5 days of the
date Buyer receives this writing[.]”
In early September 2001 Chase began submitting bills to
Stone Creek that exceeded the $113,000 allocated to it for
its work under the purchase order. In light of Chase’s
shortcomings in performance to that point, Stone Creek was
not pleased with this development. On September 13, 2001,
Worth notified Carnes that Stone Creek would not make
any payments for the units already delivered until he
received engineering drawings representing the units as
built (referred to as “as-built submittals”). Carnes sent the
submittals by overnight mail that very day, and tracking
information on the package indicated that Worth received
them on September 14. On October 2, 2001, when no
payment had been made on any of Carnes’ invoices, Carnes
notified Stone Creek that it would cease production of the
remaining units until Stone Creek paid for the completed
shipments. On October 5, 2001, Stone Creek paid some, but
not all, of the outstanding invoices. On October 18, Carnes
notified Stone Creek that it would not ship any more units
until payment on all outstanding invoices was made.
On October 24, 2001, in an effort to break the impasse, a
telephone conference was held between the two principals,
Worth on behalf of Stone Creek and Gregory Cichon,
Carnes’ general manager. The following day Worth wrote to
Cichon memorializing the oral agreement reached on the
telephone. The letter stated that Stone Creek agreed to pay
two of Carnes’ outstanding invoices by October 26, 2001,
and that in exchange, Carnes agreed to expedite the
pending manufacture of “energy recovery unit #2” for de-
livery by November 5, 2001. Worth also agreed to pay an
additional expediting cost in connection with unit #2.
Worth’s letter also stated that on October 29, 2001, Stone
Creek “will receive” final approval from the project engineer
of Carnes’ as-built submittals and that such approval “will
No. 04-1244 7
release for payment any invoices . . . over 30 days old.”
Payment on such invoices, the letter continued, “will be
made on or before November 17th[,] 2001.” Finally, Worth’s
letter stated that “all future invoices for materials as
received by Stone Creek Mechanical, Inc. will be paid net 30
days as agreed.” The letter made no mention of any agree-
ment (or even a demand by Stone Creek) to offset the
invoiced amounts by the cost of the performance deficiencies
on the part of Chase or for Stone Creek’s purchase and
installation of component parts on the units. The letter
closed by noting that Worth would be out of the country and
unable to communicate with Carnes from October 26 until
November 11, 2001.
On October 26, 2001, Carnes received payment on the two
invoices as promised in the October 25 letter. Carnes
completed its expedited production of unit #2 and shipped
it to Stone Creek, together with three other completed
units. At this point Carnes had shipped a total of 31 units
to Stone Creek, exactly the number needed by Stone Creek
to complete the first phase of its contract with the school
district in Pennsylvania.
On November 6, 2001, shortly after the units were
shipped and during the time Worth claimed to be out of the
country, Worth sent a letter to Carnes’ parent company,
Venturedyne, stating that no further payments would be
made to either Carnes or Chase. In the letter Worth
claimed that Stone Creek never agreed to any assignment
of a portion of the purchase order to Chase; that Carnes
(and not Stone Creek) was responsible for paying Chase’s
invoices; and that Carnes had agreed to assume the costs
incurred by Stone Creek for purchasing and installing the
component curbs, coils, rails, and drives on the completed
units. Attached to this letter were copies of letters purport-
edly chronicling the history of the parties’ relationship and
providing support for Stone Creek’s decision to cease
payment.
8 No. 04-1244
The district court found that at least five of the attached
letters were fabricated by Worth and never received by
Carnes. These letters, bearing various dates during July-
August 2001, ostensibly indicated agreements between the
parties that Carnes would be responsible for the cost of
components purchased and installed by Stone Creek; that
Carnes would be responsible for the payment of state sales
taxes; and that Stone Creek objected to and rejected the
payment terms and conditions contained on Carnes’ in-
voices and warranty verifications. The district court found
that if these letters had in fact been sent, Carnes never
would have built a single unit for Stone Creek.
Carnes received no further payments and shipped no ad-
ditional units to Stone Creek. Negotiations were attempted
but Carnes refused to ship any more units unless its out-
standing invoices were paid and advance payment was
made for any future shipments. No agreement was ever
reached and Carnes cancelled the contract on March 7,
2002.
