New York Law Review

Tag: breach of contract

  • Kenford Co. v. County of Erie, 67 N.Y.2d 266 (1986): Recovering Lost Profits for New Businesses

    67 N.Y.2d 266 (1986)

    A new business seeking to recover lost future profits faces a stricter standard of proof, as there is often no reasonable basis of experience to estimate profits with reasonable certainty.

    Summary

    Kenford Co. sued Erie County for breach of contract after the county failed to build a domed stadium. Kenford sought damages for lost profits it expected to earn over 20 years managing the stadium. The New York Court of Appeals held that Kenford’s proof of lost profits was too speculative, given the newness of the business and the lack of certainty that the stadium would be built and successfully operated as planned. The court emphasized the need for certainty and foreseeability in proving lost profits, particularly for new ventures.

    Facts

    Erie County contracted with Kenford and Dome Stadium, Inc. (DSI) to build and lease a domed stadium. The contract stipulated the County would start construction within 12 months and negotiate a 40-year lease with DSI. If a lease wasn’t agreed upon, a 20-year management contract appended to the agreement would take effect. The parties failed to agree on a lease, and the County never commenced construction, breaching the contract. DSI sought damages for lost profits it anticipated earning over the 20-year management period.

    Procedural History

    Kenford and DSI sued Erie County for breach of contract. The trial court granted summary judgment against the County on liability. A trial on damages resulted in a large jury verdict for the plaintiffs. The Appellate Division reversed the damages award for lost profits, finding the projections too speculative, and ordered a new trial on other issues. The Court of Appeals reviewed the Appellate Division’s decision regarding lost profits.

    Issue(s)

    Whether DSI presented sufficient evidence to recover lost profits for a 20-year period for a stadium that was never built or operated, considering the business was new and lacked an established earnings record.

    Holding

    No, because the damages were too speculative and not within the contemplation of the parties when the contract was formed. Furthermore, the multitude of assumptions required to establish projections of profitability over the life of the contract require speculation and conjecture, making it beyond the capability of even the most sophisticated procedures to satisfy the legal requirements of proof with reasonable certainty.

    Court’s Reasoning

    The court emphasized that loss of future profits must be proven with reasonable certainty and must have been within the contemplation of the parties at the time of the contract. The court acknowledged that DSI’s methodology was sound but, it found the economic model’s foundations undermined the certainty of the projections. The court stated, “If it is a new business seeking to recover for loss of future profits, a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty.”

    The court noted the speculative nature of projecting profits over 20 years for a facility that never existed, stating, “Quite simply, the multitude of assumptions required to establish projections of profitability over the life of this contract require speculation and conjecture, making it beyond the capability of even the most sophisticated procedures to satisfy the legal requirements of proof with reasonable certainty.”

    Furthermore, the court stated, “The economic facts of life, the whim of the general public and the fickle nature of popular support for professional athletic endeavors must be given great weight in attempting to ascertain damages 20 years in the future.”

    The court rejected the “rational basis” test used by the Appellate Division, reaffirming the stricter standard for proving lost profits for new businesses articulated in Cramer v Grand Rapids Show Case Co., 223 NY 63.

  • Tappan Motors, Inc. v. Volvo of America Corp., 63 N.Y.2d 111 (1984): Defining ‘Good Cause’ for Franchise Termination

    Tappan Motors, Inc. v. Volvo of America Corp., 63 N.Y.2d 111 (1984)

    A motor vehicle franchise agreement can be terminated for good cause when a dealer fails to meet contractual obligations, such as maintaining an adequate parts inventory.

    Summary

    Tappan Motors sued Volvo, alleging wrongful franchise termination under General Business Law § 197. The trial court sided with Tappan, but the Appellate Division reversed, finding good cause for termination due to Tappan’s deficient performance. The New York Court of Appeals affirmed the Appellate Division, holding that Tappan’s failure to maintain an adequate parts inventory, a contractual obligation, constituted good cause for termination. The court found that the weight of the evidence supported Volvo’s claim of insufficient performance by Tappan, obviating the need to definitively interpret the “good cause” requirement of the statute.

