Anderson Industries v. Thermal Intelligence

#30664-aff in pt & rev in pt-MES
2025 S.D. 47

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

****

ANDERSON INDUSTRIES, LLC, Plaintiff and Appellee,

v.

THERMAL INTELLIGENCE, INC., a
Canadian corporation, Defendant and Appellant.

****

APPEAL FROM THE CIRCUIT COURT OF
THE FIFTH JUDICIAL CIRCUIT
DAY COUNTY, SOUTH DAKOTA

****

THE HONORABLE MARSHALL C. LOVRIEN
Judge

****

TATUM O’BRIEN of
O’Keeffe O’Brien Lyson Ltd.
Fargo, North Dakota Attorneys for defendant
and appellant.

JONATHAN A. HEBER
NICHOLE J. MOHNING of
Cutler Law Firm, LLP
Sioux Falls, South Dakota Attorneys for plaintiff
and appellee.

****

ARGUED
OCTOBER 2, 2024
OPINION FILED 08/13/25
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SALTER, Justice

[¶1.] Anderson Industries, LLC (Anderson) commenced this action to collect

the balance of the purchase price for 30 industrial heaters it claims Thermal

Intelligence, Inc. (TI) agreed to buy. TI denied the existence of a contract, claiming

discussions about the 30 heaters were simply part of broader negotiations between

the parties that ultimately failed to yield a comprehensive agreement. Both parties

moved for summary judgment, and the circuit court granted Anderson’s motion.

The court determined there were no disputed issues of material fact as to the

agreement to purchase the 30 heaters and, despite TI’s complaints about some of

the heaters, it did not reject them as nonconforming goods. TI appeals, and we

affirm in part, reverse in part, and remand for further proceedings.

Factual and Procedural Background

[¶2.] TI is a Canadian corporation that specializes in selling industrial

heaters. In 2018, TI sought a new supplier for its retail heater offering and

negotiated with Anderson, a South Dakota limited liability company, to custom

manufacture 30 K2 model V1.0 industrial heaters (V1.0 heaters).1 Anderson used

TI’s technical specifications to custom build the V1.0 heaters, which bore TI’s logo

and insignia. TI paid for the heaters, which were then sold to an affiliated

company.

[¶3.] After completing the initial order, Anderson still had a sufficient

supply of components and parts to build another 30 V1.0s. The V1.0s, however, did

1. All the heaters referred to are different versions (V1.0, V1.5, V1.7, V2.0) of
Anderson’s K2 product line.

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not perform in the field as the parties had hoped. Recognizing that an additional 30

V1.0s would likely be difficult to sell, Anderson proposed using the previously

purchased surplus parts to build 30 V1.5 models, which would incorporate design

modifications to the V1.0 heater.

[¶4.] In 2019, the parties began discussing the potential V1.5 heater. These

discussions occurred amid ongoing negotiations regarding other future heater

models, namely the future development of V1.7 and V2.0 models, timelines, and

pricing, as well as TI’s potential purchase of Anderson’s intellectual property (IP)

rights to the K2 product line.2

[¶5.] On July 19, 2019, Dan Ewert, acting on behalf of Anderson, emailed a

proposal to TI’s president, Brian Tiedemann, listing four enumerated items, which

allowed the parties to make corresponding numeric references in subsequent

emails, including the following excerpted email discussions:

Ewert: It seems that we’ve tied the price on the V1.5 to the
acquisition of the IP and designs and this has complicated the
negotiations, rather than simplifying them. It appears that IP
and Designs are a longer-term discussion and we should
continue that, but for now, time is of the essence for both our
companies, so here’s a fourth option with its subsets.

1. Lower our V1.5 selling price to $69,500 on all 30 units, if you
agree to provide a [purchase order] for all 30 units at a down

2. The record contains copies of several email communications between the
parties in which the principals of TI and Anderson express a desire to work
“collaboratively” to develop a flameless industrial heater line. The parties
also frequently refer to themselves and each other as “partners.” But these
terms seem to be used informally to reflect an effort to foster a positive
business relationship; neither party has suggested that Anderson and TI
were actually engaged in a partnership or joint venture or that their
relationship was anything other than that of a purchaser and a manufacturer
seller.

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payment of 20%. . . . On receipt of [the purchase order] and down
payment it is 10 weeks until we ship the first units. . . .

