New York Law Review

Tag: breach of contract

  • Yonkers Contracting Co. v. State, 24 N.Y.2d 167 (1969): State’s Waiver of ‘No-Interest’ Provision in Construction Contract

    Yonkers Contracting Co. v. State, 24 N.Y.2d 167 (1969)

    When the State reserves the question of interest on a severed claim until the determination of additional claims and the claimant successfully recovers judgment on those additional claims, the State waives the contract’s ‘no-interest’ provision on the severed claim.

    Summary

    Yonkers Contracting Co. sued the State of New York for breach of contract related to the construction of a bridge. The claim included a cause of action for the unpaid contract balance and three additional claims. The State initially refused to pay interest on the contract balance, citing a contract provision that acceptance of final payment waived any interest claim. However, the parties agreed to sever the cause of action for the contract balance and reserve the question of interest. The Court of Appeals held that because the State reserved the interest question and the claimant prevailed on one of its additional claims, the State waived the ‘no-interest’ provision. The court also addressed and rejected the claimant’s other claims regarding fabrication costs and alleged extra work.

    Facts

    Yonkers Contracting Co. contracted with the State to construct a bridge. After completing the work, Yonkers filed a claim that included the unpaid contract balance, increased fabrication costs due to the State’s rejection of horizontal girder fabrication, and payment for alleged extra work. The State accepted the work on October 20, 1961, but Yonkers did not submit required affidavits until October 24, 1962. The State tendered final payment on November 2, 1962, but Yonkers refused it due to a clause that acceptance would waive additional claims. The contract contained a standard specification that refusal of final payment waived any claim to interest.

    Procedural History

    Yonkers filed a claim in the Court of Claims. The cause of action for the contract balance was severed, and judgment was entered and paid on March 20, 1963, with the interest question reserved. The Court of Claims initially awarded interest. The Appellate Division reversed the interest award and dismissed some of the other causes of action. Yonkers appealed to the Court of Appeals.

    Issue(s)

    1. Whether the State waived the contract’s ‘no-interest’ provision by stipulating to reserve the question of interest on the severed contract balance claim until the resolution of the remaining claims, where the claimant was ultimately successful on one of those claims.

    2. Whether the State breached the contract by refusing to approve the claimant’s proposal to fabricate bridge girders horizontally, thereby entitling the claimant to recover increased costs of vertical fabrication.

    3. Whether the claimant was entitled to additional compensation for alleged extra work not required by the original contract or a supplemental agreement.

    Holding

    1. Yes, because the State’s reservation of the interest question coupled with the claimant’s successful recovery on another claim constituted a waiver of the contract provision. The Court reasoned that otherwise, the claimant would face an unfair choice of either waiving additional claims or forfeiting interest.

    2. No, because the contract and specifications, taken as a whole, contemplated vertical casting, and the State’s refusal to approve horizontal fabrication did not constitute a breach of contract.

    3. No, because the items were either required by the original contract specifications or the claimant was fully compensated for the work performed as required by the contract.

    Court’s Reasoning

    Regarding the interest claim, the Court distinguished its prior holding in Wood v. State of New York, which enforced a similar ‘no-interest’ provision, by relying on Higgins & Sons v. State of New York. The Court stated that Higgins held that the State could waive the ‘no-interest’ provision “by stipulating at the time of the severance of the cause of action for the conceded contract balance that the question of interest be reserved until such time as the remaining portions of the claim were decided.” The court reasoned that reserving the question of interest with the validity of the additional claims hinging upon the resolution of those claims allows for fairness. Here, Yonkers prevailed on its third cause of action. As to the fabrication method, the Court deferred to the lower courts’ findings that the contract specifications, when viewed holistically, indicated that vertical casting was intended. For example, the specifications detailed the girder’s underside when in a vertical position. Regarding the “extra” work claim, the court affirmed the lower courts’ factual findings that the items were either part of the original contract or already covered by a supplemental agreement, precluding additional compensation. The court emphasized that the specifications called for preparation of the concrete deck and that the area covered by the waterproofing substance was consistent with contract requirements.

  • Kaminsky v. Kahn, 23 N.Y.2d 516 (1969): Availability of Accounting in Contract Disputes

    Kaminsky v. Kahn, 23 N.Y.2d 516 (1969)

    An accounting is not warranted in a contract dispute where the relationship between the parties is solely that of seller and buyer, and no fiduciary duty exists, even if profits and dividends are to be shared as part of the consideration.

    Summary

    Kaminsky and Kahn were parties to a contract involving the sale of stock. A dispute arose, and Kaminsky sought an accounting from Kahn. The Court of Appeals held that an accounting was not warranted because the relationship between Kaminsky and Kahn was solely contractual, lacking the fiduciary duty necessary to justify equitable relief. While the contract provided for profit and dividend sharing, the court construed these provisions as relating to the final consideration Kahn would pay, rather than establishing a joint venture or fiduciary relationship. The court reversed the lower court’s order and remanded the case to allow for a jury trial on the legal issues.