    Facts

    Tappan Motors, a Volvo dealer, was threatened with termination of its franchise by Volvo of America Corp. Tappan Motors then initiated legal action against Volvo in November 1979. Volvo alleged that Tappan failed to meet the obligations of the franchise agreement, specifically regarding the maintenance of an adequate parts inventory. Volvo argued this deficiency justified the franchise termination. Tappan argued compliance with the franchise agreement.

    Procedural History

    The trial court initially enjoined Volvo from terminating the franchise after a nonjury trial, finding Tappan had complied with the franchise agreement obligations. The Appellate Division reversed, finding both legal and factual errors and holding Volvo’s termination was justified due to deficiencies in Tappan’s performance. Tappan appealed to the New York Court of Appeals. The Court of Appeals affirmed the Appellate Division’s order and the prior nonfinal Appellate Division order brought up for review.

    Issue(s)

    Whether the Appellate Division erred in determining that Volvo had good cause to terminate the dealership agreement with Tappan Motors based on the insufficiency of Tappan’s performance, particularly its breach of the contractual duty to maintain an adequate parts inventory.

    Holding

    Yes, because the weight of the evidence more nearly comports with the holding of the Appellate Division that Volvo had good cause to terminate the dealership because of the insufficiency of Tappan’s performance, particularly breach of its contractual duty to maintain on premises an adequate parts inventory to meet the current and reasonably anticipated service requirements of its customers.

    Court’s Reasoning

    The Court of Appeals focused on whether the evidence supported the Appellate Division’s finding of good cause for termination. The court determined that Tappan’s failure to maintain an adequate parts inventory constituted a breach of its contractual duty and justified the termination. This decision was based on the court’s assessment of the weight of the evidence presented. The court explicitly stated that it did not need to determine whether section 197 imposed a “good cause” requirement or, as Volvo claimed, protected only against arbitrary and capricious terminations because it agreed with the Appellate Division’s finding of good cause. The court did not delve into a deep analysis of the statutory interpretation of General Business Law § 197, as the factual determination of Tappan’s breach was sufficient to resolve the case. The dissenting judges believed that the weight of the evidence supported the trial court’s original findings. The dissent referenced the analysis presented in the dissenting memorandum of Justice Vito J. Titone at the Appellate Division, signaling a disagreement regarding the factual assessment of Tappan’s performance.

  • D & N Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y.2d 449 (1984): Statute of Frauds and Agreements Terminable Only by Breach

    D & Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y.2d 449 (1984)

    An oral agreement that is indefinite in duration and terminable within one year only by its breach falls within the Statute of Frauds and is void if unwritten.

    Summary

    D & Boening, Inc. sued Kirsch Beverages, Inc. and American Beverage Corp. seeking damages for breach of an alleged oral exclusive sub-distributorship agreement for “Yoo-Hoo” beverage. The agreement, initiated in 1955 and continued through successive company acquisitions, was allegedly terminable only if Boening failed to satisfactorily distribute the product. Kirsch terminated the agreement in 1982. The New York Court of Appeals held that the agreement was subject to the Statute of Frauds because it was indefinite in duration and terminable within one year only upon a breach by Boening, rendering it void for lack of a written contract. The court emphasized that termination due to breach is not the same as performance and does not take an agreement outside the Statute of Frauds.

    Facts

    In 1955, Minck Beverages, a “Yoo-Hoo” distributor, entered into an oral agreement with Joseph Boening and his sons, granting them exclusive sub-distribution rights in Nassau County and part of Suffolk County. The Boenings were required to stop distributing a competitor’s drink, and the agreement was to last “for as long as they satisfactorily distributed the product, exerted their best efforts and acted in good faith.” American Beverage Corp. acquired the franchise in 1963 and continued the agreement. Upon Joseph Boening’s death in 1965, his sons continued the business as D & Boening, Inc. In 1982, Kirsch Beverages, Inc. purchased American and then terminated the agreement with Boening. Boening sued for breach of contract.