****

Tiedemann: We agree the timing of this negotiation is brutal, so
in the efforts of finding a path forward, we can agree to the
following:

1) We will issue a [purchase order] for 21 units at a price of
$69,500 with a downpayment of 20%, and issue subsequent
[purchase orders and] downpayments immediately upon
receiving commitment from customers.

****

Ewert: We agree, with the stipulation that . . . no V1.7s are built
until all 30 V1.5s have been sold.

****

Tiedemann: 1) We agree. Our intention all along was that we
would exhaust the V1.5’s first.

[¶6.] Although they never materialized, the other proposed terms covered a

larger scope. For instance, the second item from Ewert’s proposal concerned a

credit against the purchase price of the 30 V1.5 heaters if TI purchased Anderson’s

IP rights; it never did. The third item in Ewert’s proposal discussed pricing for a

V1.7 model, and the fourth item concerned the design of a V2.0 model. Both were

prospective in nature.

[¶7.] As to the more immediate topic of the 30 V1.5 heaters, Tiedemann

further acknowledged the agreement on July 20, 2019, when he emailed Anderson’s

president, Kory Anderson: “I am pleased we were able to reach an agreement to

liquidate the Anderson inventory and take care of the immediate needs of [TI]

customers.”

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[¶8.] The following Monday, July 22, 2019, TI wired Anderson $291,900,

which equals 20% of the purchase price for 21 units. Anderson subsequently began

production of the 21 V1.5 heaters. In his deposition testimony, Tiedemann

confirmed that TI was “aligned” with purchasing 21 units at $69,500 with a 20%

downpayment because they already had 21 sales lined up to retail customers.

Tiedemann later confirmed the purchase of the remaining nine heaters in an

August 2 email stating, “Without having firm offers ‘in-hand’ we will still order the

remaining 1.5’s.”

[¶9.] This, however, was the extent of the parties’ consensus. Tiedemann’s

August 2, 2019 email confirming the purchase of all 30 V1.5 heaters came in the

midst of continuing, but unfruitful, discussions between the parties about future

models, pricing, and an IP purchase.

[¶10.] TI subsequently paid Anderson $125,100 on August 22, 2019, which

equals 20% of the remaining nine V1.5 heaters at a purchase price of $69,500

apiece. The payment prompted Anderson to begin production of the final nine V1.5

heaters. At this point, TI’s July 22 and August 22 payments totaled $417,000,

which equaled 20% of the purchase price for all 30 V1.5 heaters.

[¶11.] TI proposed a payment plan on October 3, 2019, that acknowledged the

$417,000 it had already paid toward the V1.5s and committed to a minimum of

$200,000 in additional payments per week to pay for the 30 V1.5 heaters TI would

be receiving. Specifically, TI proposed $100,000 payments twice per week, with the

option to accelerate the schedule based on receivables it collected through heater

sales. TI made the first week’s payment of $200,000, and Anderson signaled its

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agreement to the payment arrangement, telling TI that it “will move forward with

shipment releases based on accountability to [TI’s] proposed payment schedule.”

[¶12.] Pursuant to its plan, TI made the following payments totaling

$750,000:

October 3, 2019: $200,000
October 7, 2019: $100,000
October 10, 2019: $100,000
October 15, 2019: $100,000
October 15, 2019: $100,000
October 21, 2019: $100,000
October 24, 2019: $ 50,000
Total $750,000

[¶13.] Following the partial payment on October 24, Anderson received no

further payments from TI. At that point, TI’s payments totaled $1,167,000 of the

total $2,085,000 purchase price for the 30 V1.5 heaters.

[¶14.] After three weeks without receiving payment, Anderson informed TI

on November 15, 2019, that it would not release the eighteenth V1.5 heater, which

was scheduled for shipment on November 18. An Anderson representative notified

Tiedemann via email that Anderson “can only extend a credit limit of $200,000 on

[its] heater shipments.” The Anderson representative stated that the company

“need[ed] to receive some payment[s] . . . in order to let the heater go out as

scheduled.” TI made no further payments, and Tiedemann was notified the

following Monday that the heater scheduled for pick-up that day by Tiedemann’s

contracted carrier was put on hold. This prompted the following terse email

exchange:

Tiedemann: I notified Kory on Friday that if the heater wasn’t
released[,] we would be terminating our relationship with
Anderson effective immediately. The heater was not released so

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we have notified our customers that all remaining orders have
been cancelled.

