## Facts

- Bernard Baker (a popcorn buyer/processor) contracted with James W. Ratzlaff (a popcorn grower) for Ratzlaff to raise 380 acres of popcorn and deliver the shelled crop to Baker’s plant in Stratford, Texas, for $4.75 per hundredweight.
- The contract required Baker to pay the grower “when delivered,” and provided that if Baker failed to pay “at the time of delivery,” the grower could, at the grower’s option, treat remaining undelivered popcorn as released for the grower to retain or sell.
- The “payment at the time of delivery” language was included at Ratzlaff’s request.
- After contracting, the market price of popcorn rose substantially above the contract price.
- Ratzlaff made two deliveries in early 1974; Baker’s foreman prepared weight slips that were forwarded to Baker’s office for payment processing under Baker’s standard practice.
- At neither delivery did Baker tender payment at the dock, and Ratzlaff did not demand payment at that time.
- The parties discussed scheduling future delivery without mentioning any payment default.
- Ratzlaff then sent notice purporting to terminate the contract for failure to pay at delivery; Baker promptly paid for the two deliveries after receiving the notice.
- Ratzlaff contracted to sell popcorn to a third party at a higher price, and Baker covered by purchasing substitute popcorn at a substantially higher price.

## Issues

1. Whether the contractual termination provision could be exercised based on literal nonpayment “at the time of delivery” without regard to the UCC duty of good faith.
2. Whether the parties’ course of performance supported the trial court’s finding that Baker substantially complied and that Ratzlaff’s termination was a breach.
3. Whether the trial court’s findings and damage award were supported by substantial competent evidence.

## Decision

- The court held that the UCC imposes a duty of good faith in the performance and enforcement of the contract, limiting the exercise of a termination right.
- The court affirmed the finding that Ratzlaff breached by invoking the termination provision in bad faith, given the parties’ course of performance and the lack of any prior insistence on immediate payment at delivery.
- The court affirmed the judgment for Baker and upheld the approximately $52,000 damages award, concluding the trial court’s findings were supported by substantial competent evidence.
- The court rejected Baker’s cross-appeal seeking an increased award.

## Legal Principles

- Every contract governed by the UCC carries an obligation of good faith in performance and enforcement.
- A contractual termination clause is not enforceable as a purely mechanical option when its exercise violates the duty of good faith.
- Course of performance may show waiver or practical construction of strict contract terms, and may bar sudden enforcement without prior demand or notice when the parties’ conduct indicated otherwise.
- Appellate courts will not disturb trial court findings supported by substantial competent evidence.

## Conclusion

The court held that a seller could not terminate a crop-purchase contract based solely on literal nonpayment at the moment of delivery where the parties’ conduct showed payment was processed after delivery and the termination appeared aimed at escaping a below-market bargain; the judgment and damages for the buyer were affirmed.


Baker v. Ratzlaff, 564 P.2d 153 (Kan. Ct. App. 1977)