    Procedural History

    The defendants moved to dismiss the complaint under CPLR 3211(a)(5), arguing the agreement violated the Statute of Frauds. Special Term denied the motion, reasoning that the agreement was terminable at any time and thus could be performed within one year. The Appellate Division reversed, holding the agreement was not performable within one year but only terminable by breach, thus falling under the Statute of Frauds and being void because it was unwritten. The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

    Issue(s)

    Whether an oral franchise agreement that is indefinite in duration and terminable within one year only upon a breach by one of the parties falls within the Statute of Frauds and is therefore void if unwritten?

    Holding

    Yes, because the agreement’s duration was indefinite and its termination within one year could only occur through a breach of contract, making it subject to the Statute of Frauds and requiring a written agreement for enforceability.

    Court’s Reasoning

    The Court of Appeals held that the Statute of Frauds requires certain agreements, including those not performable within one year, to be in writing. The court emphasized a narrow interpretation, limiting the statute to agreements with “absolutely no possibility in fact and law of full performance within one year.” The court distinguished between agreements terminable at will (outside the statute) and those terminable only by breach (inside the statute). Citing Zupan v. Blumberg, the court stated, “The contract was not, then, one which might be performed within a year, but rather one which could only be terminated within that period by a breach of one or the other party to it [emphasis in original].” The court found that the alleged agreement was indefinite in duration and was terminable within one year only by Boening’s failure to satisfactorily distribute the product, constituting a breach. The court reasoned that a breach is not a mode of performance, and thus, the agreement fell within the Statute of Frauds and was void for being unwritten. The court noted that “termination is not performance, but rather the destruction of the contract…where there is no provision authorizing either of the parties to terminate as a matter of right.” Because Boening’s satisfactory performance was the sole limitation and any failure would constitute a breach, there was no option for rightful termination within the first year and thus the agreement was in violation of the statute.

  • Fertel v. Gordon, 61 N.Y.2d 851 (1984): Measuring Damages for Breach of Contract Under the UCC

    Fertel v. Gordon, 61 N.Y.2d 851 (1984)

    In a breach of contract for the sale of securities (cooperative apartment shares), damages are measured by the difference between the market price when the buyer learned of the breach and the contract price, as dictated by the Uniform Commercial Code (UCC).

    Summary

    Fertel sued Gordon for breach of contract after Gordon refused to sell them a cooperative apartment. The parties stipulated to the breach, leaving the court to determine damages. The trial court awarded damages based on the difference between the contract price and the market value at the time of the breach, plus consequential damages. The Appellate Division modified the award, reducing the market value and dismissing the consequential damages. The Court of Appeals affirmed the Appellate Division’s decision, holding that the UCC governs the sale of cooperative apartment shares and dictates that damages are measured at the time the buyer learned of the breach. Furthermore, consequential damages were not recoverable because the seller was unaware of the buyer’s specific need for a replacement apartment during the contract formation.

    Facts

    Fertel contracted to purchase a cooperative apartment from Gordon for $475,000.
    Gordon breached the contract by refusing to sell the apartment.
    Fertel sued for damages resulting from the breach.
    The parties stipulated that Gordon breached the contract, and the only issue was the amount of damages.
    Fertel sought damages based on the difference between the contract price and the market value of the apartment at the time of the breach, as well as consequential damages for maintenance paid on a replacement apartment during renovations.

    Procedural History

    Trial Term awarded Fertel $100,000 (difference between the $475,000 contract price and the $575,000 market value) plus $6,400 in consequential damages.
    The Appellate Division modified the trial court’s decision, reducing the damages to $37,000 based on a different assessment of the apartment’s market value and dismissing the award of consequential damages.
    Fertel appealed to the Court of Appeals.

    Issue(s)

    Whether the market value of the cooperative apartment should be assessed at the date the buyers learned of the breach or at a commercially reasonable time after the breach.
    Whether the consequential damages for maintenance payments on a replacement apartment were properly dismissed.