On the basis of the foregoing facts, the district court
concluded that: (1) the payment and collection terms and
conditions contained in Carnes’ warranty verification and
invoices formed a part of the parties’ agreement; (2) the
October 25, 2001, letter from Stone Creek modified the
existing agreement and committed Stone Creek to pay all
outstanding invoices without any of the “offsets” it later
claimed and retrospectively attempted to document via the
fabricated letters; (3) Stone Creek breached the modified
agreement when it failed to make payments as agreed in
the October 25 letter; (4) Carnes acted within its rights
when it ceased shipping product to Stone Creek after the
breach; (5) under the modified agreement Carnes had no
responsibility for the portion of the original purchase order
assigned to Chase; (6) Carnes did not repudiate the contract
when it demanded full payment and refused to make
deductions for cost overruns occasioned by Chase’s failure
No. 04-1244 9
to perform its portion of the project; and (7) there was no
language in the October 25 letter conditioning Stone Creek’s
liability for payment on approval of Carnes’ engineering
drawings by the project engineer.
As a preface to its conclusions on these issues, the district
court went to great pains to unambiguously declare that
Worth’s testimony was not credible and that the evidence
was “irrefutable” that he fabricated the letter attachments
to his November 6, 2001, letter to Venturedyne. The court
cited several items of evidence supporting these findings,
including: (1) discrepancies in fax headings and page
numbers on the letters; (2) Worth’s surreptitious use of
correction fluid to delete portions of Carnes’ June 27 letter;
(3) numerous occasions on which Worth promised payments
to Carnes that were never forthcoming; (4) Worth’s false
representation in the October 25 letter that he would be out
of the country until after the date on which Carnes would
ship the final four units needed to complete the first phase
of the project; (5) the fact that he had been preparing the
November 6 letter to Venturedyne while simultaneously
assuring Carnes that he would make payments if the final
four units were shipped; (6) the fact that he did not send
the November 6 letter until after he was aware that the
four units had been shipped; and (7) a boast he had made to
Carnes’ manufacturer’s representative that he “says one
thing and then does another.” In addition, the district court
held that Worth testified falsely in a number of respects,
including denying that Stone Creek had received the
information about contract terms from Carnes through
Chase, when the evidence established that Chase had
forwarded the information.
The court awarded damages in the amount of
$231,930.17, plus interest at the rate of 1.5% per month, for
the units Stone Creek received but never paid for. The court
also awarded $169,992.19 for units that had been manufac-
10 No. 04-1244
tured but not shipped and which Carnes could not resell, as
well as $219,614.74 in attorney fees.
II. Discussion
A. Carnes’ Terms and Conditions
Stone Creek argues that the district court erred in finding
that Carnes’ payment and collection terms (including the
interest and attorney fees provision) were incorporated into
the parties’ agreement. The district court held that the
terms were binding on Stone Creek because Stone Creek
had been fully apprised of and accepted (by failing to object
to) these terms prior to Carnes’ formal acceptance of the
purchase order in its letter of June 27. As noted above,
Carnes sent Stone Creek its “Terms, Conditions, and
Warranty”on April 5, 2001, and this document stated in
relevant part:
This writing constitutes the complete and exclusive
statement of the terms and conditions of sale of the
products and/or services described herein, and Seller’s
obligation to sell is expressly conditioned upon assent
to these terms and conditions. Buyer will be deemed to
have assented to these terms and conditions unless
Seller receives written notice of any objection within 5
days of the date Buyer receives this writing . . . .
Stone Creek argues that because this document was
provided to Chase, not Stone Creek, the district court’s
finding that Stone Creek was aware of Carnes’ terms was
clearly erroneous. We disagree. First, Stone Creek, not
Chase, requested Carnes’ warranty information. Indeed,
Carnes’ warranty verification was required by Stone Creek
under the terms of the purchase order, and Stone Creek’s
request for the information was prompted by a demand for
it from the project engineer. The document was passed from
Carnes to Chase with the understanding that it would be
No. 04-1244 11
forwarded to Stone Creek in compliance with the latter’s
request, and the district court specifically discredited
Worth’s testimony that Stone Creek had not received
information that Carnes transmitted to it through Chase.
In addition, there is no evidence that Stone Creek was
forced to make a second request for warranty verification.
Finally, one of the letters the district court found to have
been fabricated by Worth included a statement to the effect
that Stone Creek did not accept Carnes’ “Terms, Conditions
and Warranty2.” If Stone Creek had never received the
terms-and-conditions document, Worth would not have
attempted to disclaim it, even in a letter prepared sometime
after its purported date of mailing. The fact that this letter
sought to affirmatively disavow any acceptance of Carnes’
payment terms is evidence that Stone Creek considered
itself bound in the absence of a falsified document rejecting
the conditions.
Stone Creek also argues that it is not “reasonable” to hold
it to Carnes’ payment terms because the “Terms, Condi-
tions, and Warranty” document was provided in response to
Stone Creek’s request for warranty verification alone. Stone
Creek offers no authority for the proposition that a contrac-
tual term cannot be incorporated into an agreement in this
way. In any event, the district court properly held that
Carnes’ payment terms and conditions are among those
“additional terms” that are customarily included in invoices
and considered incorporated in the parties’ contract unless
certain exceptions, not applicable here, apply. See WIS.