****

Anderson: Unfortunately[,] it’s not as easy as walking away at
this point as we still have a handful of units being custom built
to your order in process. To cancel . . . at this stage would be
significant restocking fees per standard protocol.

****

Tiedemann: We are well aware of our obligations and re-
stocking fees are not part of them. You are free to sell whatever
remaining stock you have to whomever you choose. Our account
is officially and permanently closed.

[¶15.] Later on November 18, after notifying Anderson that TI was

“terminating [their] relationship,” Tiedemann sent another email in which he

complained of ongoing performance issues with the Anderson heaters. Tiedemann

described Anderson’s refusal to release the heaters without payment earlier that

day as the “last straw.”

[¶16.] The parties’ emails indicate that the performance issues with the V1.5

heaters were not new and had surfaced in late September and early October. TI

noted a customer’s report of two V1.5 heaters that would not start and another

instance of a customer listing concerns with the product. TI ultimately decided to

undertake the repairs itself, citing frustration with Anderson’s lead times for parts.

Significantly, however, TI did not reject or return any of the heaters. Instead,

despite the performance issues it identified, TI continued to accept the V1.5 heaters,

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continued to sell them, and even sought to purchase more, that is, until Anderson

refused to release the eighteenth heater.3

[¶17.] Anderson filed suit alleging two counts of breach of contract: the first

arising from the July 19, 2019 agreement for 21 V1.5 heaters; and the second from

the August 2, 2019 agreement for the remaining nine units. TI answered, denying

any liability and asserting several affirmative defenses, including the claim that the

parties never formed a contract. Alternatively, to the extent a contract existed, TI

claimed its performance was excused by quality issues with the V1.5 heaters, which

TI alleged constituted Anderson’s prior breach. Both parties moved for summary

judgment.

[¶18.] In its motion, Anderson asserted it was entitled to the remaining

balance of $918,000 plus interest, relying on principles set out in Article 2 of the

Uniform Commercial Code (UCC), which is codified within SDCL chapter 57A-2.

Specifically, Anderson emphasized that TI never exercised its right to reject goods

under SDCL 57A-2-602, and as a result, TI’s premature termination could not be

excused by its complaints about the heaters’ performance. Regarding damages,

Anderson asserted that no secondary market exists because the heaters were

custom-built for TI.

[¶19.] In contrast, TI’s cross-motion for summary judgment rested largely on

3. Anderson asserted that it had constructed all 30 of the V1.5 heaters and
stored the remaining 13 V1.5 heaters in a warehouse in Webster, where they
apparently remain.

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common law concepts and not the UCC.4 Focusing on the overlapping negotiations,

TI asserted principally that no contract was ever formed. Alternatively, it

maintained that any breach was excused by Anderson’s prior breach and that

Anderson failed to mitigate its damages.

[¶20.] The circuit court conducted a hearing and subsequently issued an oral

ruling denying TI’s motion and granting Anderson’s motion. The court determined

that there were “no genuine issues of material fact as to the argument that [TI]

entered into an agreement with Anderson . . . to purchase 30 V1.5 heaters at a price

of $69,500.” The court also concluded it was undisputed that TI first breached the

agreement by failing to make payments pursuant to the payment plan and also

breached it when TI terminated the entire agreement on November 18, 2019.

Further, the court concluded that TI “failed to cite any evidence in the record to

support its claim [that Anderson failed to mitigate its damages].” On the other

hand, the court observed that Anderson “presented evidence . . . that there is no

secondary market[,]” it custom-manufactured the heaters to TI’s specifications, and

“[took] affirmative steps to mitigate its damages by storing the heaters for four

years at its own cost.”

4. TI also raised a prior breach argument under the UCC in its summary
judgment submissions, arguing that performance issues constituted a breach
of the implied warranty of merchantability under SDCL 57A-2-314.
Anderson, however, contended that the claim was not presented because it
had not been pled, and the circuit court did not expressly address TI’s
warranty of merchantability theory. TI has not pursued the argument on
appeal.

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[¶21.] Despite not expressly referencing the UCC in its oral ruling, the circuit

court adopted the essence of Anderson’s argument. The court subsequently rejected

each of TI’s common law arguments.

[¶22.] TI appeals the circuit court’s decision to grant Anderson’s motion for

summary judgment. In TI’s view, there are genuine issues of material fact as to

whether an enforceable contract was created between the parties for the 30 V1.5

heaters. Alternatively, if we determine that a contract existed, TI asserts the court

erred in finding that it breached the agreement. Additionally, TI argues that the

court erred in its determination of damages.