    Holding

    No, because the sale of securities in a cooperative corporation is governed by the UCC, which specifies that damages are measured by the difference between the market price at the time when the buyer learned of the breach and the contract price.
    Yes, because the seller was unaware of the buyer’s particular need for a replacement apartment at the time the contract was made; therefore, those damages were not foreseeable.

    Court’s Reasoning

    The Court of Appeals agreed with the Appellate Division’s assessment of the market value, stating that it “more nearly comport[ed] with the weight of the evidence.” The court emphasized its role in reviewing factual findings when there is disagreement between lower courts.

    The court explicitly stated that contracts for cooperative apartments are governed by the Uniform Commercial Code (UCC) because they involve the sale of securities in the cooperative corporation. Therefore, UCC § 2-713(1) dictates the measure of damages: “the difference between the market price at the time when the buyer learned of the breach and the contract price.”

    The court relied on Uniform Commercial Code, § 2-715, subd [2], par [a] in affirming the dismissal of consequential damages. Consequential damages must arise from general or particular requirements which the seller knew or had reason to know at the time of contracting. Here, the seller was unaware of the buyer’s specific need for a replacement apartment during the renovation period. Thus, the maintenance payments were not recoverable as consequential damages. The court reasoned that the payment of maintenance on a replacement apartment was based upon a particular need of theirs of which respondent was unaware at the time the contract was made.

  • Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982): Establishing Fraud Based on Promises of Future Conduct

    Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982)

    To state a cause of action for fraud based on a promise of future conduct, a plaintiff must allege that the defendant had a present intention not to perform the promised future conduct at the time the promise was made.

    Summary

    Weiner sued McGraw-Hill, alleging breach of contract and fraud related to the termination of his employment. The New York Court of Appeals affirmed the dismissal of all 14 causes of action in Weiner’s second amended complaint. The court held that the breach of contract claim was insufficient because it involved a contract terminable at will. The court also found that the fraud claims failed because Weiner did not adequately allege that McGraw-Hill had a present intention not to fulfill its promises of future conduct when those promises were made. The court further held that statements made before the State Division of Human Rights were privileged, thereby defeating the defamation claims.

    Facts

    Weiner brought an action against McGraw-Hill after his employment was terminated. His complaint included multiple causes of action, including breach of contract, fraud, and defamation. The specific details of the initial employment agreement and the alleged defamatory statements are not fully detailed in this memorandum decision, but they form the basis of the claims against McGraw-Hill.

    Procedural History

    The Appellate Division dismissed all 14 causes of action in Weiner’s second amended complaint. Weiner appealed this decision to the New York Court of Appeals.

    Issue(s)

    1. Whether the cause of action for breach of contract was insufficient because it alleged a contract terminable at will.
    2. Whether the causes of action for fraud were insufficient for failure to allege a present intention not to perform the promises of future conduct.
    3. Whether the causes of action for defamation were insufficient because the statements were privileged as they were made before the State Division of Human Rights.
    4. Whether the Appellate Division abused its discretion in denying leave to replead certain causes of action.

    Holding

    1. Yes, because the complaint alleged no more than a contract terminable at will.
    2. Yes, because the complaint failed to allege a present intention not to perform the alleged promises of future conduct. Specifically, the court cited, “Lanzi v Brooks, 43 NY2d 778“.
    3. Yes, because statements made before the State Division of Human Rights are privileged.
    4. No, because the appellant recognized the allegations were insufficient.

    Court’s Reasoning

    The Court of Appeals affirmed the Appellate Division’s decision, finding no error in the dismissal of all 14 causes of action. Regarding the breach of contract claim, the court stated that it was properly classified as a contract terminable at will, which is insufficient to sustain a cause of action. The fraud claims were deemed insufficient because Weiner failed to allege that McGraw-Hill had a present intention not to perform the promised future conduct at the time the promises were made. This aligns with the precedent set in Lanzi v. Brooks. As for the defamation claims, the court held that statements made before the State Division of Human Rights are privileged, providing immunity from defamation suits. The court also upheld the denial of leave to replead, finding no abuse of discretion by the Appellate Division. Regarding the final cause of action, the court found that Weiner failed to allege consideration which could support the promise asserted to have been made to appellant.