    Facts

    Kaminsky, Kahn, Cowen, and Golding jointly purchased shares of Spear & Company. Kahn and Kaminsky agreed to indemnify Golding for a portion of his investment. Cowen transferred his interest to Kaminsky. Kahn then transferred his interest to Kaminsky, with Kaminsky agreeing to indemnify Kahn against certain obligations, including the amount owed to Southern Bedding Accessories, Inc. Kahn later purchased the controlling shares of Spear stock from Kaminsky via a contract. The agreement stipulated Kahn would satisfy the Southern Bedding judgment and release Kaminsky from obligations. Kaminsky was granted a first option to purchase the shares if Kahn decided to sell, and was entitled to one-third of the net proceeds after Kahn recouped expenses, and one-third of the dividends. Kahn later merged Spear with Acme-Hamilton Manufacturing Corp. A dispute arose regarding the sale of shares, leading Kaminsky to seek an accounting.

    Procedural History

    The initial complaint was dismissed by Special Term, a decision affirmed by the Appellate Division and Court of Appeals. Kaminsky then amended his complaint, which survived a motion to dismiss, with the Appellate Division affirming. After a non-jury trial, the Supreme Court ruled in favor of Kaminsky and directed an accounting. This interlocutory judgment was affirmed (with modifications) by the Appellate Division. The Appellate Division then modified the judgment, reducing the award, leading to cross-appeals to the Court of Appeals.

    Issue(s)

    Whether an accounting is warranted in a contract dispute where the relationship between the parties is solely that of seller and buyer, and no fiduciary duty exists, despite provisions for sharing profits and dividends.

    Holding

    No, because the transaction was a contract of sale, not a joint venture, and the agreement to share profits and dividends related only to the final consideration Kahn would pay, not to creating a fiduciary duty.

    Court’s Reasoning

    The Court of Appeals found that the Appellate Division erred in maintaining the amended complaint. The key determination was that the relationship between the parties was purely contractual and did not establish a fiduciary duty. The court emphasized that the provision for sharing profits and dividends was part of the final consideration Kahn agreed to pay, not an indication of a joint venture or a fiduciary relationship. The court stated, “The transaction here involved was exclusively a contract of sale between the parties… The provision providing that the parties share any profits and split any dividends is to be construed, it seems clear, as relating solely to the final consideration that Kahn would pay, not as criteria for establishing a joint venture or a fiduciary relationship. Under such circumstances an accounting is not available.” The court recognized that under CPLR 103(a) the distinctions between law and equity have been abolished, and instead of dismissing the complaint, it allowed the plaintiff to pursue legal relief in the form of a breach of contract claim. Because the defendant has a right to a jury trial in legal actions under CPLR 4103, the case was remanded to allow the defendant the opportunity to demand a trial by jury. The court also determined that Kahn was only liable to the extent that he disposed of Spear Equity shares without giving Kaminsky a right of first refusal. The Court also ruled that the damages should reflect the actual sales price of the unregistered shares since there was nothing in the contract that said they should be registered first.

  • Parker v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 176 (1957): Mitigation of Damages and the Duty to Accept Substitute Employment

    Parker v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 176 (1968)

    An employee wrongfully discharged is not required to mitigate damages by accepting employment of a different or inferior kind.

    Summary

    Shirley MacLaine Parker (Plaintiff) sued Twentieth Century-Fox Film Corp. (Defendant) for breach of contract after Defendant cancelled a film project and offered Plaintiff a role in a different film, which Plaintiff deemed inferior. The key issue was whether Plaintiff’s refusal to accept the substitute role constituted a failure to mitigate damages, thereby barring her recovery. The court held that because the substitute role was different and inferior, Plaintiff was not required to accept it to mitigate damages. This case illustrates the principle that an injured party need not accept substantially different employment to mitigate damages.

    Facts

    Plaintiff contracted with Defendant to star in a musical film titled “Bloomer Girl” for a guaranteed salary of $750,000. Prior to production, Defendant decided not to produce the film. Defendant offered Plaintiff the lead in a western film, “Big Country, Big Man,” with the same guaranteed salary and similar billing and directorial provisions. However, “Big Country, Big Man” was not a musical, and it was to be filmed in Australia, while “Bloomer Girl” was to be filmed in Los Angeles. Plaintiff refused the substitute role and sued for breach of contract, seeking the full contract price.

    Procedural History

    The trial court granted summary judgment in favor of Plaintiff. Defendant appealed, arguing that Plaintiff failed to mitigate damages by refusing the substitute role. The California Supreme Court affirmed the trial court’s decision, holding that the offer of the lead in “Big Country, Big Man” did not have to be accepted as mitigation, and upheld the summary judgment for Parker.

    Issue(s)

    Whether an employee wrongfully discharged is required to mitigate damages by accepting employment of a different or inferior kind.

    Holding

    No, because the substitute employment offered was both different and inferior, the Plaintiff was not required to accept it to mitigate damages.

