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NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Reporter, Supreme Court of New Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any editorial errors in order that corrections may be made before the opinion goes to press. Errors may be reported by E-mail at the following address: reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 a.m. on the morning of their release. The direct address of the court's home page is: http://www.courts.state.nh.us/supreme. THE SUPREME COURT OF NEW HAMPSHIRE ___________________________ Rockingham No. 2007-291 JONATHAN MCNEAL & a. v. ROBERT M. LEBEL d/b/a RML GENERAL CONTRACTOR & a. Argued: April 10, 2008 Opinion Issued: July 11, 2008 Law Office of Joshua L. Gordon, of Concord (Joshua L. Gordon on the brief), and Bosen & Springer, P.L.L.C., of Portsmouth (Jonathan S. Springer orally), for the plaintiffs. Tower, Crocker & Mullins, P.A., of Jaffrey (Thomas P. Mullins on the brief and orally), for defendant Robert M. Lebel d/b/a RML General Contractor. Gormley & Gormley, P.C., of Nashua (Arthur O. Gormley, III on the brief and orally), for defendant Pullman Modular Industries, Inc. HICKS, J. The plaintiffs, Jonathan and Paula McNeal, appeal an order of the Superior Court (McHugh, J.) in their action against the defendants, Pullman Modular Industries, Inc. (Pullman) and Robert M. Lebel d/b/a RML General Contractor (Lebel), arising out of the allegedly improper manufacture and/or construction of a modular home. We affirm in part, reverse in part, and remand.

The trial court found or the record supports the following facts. In April 2004, the plaintiffs contracted with Lebel for the construction of a modular home. The eventual contract price was $359,042. The plaintiffs and Lebel decided to purchase the home from Pullman. The home was to be constructed near the plaintiffs' existing home, allowing them to move into the new home and raze the old one upon completion. Pullman manufactured the home and delivered it to the plaintiffs' property in August 2004. Mr. McNeal and Lebel noticed several problems, most prominently that the plaintiffs had expected different kitchen cabinets, the beam and joists for the attic did not allow for installation of a flat floor, and Pullman did not deliver any of the three sets of stairs it was to supply. Pullman eventually delivered, or built on-site, the stairs that it was responsible for supplying and Lebel built two sets of basement stairs as he had contracted to do. Once built, some of the sets of stairs failed to satisfy the applicable building code. The terms of the plaintiffs' construction financing required the loan to be paid by September 30, 2004, but the home was not ready for occupancy by that date. In fact, by October 1, each of the parties had become, in the trial court's words, "somewhat disappointed and distrustful of one another." Lebel informed the plaintiffs that he would not continue construction unless he was assured payment for work done after October 1. He requested that funds be placed in escrow, but the plaintiffs were not willing to do so. On October 4, 2004, the plaintiffs' attorney sent a letter to Lebel requesting that he prioritize his work to the exterior of the home. Lebel interpreted this letter to amount to his termination, and, as of October 7, 2004, stopped work on the home. The plaintiffs did not obtain a certificate of occupancy for the new home until July 2005. The plaintiffs sued Lebel for breach of contract, and both defendants for negligence and violation of RSA 205-B:2 (2000) and RSA chapter 358-A (1995 & Supp. 2007). Lebel counterclaimed for amounts due under the contract and for unpaid work performed. With respect to the common law theories, the court concluded that "none of the parties [is] without fault" and awarded damages as follows: [T]he Court awards the plaintiffs a verdict of $9,250.00 against defendant Lebel on their claims of breach of contract and negligence. The Court awards the plaintiffs a verdict of $9,250.00 against Pullman on their claim of negligence. The Court awards Lebel a verdict of $16,500.00 on his counterclaim against the