  • State of New York v. Lundin, 60 N.Y.2d 987 (1983): Statute of Limitations for Contract Claims Begins at Substantial Completion

    State of New York v. Lundin, 60 N.Y.2d 987 (1983)

    A cause of action for breach of contract accrues, and the statute of limitations begins to run, when the contract is substantially completed, regardless of when the final payment is due or made.

    Summary

    The New York Court of Appeals held that the State’s breach of contract claim against a contractor, Lundin, was time-barred because the action was commenced more than six years after Lundin substantially completed the work, even though the final payment and related disputes occurred later. The court reasoned that the cause of action accrued upon substantial completion, not upon final payment or resolution of payment disputes. This case clarifies that the focus for statute of limitations purposes is on when the work was done, not when the money was (or wasn’t) paid.

    Facts

    In April 1967, the plaintiff, was awarded a contract to build an ice skating rink at Clove Lake Park in Staten Island. The contract was a unit-price contract, meaning the actual cost was to be determined after construction. The contractor did not present the premises for a final inspection until September 28, 1971. In January 1978, the plaintiff commenced an action seeking to recover for extra materials, additional work, losses due to project delays, and alleging a total breach of contract.

    Procedural History

    The defendant answered and asserted that the action was barred by the Statute of Limitations. Both the Supreme Court and the Appellate Division denied the defendant’s motion to dismiss the complaint. The Court of Appeals reversed, granting the motion to dismiss.

    Issue(s)

    Whether a breach of contract action accrues, for statute of limitations purposes, upon substantial completion of the contract or upon the final determination of payment owed under the contract.

    Holding

    No, because a cause of action in contract accrues when a breach occurs, and in construction contracts, the breach typically occurs when the work is substantially completed, regardless of when payment is finalized or disputes are resolved.

    Court’s Reasoning

    The Court of Appeals determined that the State’s cause of action accrued when the contractor substantially completed the work in 1971. The court emphasized that “a cause of action accrues when a breach of contract occurs.” The court rejected the argument that the cause of action accrued when the final payment was determined or when the State disputed the amount owed. The court reasoned that the liability arose out of the contract and the alleged improper performance thereof, and not out of the nonperformance of payment. The court distinguished between a suit on “liability arising out of the contract” and one for “nonperformance of payment,” stating that the gravamen of any contract action is that one party claims that it is owed certain obligations because of the agreement and that the other party has not performed those obligations. A dissenting opinion argued that the cause of action for payment does not accrue until the owner refuses to pay all that was requested, viewing the owner’s audit and determination of payment as a condition precedent to the contractor’s right to sue for final payment. However, the majority did not accept this argument. The court found the action was commenced more than six years after the completion, it was time-barred.

  • National Linen Service v. Abner A. Wolf, Inc., 47 N.Y.2d 342 (1979): Enforceability of Liquidated Damages Clauses

    National Linen Service v. Abner A. Wolf, Inc., 47 N.Y.2d 342 (1979)

    A liquidated damages clause is enforceable if the damages it stipulates bear a reasonable relation to the probable actual harm resulting from a breach and the actual damages are difficult to determine precisely.

    Summary

    National Linen Service sued Abner A. Wolf, Inc. for breaching two contracts: a uniform rental contract and a laundry contract. The contracts contained liquidated damages clauses. The trial court found both contracts were breached but awarded damages only for the rental contract. The Appellate Division affirmed the breach findings and found the liquidated damages clauses in both contracts enforceable, increasing the total damage award. The Court of Appeals modified the Appellate Division’s order, adjusting the damages to reflect the proper calculation for each contract, and affirmed the enforceability of the liquidated damages clauses due to the difficulty in predicting actual damages.