Analysis and Decision

Summary judgment and the UCC

[¶23.] “We review a circuit court’s entry of summary judgment under the de

novo standard of review.” Healy Ranch, Inc. v. Healy, 2022 S.D. 43, ¶ 17, 978

N.W.2d 786, 793 (quoting Estate of Stoebner v. Huether, 2019 S.D. 58, ¶ 16, 935

N.W.2d 262, 266). “In reviewing a grant or a denial of summary judgment under

SDCL 15-6-56(c), we must determine whether the moving party demonstrated the

absence of any genuine issue of material fact and showed entitlement to judgment

on the merits as a matter of law.” Davies v. GPHC, LLC, 2022 S.D. 55, ¶ 17, 980

N.W.2d 251, 258 (quoting Ridley v. Sioux Empire Pit Bull Rescue, Inc., 2019 S.D. 48,

¶ 11, 932 N.W.2d 576, 580). “We view the evidence most favorably to the

nonmoving party and resolve reasonable doubts against the moving party.” Id.

(quoting Burgi v. East Winds Ct., Inc., 2022 S.D. 6, ¶ 15, 969 N.W.2d 919, 923). “We

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will affirm the circuit court’s summary judgment decision if there exists any basis

which supports the ruling of the trial court.” Id. (citation modified).

[¶24.] At the outset, we note that this dispute arises over the sale of goods,

implicating Article 2 of the UCC, which is codified within SDCL chapter 57A-2. See

SDCL 57A-2-102(1) (providing that SDCL 57A-2 “applies to transactions in goods”).

When a contract for the sale of goods is formed, the UCC provides a comprehensive

set of rules addressing the rights and obligations of the parties, and the related

application of these statutory rules often present questions of fact. See Pomerantz

Paper Corp. v. New Cmty. Corp., 25 A.3d 221, 233–34 (listing delivery, acceptance,

and rejection of goods as questions of fact under the UCC); Moe v. John Deere Co.,

516 N.W.2d 332, 335 (S.D. 1994) (noting that the existence of breach under the UCC

is a question of fact). “But that is not to say that all factual questions are disputed.”

Davies, 2022 S.D. 55, ¶ 28, 980 N.W.2d at 261. Nor are all disputed facts material.

See Niesche v. Wilkinson, 2013 S.D. 90, ¶ 9, 841 N.W.2d 250, 253–54 (“A disputed

fact is not ‘material’ unless it would affect the outcome of the suit under the

governing substantive law[.]”) (quoting A-G-E Corp. v. State, 2006 S.D. 66, ¶ 14, 719

N.W.2d 780, 785)).

[¶25.] Accordingly, “even factual determinations may be appropriate for

summary judgment ‘if the pleadings, depositions, answers to interrogatories, . . .

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a matter of law.”

Davies, 2022 S.D. 55, ¶ 29, 980 N.W.2d at 261 (quoting Stern Oil Co. v. Brown, 2012

S.D. 56, ¶ 8, 817 N.W.2d 395, 398). “To successfully resist summary judgment, the

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non-moving party ‘must substantiate his allegations with sufficient probative

evidence that would permit a finding in his favor on more than mere speculation,

conjecture, or fantasy.’” Id.; see also Celotex Corp. v. Catrett, 477 U.S. 317, 323–24

(1986) (“One of the principal purposes of the summary judgment rule is to isolate

and dispose of factually unsupported claims . . . .”).

Existence of an agreement for 30 V1.5 heaters

[¶26.] “A contract for sale of goods may be made in any manner sufficient to

show agreement, including conduct by both parties which recognizes the existence

of such a contract.” SDCL 57A-2-204(1). Further, “[a]n agreement sufficient to

constitute a contract for sale may be found even though the moment of its making is

undetermined.” SDCL 57A-2-204(2).

[¶27.] Here, there are no issues of material fact concerning the existence of a

contract for 30 V1.5 heaters. Initially, Anderson offered to sell 30 V1.5 heaters at a

price of $69,500 per unit with a lead-in time of ten weeks upon receipt of first

payment and a downpayment of 20%. In a July 19, 2019 email, Tiedemann wrote

that TI would issue purchase orders and downpayments for 21 of the 30 V1.5 units

to be followed by purchase orders for the remaining units “immediately upon

receiving a commitment from customers.” In his deposition, Tiedemann testified

that TI agreed on the purchase order of 21 units “[b]ecause that’s how many [TI]

had already sold.” And TI’s conduct was consistent with the agreement. It

promptly wired $291,900, which is 20% of the purchase price of 21 units at $69,500.