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plaintiffs as it finds that they breached their contract with him by not paying him for all the work that he did and by not allowing him to complete his work. Thus the plaintiffs owe Lebel $7,250.00 at present and Pullman owes the plaintiffs $9,250.00 at present. On reconsideration, the court ruled that the plaintiffs were entitled to credit for $1,978.36 they paid Lebel for a change order, and reduced the damage award to Lebel by that amount. The trial court found that the evidence did not support the claimed statutory violations. On appeal, the plaintiffs argue that the trial court erred in: (1) ruling that they breached the contract; (2) making certain factual findings; (3) determining damages; (4) ruling that the home contained no "substantial defects" as that phrase is used in RSA 205-B:2; and (5) ruling that neither defendant committed any unfair or deceptive trade practices as contemplated by RSA 358-A:2 (1995). We will uphold the trial court's factual findings and rulings of law unless they lack evidentiary support or constitute a clear error of law. Barrows v. Boles, 141 N.H. 382, 389 (1996). The plaintiffs first challenge the trial court's determinations of contractual liability, asserting that Lebel materially breached and they committed no breach. They contend that Lebel breached the contract by leaving the job prior to completing his work after insisting upon conditions not contemplated in the contract; specifically, the placement of funds in escrow and assurance of end financing. They further contend that these were material breaches, relieving them of further contractual obligations. The trial court found that on September 30, 2004, the plaintiffs' construction lender informed Lebel that it "would not be [disbursing] any more monies for the Plaintiff[s'] project because they were [two] months behind in [their] interest payments." The court also ruled that "Lebel performed his work in accordance with the contract until funding was withdrawn by the finance company" and that the plaintiffs' "unwillingness to escrow sufficient funds to enable Lebel to complete the project was unreasonable." We read the court's order as implicitly ruling that the cessation of disbursements under the construction loan was an apparent anticipatory breach or repudiation of the plaintiffs' contractual obligations, entitling Lebel to seek assurance of payment before continuing his performance. "An anticipatory breach of contract occurs when a promising party repudiates his obligations either through words or by voluntarily disabling himself from performing them before the time for performance." Syncom Indus. v. Wood, 155 N.H. 73, 83-84 (2007). Interestingly, as we noted in Syncom, the action constituting anticipatory breach in both of our leading cases on the subject, LeTarte v. West Side Development Group, LLC, 151 N.H. 291 (2004), and Hoyt

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v. Horst, 105 N.H. 380 (1964), was the failure to make payments under the contract. Id. at 84. Our cases note that "[i]n instances of anticipatory breach, the nonbreaching party has the option to treat the repudiation as an immediate breach and maintain an action at once for the damages." LeTarte, 151 N.H. at 294. As other courts have recognized, however, where the actions of the apparently repudiating party are equivocal or uncertain, this option presents the nonbreaching party with a dilemma. See Norcon Power v. Niagara Mohawk Power, 705 N.E.2d 656, 659 (N.Y. 1998). If the promisee regards the apparent repudiation as an anticipatory repudiation, terminates his or her own performance and sues for breach, the promisee is placed in jeopardy of being found to have breached if the court determines that the apparent repudiation was not sufficiently clear and unequivocal to constitute an anticipatory repudiation justifying nonperformance. If, on the other hand, the promisee continues to perform after perceiving an apparent repudiation, and it is subsequently determined that an anticipatory repudiation took place, the promisee may be denied recovery for post-repudiation expenditures because of his or her failure to avoid those expenses as part of a reasonable effort to mitigate damages after the repudiation. Id. (quotation omitted). In the case of contracts for the sale of goods, Article 2 of the Uniform Commercial Code (UCC) provides a means for dealing with this dilemma by providing a right to demand adequate assurance of due performance "[w]hen reasonable grounds for insecurity arise" and declaring a failure to provide such assurance within a reasonable time to be a repudiation of the contract. See RSA 382-A:2-609(1) (1994). This provision of the UCC "has been considered so effective in bridging the doctrinal, exceptional and operational gap related to the doctrine of anticipatory breach that some States have imported the complementary regimen of demand for adequate assurance to common-law categories of contract law, using UCC 2-609 as the synapse." Norcon Power, 705 N.E.2d at 660; see also Restatement (Second) of Contracts

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