    Facts

    National Linen Service (plaintiff) entered into two contracts with Abner A. Wolf, Inc. (defendant): one for uniform rental and another for laundry services. Both contracts contained clauses stipulating liquidated damages in the event of a breach. Abner A. Wolf, Inc. breached both contracts. The specific terms of the liquidated damages clauses related to the remaining value of the contracts and the difficulty in assessing actual losses due to factors such as labor, capital costs, and potential for utilizing resources after a breach.

    Procedural History

    National Linen Service sued Abner A. Wolf, Inc. in the trial court for breach of contract. The trial court found that Abner A. Wolf, Inc. breached both contracts but awarded damages only for the uniform rental contract. Abner A. Wolf, Inc. appealed to the Appellate Division, which affirmed the finding of breach for both contracts and held that the liquidated damages clauses were enforceable for both contracts, increasing the total damages awarded. Abner A. Wolf, Inc. then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the liquidated damages clause in the uniform rental contract is enforceable.
    2. Whether the liquidated damages clause in the laundry contract is enforceable.

    Holding

    1. Yes, because the provision for liquidated damages in the rental contract bore a reasonable relation to the amount of probable actual harm for breach of that contract, there being uncertainty concerning the re-rental or sale value of the uniforms supplied by plaintiff under the contract.
    2. Yes, because the damages were unpredictable in view of the labor and capital costs that the laundry contract involved and the uncertainty that after a contract breach they would be fully utilized during the remainder of the contract term.

    Court’s Reasoning

    The Court of Appeals relied on the principle established in Truck Rent-A-Center v. Puritan Farms 2nd, stating that a liquidated damages provision is enforceable if it bears a reasonable relation to the probable actual harm and the actual damages are difficult to ascertain. Regarding the uniform rental contract, the court agreed with the lower courts that the liquidated damages clause was reasonable because the re-rental or sale value of the uniforms was uncertain. As to the laundry contract, the court found the damages unpredictable due to labor and capital costs and the uncertainty of resource utilization after a breach. The court stated, “the damages being unpredictable in view of the labor and capital costs that the contract involved and the uncertainty that after a contract breach they would be fully utilized during the remainder of the contract term.” The court emphasized the difficulty in determining actual damages in both scenarios, justifying the enforcement of the liquidated damages clauses. The court adjusted the specific damage amounts to align with the evidence presented, but upheld the enforceability of the clauses themselves.

  • Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982): Enforceability of “Just Cause” Termination Policies in Employment Handbooks

    Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982)

    An employer’s promise of job security in a personnel handbook, coupled with an employee’s reliance on that promise by leaving a prior job and rejecting other offers, can create an enforceable contract requiring just cause for termination, even in the absence of a fixed employment term.

    Summary

    Walton Weiner left his previous employment at Prentice-Hall to work for McGraw-Hill after being assured that McGraw-Hill’s policy was to terminate employees only for “just cause,” as stated in its personnel handbook. Weiner signed an application referencing the handbook. He alleged he relied on this assurance, forfeiting benefits and a raise at Prentice-Hall. After eight years, McGraw-Hill fired Weiner for “lack of application.” Weiner sued for breach of contract. The Court of Appeals held that Weiner stated a cause of action because the promise of job security, combined with Weiner’s reliance, could create an enforceable contract modifying the at-will employment presumption.

    Facts

    In 1969, McGraw-Hill recruited Walton Weiner from Prentice-Hall. McGraw-Hill’s representative assured Weiner that the company’s policy was to terminate employees only for “just cause,” as detailed in its personnel handbook. The handbook stated dismissal would occur “for just and sufficient cause only, and only after all practical steps toward rehabilitation or salvage of the employee have been taken and failed.” Weiner signed an employment application referencing the handbook. Weiner alleges he relied on these assurances, leaving Prentice-Hall, forfeiting accrued fringe benefits, and turning down a salary increase offered by Prentice-Hall to stay. After eight years of employment, Weiner was fired in February 1977 for “lack of application.”

    Procedural History

    Weiner sued McGraw-Hill for breach of contract. The Supreme Court (Special Term) upheld the complaint. The Appellate Division reversed, holding that because Weiner was an at-will employee, he could be terminated arbitrarily. Justice Kupferman dissented. The Court of Appeals reversed the Appellate Division, reinstating the Special Term order.