As a result, Anderson performed by building the first 21 V1.5 heaters.

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[¶28.] The fate of the nine heaters seemingly not included in TI’s initial

purchase was resolved by subsequent events which are equally undisputed. On

August 2, Tiedemann emailed Kory Anderson and explained that, despite the fact

that TI was unable to accept Anderson’s larger proposal for the sale of the K2

heater line, IP rights, and future heater models, “we will still order the remaining

1.5’s” despite not yet “having firm orders ‘in-hand[.]’” (Emphasis added.)5

[¶29.] And on August 22, 2019, TI paid Anderson $125,100, which equals a

20% downpayment for the remaining nine V1.5 heaters using a unit price of

$69,500. Upon receipt of TI’s downpayment, Anderson began production of the

remaining nine V1.5 heaters. In other words, TI ultimately agreed to buy all 30

heaters in accordance with the July 19 contract and later even proposed a payment

plan.

[¶30.] The plain fact that evidence of the parties’ agreement relating to all 30

V1.5 heaters may have come at different stages and involved a combination of

writings and conduct is not significant. The UCC specifically allows for

circumstances like these by providing that “[a] contract for sale of goods may be

made in any manner sufficient to show agreement, including conduct by both

parties which recognizes the existence of such a contract.” SDCL 57A-2-204(1). The

UCC further elevates the substance of the contract over the formality of a discrete

point of formation by recognizing that “[a]n agreement sufficient to constitute a

5. In the July 19 series of emails, Tiedemann wrote, “Our intention all along
was that we would exhaust the V1.5’s first.”

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contract for sale may be found even though the moment of its making is

undetermined.” SDCL 57A-2-204(2).

[¶31.] TI’s principal argument on appeal is that “multiple essential terms

were left open” and, as a result, an enforceable contract was not established.6 But

under the UCC, the fact that terms are left open is most often associated with the

existence of a contract, not its absence. The text of SDCL 57A-2-204(3) says as

much: “Even though one or more terms are left open[,] a contract for sale does not

fail for indefiniteness if the parties have intended to make a contract and there is a

reasonably certain basis for giving an appropriate remedy.” The UCC comment

explains the rationale:

If the parties intend to enter into a binding agreement, this
subsection recognizes that agreement as valid in law, despite
missing terms, if there is any reasonably certain basis for
granting a remedy. The test is not certainty as to what the
parties were to do nor as to the exact amount of damages due
the plaintiff. Nor is the fact that one or more terms are left to be
agreed upon enough of itself to defeat an otherwise adequate
agreement. Rather, commercial standards on the point of
“indefiniteness” are intended to be applied, this Act making
provision elsewhere for missing terms needed for performance,
open price, remedies and the like.

The more terms the parties leave open, the less likely it is that
they have intended to conclude a binding agreement, but their
actions may be frequently conclusive on the matter despite the
omissions.

6. TI also makes what it describes as an alternative argument that presumes
the formation of a contract, but it is essentially the same argument as it
makes against enforceability. Instead of arguing that the allegedly
unresolved terms preclude enforceability, TI argues alternatively that
disputed issues of material fact concerning these additional terms preclude
summary judgment.

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SDCL 57A-2-204(3), cmt.7

[¶32.] Here, the parties’ words and conduct conclusively establish that they

reached an agreement for the sale of the 30 V1.5 heaters and, further, that the

other items of negotiation were not open terms at all; they were simply separate

items on which the parties failed to reach mutual agreement. TI’s all-or-nothing

argument is unsupported by the UCC or the record.

[¶33.] The undisputed facts make clear that even amid unsuccessful

negotiations concerning the more ambitious, far-reaching terms of future heater

development and the sale of IP and the K2 heater line, Tiedemann wrote in his

August 2, 2019 email that TI “will still order the remaining 1.5’s” despite not yet

“having firm orders ‘in-hand.’” (Emphasis added.) Tiedemann acknowledged the

nature of separate and certain agreements for the 30 heaters in his deposition

testimony:

I just wanted to say that our intention always was to try and sell
all of the 30 units that Anderson had partly because we wanted
to get rid of inventory for Kory and partly because we knew we
couldn’t move to another – whatever stage that looked like,
which had not been defined yet, but we knew we could not get to
the next stage until those 30 were sold because they were the
cash flow bottleneck so our intention was to sell the 30 units all
along. . . . We committed to the 21. And, hey, . . . maybe that
down payment was for the other 9. I don’t know. I honestly
don’t remember it, but I will admit it’s quite coincidental in the
amount of it, but it also was our intention to buy those—all 30
units. That was our goal and that was our intention.

