## Facts

- The United States contracted with Seacoast Gas Co. to supply gas to a federal housing project from April 15, 1947, to June 15, 1948.
- On October 7, 1947, Seacoast gave written notice it would cancel the contract effective November 15, 1947; the parties treated this as an anticipatory repudiation.
- The United States rejected Seacoast’s claimed right to stop performance and advertised for bids to secure a replacement gas supply.
- Bids were opened on November 6, and Trion Company submitted the low bid; Seacoast’s president, Zell, was also Trion’s president and attended the bid opening.
- On November 6, the United States sent Seacoast a registered letter stating that unless Seacoast retracted within three days, the United States would accept Trion’s bid and hold Seacoast and its surety liable.
- Seacoast did not retract within the three-day period; on November 10, the United States accepted Trion’s bid and began preparations to execute a higher-priced substitute contract.
- On November 10, government officials again asked Zell whether Seacoast would withdraw its repudiation; he declined.
- After November 10 but before the United States signed the Trion contract on November 17, Seacoast sent written notice withdrawing its cancellation and offering to continue performance.
- The United States refused to accept the retraction, contracted with Trion, and sued Seacoast and its surety for the excess cost above the Seacoast contract price.

## Issues

1. Whether a repudiating party may retract an anticipatory repudiation after the nonbreaching party has taken definite action treating the repudiation as final.
2. Whether the government’s solicitation of bids and acceptance of a substitute bid constituted a material change of position that cut off Seacoast’s power to retract.
3. Whether retraction remains effective when made before the substitute contract is formally signed but after the substitute bid is accepted.

## Decision

- The Fifth Circuit reversed the district court’s judgment for Seacoast and its surety.
- The court held Seacoast’s attempted retraction was ineffective because the United States had already changed its position in reliance on the repudiation.
- The court concluded the United States was entitled to damages measured by the difference between the Seacoast contract price and the higher price under the Trion arrangement.

## Legal Principles

- A party that anticipatorily repudiates may withdraw the repudiation only before the nonbreaching party materially changes position in reliance on it or otherwise treats it as final.
- “Definite action” by the nonbreaching party—such as soliciting offers, accepting a substitute bid, and undertaking steps toward a replacement contract—terminates the repudiator’s right to retract.
- The cutoff occurs upon reliance and acceptance of substitute performance arrangements; formal execution of the substitute contract is not required to bar retraction.
- After an effective cutoff, the repudiation is final for liability purposes, and the nonbreaching party may recover the resulting excess costs of substitute performance.

## Conclusion

Because the United States accepted a substitute bid and began implementing a higher-priced replacement supply arrangement before Seacoast attempted to withdraw its cancellation, Seacoast could not retract its anticipatory repudiation, and Seacoast and its surety were liable for the government’s cover damages.


United States v. Seacoast Gas Co., 204 F.2d 709 (5th Cir. 1953)