No published Arizona opinion provides for an implied right to cure. However, a recent unpublished Court of Appeals opinion suggests that Arizona is inching closer to adopting an implied right to cure absent a contractual right to cure. In Fisher v. Rondo Pools, 1 CA-CV 18-0343 (Ariz. App. 2019), the court found no error in the superior court instructing the jury that “in determining whether Rondo materially breached the contract, it could consider Rondo’s ‘ability to cure or fix the alleged breach’ and whether Rondo ‘can make any reasonable assurances that it would cure the alleged breach.’”
Fisher v. Rondo Pools
In Fisher v. Rondo Pools, an owner terminated a contractor mid-project for various defaults. The owner sued, and the jury found the contractor did not materially breach the contract because the contractor had offered to cure its defaults. On appeal, the court upheld the verdict using the “materiality” test in Restatement (Second) of Contracts § 241 (1981). Per the Restatement, “the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances” is a factor to consider when deciding whether a breach of contract is material.
The owner in Rondo Pools argued that this ruling could result in an owner “‘stuck’ with an incompetent contractor so long as the contractor was willing to try to fix its mistakes.” The court responded that the jury instruction hinged on whether the breaching party will cure its failure and its ability to make reasonable assurances. To use the language of the Restatement, the contractor must be likely to cure its default.
The contractor did not need to cure the defaults or even commence to cure the defaults. A sincere offer to cure was enough even though the contract did not give the contractor an express right to cure.
Practical Effect of the Rondo Pools Decision
Practically speaking, the right to demand a cure is usually invoked by an owner demanding a contractor cure its defaults within a specified time. But when a construction contract contains no cure provisions like the one in Rondo Pools, does the contractor have a right to cure its defaults?
According to Bruner & O’Connor, 18:41, yes: “Cure is a fundamental common law right implied in every contract as a matter of law.”
The basis for this purported “common law right” is the same Restatement (2d) of Contracts provision relied on in Rondo Pools. This suggests the Restatement (2d) of Contracts, § 241(d) itself implies a right to cure: If an alleged breach is immaterial in part because the breaching party can and likely will cure it, then the nonbreaching party cannot terminate the contract and must allow the breaching party to cure. The practical effect of this provision may be that when a contractor offers to cure a defect, the contractor creates a de facto right to cure because his breach becomes immaterial. See also, McClain v. Kimbrough Constr. Co., 806 S.W.2d 194, 198–99 (Tenn. Ct. App. 1990) (holding that absent a contractual provision, a subcontractor had a right to cure so long as the subcontractor had not materially breached the contract under the Restatement (2d) of Contracts, § 241(d)).