    Issue(s)

    Whether an employer’s promise of job security in a personnel handbook, coupled with an employee’s reliance on that promise, can create an enforceable contract requiring just cause for termination, despite the employee not being hired for a fixed term.

    Holding

    Yes, because the promise of job security, incorporated in the employment application and relied upon by the employee in leaving prior employment and rejecting other offers, presents a question for trial as to whether the employer was bound not to discharge the employee without just and sufficient cause and an opportunity for rehabilitation.

    Court’s Reasoning

    The Court of Appeals reasoned that the traditional at-will employment rule is a rebuttable presumption, not an absolute bar to contractual obligations. The court emphasized that “mutuality” (coextensive promises) is not always necessary for a binding contract; consideration, which can be a benefit to the promisor or a detriment to the promisee, is the key. Here, Weiner’s leaving his prior employment and rejecting other offers in reliance on McGraw-Hill’s promise of job security constituted sufficient consideration. The court stated, “[i]t is enough that something is promised, done, forborne or suffered by the party to whom the promise is made as consideration for the promise made to him.” The court found sufficient evidence of a contract and breach based on four factors: (1) inducement to leave prior employment with assurances of discharge only for cause, (2) incorporation of those assurances into the employment application, (3) rejection of other job offers in reliance, and (4) internal enforcement of handbook procedures for subordinate dismissals. The court also noted that the trier of fact should consider the parties’ course of conduct, writings, and negotiations to determine if the at-will presumption was overcome. As the court stated, it is “the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain”, which will control.

  • Savin Brothers, Inc. v. State, 48 N.Y.2d 754 (1979): Contract Liability When Estimates are Not Guaranteed

    Savin Brothers, Inc. v. State, 48 N.Y.2d 754 (1979)

    A contractor cannot recover damages from the state for additional costs incurred due to inaccurate estimates in contract documents when the contract explicitly disclaims any warranty or representation of actual field conditions or quantities.

    Summary

    Savin Brothers, Inc. sued the State of New York for breach of contract, alleging that the state’s failure to include certain borrow requirements in the earthwork summary provided for bid preparation led to increased costs. The Court of Appeals reversed the Appellate Division’s partial allowance of the claim, holding that the contract documents expressly stated that the earthwork summary was not a warranty of actual conditions and that additional borrow, if required, would be paid at the standard unclassified excavation rate. The court emphasized that the contractor was not entitled to rely solely on the earthwork summary and was compensated according to the contract terms.

    Facts

    Savin Brothers, Inc. contracted with the State of New York for the reconstruction of a 2.3-mile section of road in Niagara County.
    The State provided an earthwork summary for bid preparation, which allegedly omitted certain borrow requirements.
    Claimants asserted that the State’s failure to include these borrow requirements led to increased costs in the borrow operation.
    The contract documents contained a disclaimer stating that the conditions and quantities in the earthwork summary were not warranted or represented as actual field conditions, and that borrow may be necessary even when not indicated.

    Procedural History

    The Court of Claims dismissed all causes of action asserted by Savin Brothers, Inc.
    The Appellate Division agreed with the Court of Claims except for the cause of action pertaining to the claimants’ “borrow” operation, for which it granted relief to the claimant.
    The State appealed to the Court of Appeals regarding the borrow operation claim.

    Issue(s)

    Whether the State of New York incurred liability for breach of contract by failing to include certain borrow requirements in the earthwork summary provided to Savin Brothers, Inc. for bid preparation, despite a disclaimer stating that the summary was not a warranty of actual field conditions or quantities.

    Holding

    No, because the contract documents explicitly stated that the earthwork summary was not a warranty or representation of actual field conditions or quantities, and the claimants were only entitled to be paid for additional borrow at the unclassified excavation rate, which they were.