STAT. § 402.207; Advance Concrete Forms, Inc. v. McCann
Constr. Specialties Co., 916 F.2d 412, 415 (7th Cir. 1990)
(applying Wisconsin law); Mid-State Contracting, Inc. v.
Superior Floor Co., 655 N.W.2d 142, 145 (Wis. App. 2002).
2
This letter was dated July 10, 2001, and Stone Creek has not
taken issue with the district court’s conclusion that Worth fabri-
cated this letter after the fact.
12 No. 04-1244
B. Modification of the Contract
Stone Creek next contends that the district court erred in
finding that the parties’ agreement was modified by Worth’s
October 25, 2001, letter. Whether a contract has been
modified is a question of fact subject to the clearly errone-
ous standard of review. Am. Suzuki Motor Corp. v. Bill
Kummer, Inc., 65 F.3d 1381, 1386 (7th Cir. 1995) (applying
Wisconsin law); Kohlenberg v. Am. Plumbing Supply Co.,
263 N.W.2d 496, 500 (Wis. 1978). The existence of an
agreement modifying a previous contract is “established in
the same way as any other contract.” Kohlenberg, 263
N.W.2d at 500. The acts relied upon to modify a prior con-
tract must be unequivocal in character, and acts that are
ambiguous as to whether a modification was intended are
not sufficient to establish a modification. Am. Suzuki, 65
F.3d at 1386 (citing Nelsen v. Farmers Mut. Auto Ins. Co.,
90 N.W.2d 123, 134 (Wis. 1958)). While the effect of a
modification may be the creation of a new contract, that
contract consists of not only the new terms agreed upon but
those terms of the original contract which were not modi-
fied. Estreen v. Bluhm, 255 N.W.2d 473, 479 (Wis. 1977).
In the face of its burden to demonstrate clear error, Stone
Creek argues only that the October 25 letter “merely set
forth the parties’ agreement regarding payment of the
invoices Carnes’ asserted were past due, and nothing more.”
But the evidence supports the conclusion that the letter was
intended as far more. At the time, Carnes was accusing
Stone Creek of breaching the agreement and was with-
holding shipments based upon nonpayment. Stone Creek
needed four additional units to complete the first phase of
its contract with the school district and was required to
make concessions in order to break the parties’ impasse and
induce Carnes to ship the additional units. The agreements
memorialized in the October 25 letter specified that Stone
Creek would pay Carnes for the two oldest invoices immedi-
ately, get current on other outstanding invoices within a
No. 04-1244 13
few weeks, and pay invoices on additional units to be
shipped on the original thirty-day terms, in exchange for
Carnes’ promise to expedite the manufacture of unit #2 and
ship it on or before November 5, 2001.
The district court properly concluded that Carnes’ agree-
ment to permit Stone Creek to pay in this manner and to
expedite the manufacture of unit #2 in exchange for Stone
Creek’s promise to adhere to the specified payment sche-
dule was a modification of the contract. Stone Creek has not
demonstrated that this finding was clearly erroneous.
C. Breach and Repudiation
Stone Creek takes issue with the district court’s conclu-
sion that it breached the terms of the modified contract
when it refused to make any payments after October 26,
2001. Whether Stone Creek breached the terms of the modi-
fied contract requires an interpretation of the modified
contract, which is a question of law that we review de novo.
Designer Direct, Inc. v. DeForest Redevelopment, 313 F.3d
1036, 1041 (7th Cir. 2002) (applying Wisconsin law). Stone
Creek’s argument flows from language in the October 25
letter stating that “Stone Creek . . . will receive on 10/29/01
final approval of the submittal information[.] The approval
of this information will release for payment any invoices . . .
over 30 days old. Payment for these invoices will be made
on or before November 17th[,] 2001.”
Based on this language, Stone Creek argues that it did
not breach the modified contract because it only promised
to pay if and when the project engineer approved Carnes’
submittals. Apparently the project engineer never actually
gave such approvals, although the record does not elaborate
as to why this is so. The district court examined the
language of the October 25 letter and concluded that there
was no such condition attached to Stone Creek’s promise to
pay, and we agree with this interpretation. The letter pre-
14 No. 04-1244
sents the approvals as a fait accompli, not as a condition
that may or may not occur and upon which Stone Creek’s
obligation to pay depends. The letter presents the approval
issue as an assurance to Carnes that payment will be
forthcoming very soon, and even promises a date certain by
which payment will be made. The district court correctly
concluded that Stone Creek breached the modified contract.