7. “Although the comments to the [UCC] were not adopted by the South Dakota
Legislature, this Court has found them to be a helpful guide to interpreting
the text of the Code.” Stern Oil Co., 2012 S.D. 56, ¶ 18 n.7, 817 N.W.2d at
402 n.7 (citing Estate of Klauzer, 2000 S.D. 7, ¶ 33 n.5, 604 N.W.2d 474, 481
n.5).

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(Emphasis added.)

[¶34.] There are no genuine disputed material facts regarding the parties’

agreement for 30 V1.5 heaters at $69,500 per unit. The circuit court correctly

determined the existence of a contract and granted summary judgment on this

issue.

Acceptance and substantial impairment

[¶35.] Generally, a “buyer is [obligated] to accept and pay in accordance with

the contract.” SDCL 57A-2-301. The UCC establishes three distinct bases that

individually satisfy acceptance:

(1) Acceptance of goods occurs when the buyer

(a) After a reasonable opportunity to inspect the goods
signifies to the seller that the goods are conforming
or that he will take or retain them in spite of their
nonconformity; or

(b) Fails to make an effective rejection (subsection (1)
of § 57A-2-602), but such acceptance does not occur
until the buyer has had a reasonable opportunity to
inspect them; or

(c) Does any act inconsistent with the seller’s
ownership; but if such act is wrongful as against
the seller it is an acceptance only if ratified by him.

SDCL 57A-2-606(1)(a) to (c); see also SDCL 57A-2-106(2) (defining goods as

“‘conforming’ . . . when they are in accordance with the obligations under the

contract”).

[¶36.] To make an effective rejection of goods, the buyer “must [reject] within

a reasonable time after their delivery” and “seasonably notif[y] the seller.” SDCL

57A-2-602(1). However, a buyer’s right to reject nonconforming goods differs based

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on whether the contract calls for single delivery, see SDCL 57A-2-307, or is an

“installment contract,” see SDCL 57A-2-612.

[¶37.] Contracts, like the one here, that “require[] or authorize[] the delivery

of goods in separate lots to be separately accepted,” are considered “installment

contracts.” SDCL 57A-2-612(1).8 The UCC allows installment contract buyers to

“reject any installment which is nonconforming if the nonconformity substantially

impairs the value of that installment and cannot be cured[.]” SDCL 57A-2-612(2);

cf. SDCL 57A-2-601 (articulating the UCC’s “perfect tender” rule, which permits a

buyer to reject goods that “fail in any respect to conform to the contract” (emphasis

added)). “But the aggrieved party reinstates the contract if he accepts a

nonconforming installment without seasonably notifying of cancellation[.]” SDCL

57A-2-612(3).

[¶38.] The buyer’s election to accept or reject the goods is a fateful one, but

for installment contracts, not necessarily a final one. The UCC recognizes the

incremental nature of these contracts and states that “[w]henever nonconformity or

default with respect to one or more installments substantially impairs the value of

the whole contract there is a breach of the whole.” Id. In other words, the “defects

in prior installments are cumulative in effect, so that acceptance does not wash out

the defect ‘waived.’” Id., cmt. 6. “‘Substantial impairment,’ as explained by the

official commentary to section 2-612(2), involves consideration of the quality,

8. Anderson states that this was an installment contract, and TI has not
disputed the claim, which appears to be correct. The parties’ communications
contained in the record make clear that both Anderson and TI understood the
heaters would be delivered in separate lots.

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quantity, and assortment of goods, as well as the time frame contemplated by the

contract.” Design Plus Store Fixtures, Inc. v. Citro Corp., 508 S.E.2d 825, 829–30

(N.C. Ct. App. 1998) (citing UCC § 2-612, cmt. 4). Moreover, “the question of

‘substantial impairment’ . . . presents a question of fact.” Bill’s Coal Co. v. Bd. of

Pub. Utils., 887 F.2d 242, 247 (10th Cir. 1989) (citing Cherwell–Ralli, Inc. v.