    Court’s Reasoning

    The Court of Appeals based its decision on the specific language of the earthwork summary and related contract documents. The court highlighted the disclaimer, which stated: “Conditions and quantities as shown on the table * * * are not to be deemed or considered by the contractor as a warranty or a representation * * * of actual field conditions or quantities. Borrow may be necessary even when not shown on the excavation table. Borrow, if required, shall be paid for under the regular item of unclassified excavation, unless specifically provided for in the contract.”

    This language, according to the court, made it clear that the claimants were not entitled to rely solely on the earthwork summary. The court emphasized that the claimants were compensated for the additional borrow at the unclassified excavation rate, as stipulated in the contract. The court found no basis to deviate from the express terms of the agreement between the parties. By agreeing to the terms of the contract, the contractor assumed the risk of discrepancies between the estimated and actual borrow requirements.

  • Flying Tiger Line, Inc. v. N.Y. Mackintosh Co., Inc., 44 N.Y.2d 963 (1978): Enforceability of Tariff Regulations in Air Carrier Contracts

    Flying Tiger Line, Inc. v. N.Y. Mackintosh Co., Inc., 44 N.Y.2d 963 (1978)

    Air carrier tariffs filed pursuant to federal law are binding on both the shipper and the carrier, regardless of the shipper’s actual knowledge of the tariff provisions, and failure to comply with the tariff’s notice of claim requirements bars counterclaims for breach of contract or negligence.

    Summary

    Flying Tiger Line sued N.Y. Mackintosh for unpaid shipping charges. Mackintosh counterclaimed for breach of contract and negligence, alleging damage due to Flying Tiger’s failure to transport goods as agreed. The New York Court of Appeals held that Mackintosh’s counterclaims were barred because it failed to provide written notice of claim within the time limits specified in Flying Tiger’s tariffs, which were filed as required by federal law. These tariffs constituted the written contract of carriage and were binding, preempting the field, irrespective of Mackintosh’s awareness of their specific terms.

    Facts

    Flying Tiger Line, an air carrier, sued N.Y. Mackintosh Co., a shipper, to recover unpaid charges for air transportation services. Mackintosh asserted counterclaims against Flying Tiger Line for breach of contract and negligence. These counterclaims stemmed from allegations that Flying Tiger Line failed to transport the goods on one aircraft, using one waybill, and failed to use special containers as allegedly agreed. Mackintosh did not provide written notice of these claims within the time frame specified in Flying Tiger Line’s tariffs.

    Procedural History

    The lower court granted summary judgment to Flying Tiger Line on its affirmative cause of action. Mackintosh’s counterclaims were initially addressed at Special Term and then reviewed by the Appellate Division. The Appellate Division’s resettled order was appealed to the New York Court of Appeals.

    Issue(s)

    Whether a shipper’s failure to file a written notice of claim within the time limits prescribed by an air carrier’s tariffs, filed as required by federal law, bars the shipper’s counterclaims against the carrier for breach of contract and negligence.

    Holding

    Yes, because the tariffs filed by the air carrier constitute the contract of carriage and are binding on both the shipper and carrier, regardless of the shipper’s actual knowledge; failure to comply with the notice of claim provisions bars the counterclaims.

    Court’s Reasoning

    The Court of Appeals held that Flying Tiger’s tariffs, filed pursuant to the Federal Aviation Act, constituted the binding written contract of carriage. The court emphasized that federal law preempts the field of air carrier regulation, making the tariffs binding on both the shipper and the carrier, irrespective of the shipper’s actual knowledge of their provisions. The court stated that “Constituting the written contract of carriage under a regulatory scheme in which Congress has pre-empted this field…the tariffs are binding upon shipper and carrier, regardless of the shipper’s lack of actual knowledge of their provisions.” The court reasoned that because Mackintosh failed to present a written notice of claim within the time limitations specified in the tariffs, its counterclaims for breach of contract and negligence were barred. The court found support in prior case law, including Crosby & Co. v Compagnie Nationale Air France, affirming the binding nature of such tariffs. This ensures uniformity and predictability in air carrier contracts, which is a significant policy consideration. There were no dissenting or concurring opinions noted in the memorandum decision.