Stone Creek argues that Carnes engaged in an anticipa-
tory repudiation of the contract when Cichon notified Worth
that Carnes was not responsible for cost overruns associ-
ated with Chase’s nonperformance and that Carnes was not
responsible for tasks assigned to Chase under the purchase
order. Anticipatory repudiation of a contract occurs “when
either party repudiates the contract with respect to a
performance not yet due, the loss of which will substantially
impair the value of the contract to the other.” WIS. STATS.
§ 402.610 (UCC 2-610). In order to constitute an anticipa-
tory repudiation of a contract, there must be a definite and
unequivocal manifestation of intention on the part of the
repudiator that he will not render the promised perfor-
mance when the time fixed for it in the contract arrives.
Wis. Dairy Fresh, Inc. v. Steel & Tube Prods. Co., 122
N.W.2d 361, 367 (Wis. 1963).
We find no merit to Stone Creek’s anticipatory repudia-
tion argument for several reasons. First, the evidence does
not support Stone Creek’s position that Carnes had ac-
cepted responsibility for the cost overruns attributable to
Chase under the original purchase agreement, much less
the agreement as modified in the October 25 letter. From
the very beginning of the parties’ relationship, Stone Creek
assumed duties that had been assigned to Chase under the
original purchase agreement, such as ordering the “curbs,
coils and variable frequency fans” and guaranteeing Chase’s
payments to suppliers. Prior to the shipment of the final
four units needed to complete phase one of the project,
Stone Creek never suggested to Carnes that these tasks,
No. 04-1244 15
assigned to Chase, were actually Carnes’ responsibility. Not
once did Stone Creek apprise Carnes of the costs it was
incurring as a result of Chase’s inability to perform its as-
signed tasks. Not once did Stone Creek suggest to Carnes
that it would be claiming an offset against Carnes’ invoices
for cost overruns incurred by Chase or for costs incurred by
Stone Creek for having to assume Chase’s responsibilities.
To the contrary, the evidence supports the conclusion that
it was not until November 6, 2001, after he had unam-
biguously promised full payment and after Carnes shipped
the four units in compliance with the modified agreement
that Worth first indicated that he considered Carnes
responsible for these costs and would make no further
payments to Carnes as a result. Indeed, the district court
held that Worth’s November 6 letter attempted to prove an
understanding between the parties as to Carnes’ responsi-
bility for Chase’s nonperformance only by resorting to
falsified documents ostensibly evidencing that this was the
agreement all along. In short, the evidence fully supports
the conclusion that Worth placated Carnes with promises
of full payment until he had gotten what he needed, and
only then did he raise the issue of offsets by resorting to
fabricated documents.
Stone Creek’s second basis for arguing that Carnes either
breached or repudiated the contract is that after Worth sent
the November 6 letter indicating that no future payments
would be forthcoming, Carnes refused to ship any more
product in the absence of the payment promised in the
October 25 letter as well as advance payment for any future
shipments. We agree with the district court’s conclusion
that far from being a repudiation of the contract by Carnes,
the refusal to ship was a legally justifiable response to
Stone Creek’s repudiation of the contract in its November
6 letter.
First, there can be little doubt that Worth’s November 6
letter, coming directly on the heels of the October 25 letter
16 No. 04-1244
setting forth the modified payment-and-delivery schedule,
was a repudiation of the contract by Stone Creek. The
November 6 letter unequivocally states that “[n]o further
payments of any kind will be made to Carnes Company”
until Carnes picked up the cost of Chase’s deficient per-
formance. This plainly is a manifestation of Stone Creek’s
intention not to perform. Wis. Dairy Fresh, 122 N.W.2d at
367. At this point Carnes could properly treat the contract
as having been repudiated. In addition, Carnes’ response to
the November 6 letter was consistent with its rights under
WIS. STATS. § 402.609(1) (UCC 2-609):
When reasonable grounds for insecurity arise with re-
spect to the performance of either party the other may
in writing demand adequate assurance of due perfor-
mance and until the demanding party receives such
assurance may if commercially reasonable suspend any
performance for which the demanding party had not
already received the agreed return.
When Carnes received the November 6 letter indicating
that no payments would be made, it had more than ample
grounds for insecurity as to Stone Creek’s performance un-
der the terms of the modified agreement. Carnes’ response,
to suspend any performance until adequate assurances of
performance were forthcoming, was commercially reason-
able in light of the history of the parties leading up to that
point.
Accordingly, the evidence supports the district court’s
conclusion that Stone Creek—not Carnes—breached the
parties’ modified agreement. The judgment of the district
court is AFFIRMED.
No. 04-1244 17
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-5-05