Rytman Grain Co., Inc., 433 A.2d 984, 986 (Conn. 1980)); see Integrity Bio-Fuels,

LLC v. Musket Corp., No. 13-cv-00768, 2015 WL 1417849, at *12 (S.D. Ind. Mar. 27,

2015) (denying summary judgment and observing that substantial impairment

determination “necessarily requires the trier of fact to weigh the evidence”); Asi

Indus. GmbH v. MEMC Elec. Materials, Inc., No. 06CV951, 2008 WL 413819, at *3

(E.D. Mo. Feb. 13, 2008) (“Whether there has been a ‘substantial impairment’ of an

installment contract is generally a question of fact.”); Extrusion Painting, Inc. v.

Awnings Unlimited, Inc., 37 F. Supp. 2d 985, 997 (E.D. Mich. 1999) (same).

[¶39.] Here, TI accepted the 17 V1.5 heaters; it did not reject them. However,

there is an undisputed record of TI’s complaints about the performance of at least

some of the heaters. As early as September 17, 2019, TI communicated, in writing,

its concerns to Anderson regarding its ability to deliver conforming heaters on

schedule with agreed-upon support services. On October 28, TI notified Anderson

that some of the heaters would not start, including two heaters delivered in North

Dakota. TI told Anderson that TI’s technician would work “on units in Canada

experiencing the same issue” and asked Anderson to resolve the problem with the

two heaters in North Dakota. Anderson’s representative responded that he was not

sure if “traveling someplace to perform repairs is something that fits into [his]

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schedule this week at Anderson[.]” In other emails on October 28, TI expressed its

frustration about the lack of product support and delays in resolving customer

issues, stating: “If we ever want to get paid I suggest we get these issues resolved

ASAP or equipment will be coming back to the factory instead of being delivered

from it.”

[¶40.] Construing the facts in the light most favorable to TI, there appear to

be genuine issues of material fact relating to several key UCC questions, including

the accuracy of TI’s claims relating to defects in the heaters and the related

determination of whether the alleged defects for the accepted heaters “substantially

[impaired] the value of the whole contract” thereby permitting TI to cancel the

remaining thirteen installments.9 SDCL 57A-2-612(3); see also Design Plus, 508

S.E.2d at 830 (“Once a non-conforming installment substantially impairs the

installment contract as a whole, the aggrieved party has no duty to provide an

opportunity to cure the defects of future installments; rather, the buyer has an

immediate right to cancel the entire contract.”).

[¶41.] There is, however, a complication. TI has not oriented its arguments

to the UCC or SDCL 57A-2-612 either before the circuit court or on appeal. Still,

relying upon more generic contract principles, TI has argued that Anderson

delivered defective heaters which “justified . . . suspending payments to [Anderson]

and subsequently canceling any remaining orders[.]” Because there is no dispute

that the UCC governs this installment contract, we must therefore apply the

9. Also, TI’s cancellation could only be effective under SDCL 57A-2-612(3) if its
notice of cancellation was seasonable.

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governing law. See Scotlynn Transp., LLC v. Plains Towing & Recovery, LLC, 2024

S.D. 24, ¶ 17, 6 N.W.3d 671, 676 (“Our task on appeal is to determine only whether

a genuine issue of material fact exists and whether the law was correctly applied.”

(citation omitted)).

[¶42.] Viewed in the light most favorable to TI, this argument sufficiently

raises a genuine issue of material fact as to whether the defects it identified for the

accepted heaters had accumulated to a critical tipping point at which TI could claim

that Anderson had breached the contract because the value of the whole contract

had become substantially impaired. See SDCL 57A-2-612(3). Given this

determination of the breach issue, we do not reach the question of damages, which

remains open on remand.

Conclusion

[¶43.] The circuit court correctly determined that Anderson and TI did have a

contract for the sale of 30 heaters, as detailed above. However, questions of

material fact regarding breach remain for resolution at a trial. We, therefore,

affirm the circuit court in part, reverse in part, and remand the case for further

proceedings.10

[¶44.] JENSEN, Chief Justice, and KERN, DEVANEY, and MYREN,

Justices, concur.

10. In its requested relief, TI has sought reassignment to a different circuit court
judge on remand. This request is unfounded and based upon nothing more
than the existence of an adverse decision, as counsel confirmed at oral
argument. The request is denied.

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