    Court’s Reasoning

    The court reasoned that the general rule requiring mitigation of damages only applies when the substitute employment is substantially similar to the original employment. The court articulated the rule: “The general rule is that the measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment.” However, this rule is qualified. The court stated, “before projected earnings from other employment opportunities not sought or accepted are allowable in mitigation, the employer must show that the other employment was comparable, or substantially similar, to that of which the employee has been deprived; the employee’s rejection of or failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages.” Here, the substitute role in “Big Country, Big Man” was deemed different and inferior because it was a western rather than a musical, and it involved filming in Australia instead of Los Angeles. Therefore, Plaintiff was not obligated to accept it to mitigate damages. The dissenting opinion argued that the majority’s interpretation of the mitigation principle placed a premium on ignorance of the law. The dissent contended that if the plaintiff knew the exclusive employment provision of the contract was void, she would have sought other work regardless of the defendant’s refusal to release her. The dissent further argued that the case was tried on a different theory than that on which the reversal was sought and granted.

  • Whitmyer v. New York, 186 N.Y. 25 (1906): Water Company’s Duty to Provide Adequate Supply

    Whitmyer v. New York, 186 N.Y. 25 (1906)

    A water company, as a quasi-public corporation, has an implied contractual duty to provide an adequate water supply to its customers, and cannot terminate service for non-payment when the company itself is in breach of that duty by failing to provide sufficient water.

    Summary

    Whitmyer sued the City of Kingston’s water provider, alleging insufficient water supply and seeking to prevent the company from shutting off his water service due to non-payment. The court found that the company had failed to provide an adequate water supply, breaching its implied contractual duty. The court held that a water company cannot terminate service for non-payment when it is in default of its contractual obligations to provide sufficient water. The court reasoned that allowing the company to do so would be unjust, as it would allow them to be the judge in their own case.

    Facts

    The plaintiff, Whitmyer, was a resident of Kingston, supplied with water by the defendant water company. The water company was incorporated to supply Kingston and its inhabitants with water. Prior to the lawsuit, the water supply to Whitmyer’s house had decreased in quantity and pressure, failing at times due to an increased number of consumers. This insufficient supply sometimes did not meet the plaintiff’s family’s needs, and the plaintiff had no other water source.

    Procedural History

    The trial court ruled in favor of the defendant, dismissing the complaint and vacating a preliminary injunction that prevented the water company from shutting off the water supply. The Appellate Division affirmed the trial court’s decision without opinion. Whitmyer appealed to the New York Court of Appeals.

    Issue(s)

    Whether a water company, failing to furnish a sufficient supply of water, can shut off the water from a customer’s house when the customer refuses to pay the bill.

    Holding

    No, because a water company, as a quasi-public corporation, has an implied contractual duty to provide an adequate water supply to its customers, and cannot terminate service for non-payment when the company itself is in breach of that duty.

    Court’s Reasoning

    The Court of Appeals determined that an implied contract existed between Whitmyer and the water company. The court emphasized that the water company was a quasi-public corporation with a duty to supply water to the city and its inhabitants. By connecting Whitmyer’s house to the water mains and providing water for years, the company entered into an implied agreement to provide water if Whitmyer paid the rates. The court stated, “The duties imposed upon a corporation raise an implied promise of performance.” The court distinguished the case from prior cases where companies shut off service due to non-payment, because in those cases, the companies had fully performed their contractual obligations. Here, the company was in default by failing to provide a sufficient water supply. The court reasoned that allowing the company to terminate service while it was in breach of contract would be unjust. “On the other hand, if the company is in default of its contract, express or implied, it would shock the sense of justice if it were to sit as a judge in its own case by cutting off the customer from his contract privileges. In such a situation the rights of the parties must be determined by the courts.” The Court of Appeals reversed the lower courts’ judgments and reinstated the injunction preventing the water company from shutting off the water supply, ordering a new trial.

  • Murdock v. Gifford, 18 N.Y. 501 (1881): Fixtures and the Duty to Deliver Property as Contracted

    Murdock v. Gifford, 18 N.Y. 501 (1881)

    A vendor of real property must convey the property in substantially the same condition as it was when the agreement of sale was made; removal of fixtures constitutes a failure of performance, barring a legal claim for damages.

    Summary

    This case addresses whether a buyer was obligated to purchase property after the seller’s tenant removed fixtures between the contract signing and the closing date. The New York Court of Appeals held that the seller materially breached the contract by failing to deliver the property in the same condition as when the agreement was made. The buyer was justified in refusing to complete the purchase, and the seller (or their assignee) could not recover damages for the buyer’s failure to perform. The court reasoned that the buyer was entitled to receive the property with all fixtures intact and functioning as part of the real estate.

    Facts

    The vendor, Trask, agreed to sell stores to the defendant. At the time of the agreement, the property included gas piping, partitions, lead pipe, plumbing work, a water closet, and basins. These items were attached to the building and appeared to be part of the realty. The tenant, after the sales agreement but before conveyance, removed these fixtures, cutting pipes and dismantling partitions. The defendant then refused to take the property in its altered condition.

    Procedural History

    The vendor, Trask, assigned his right to damages (if any) to the plaintiff, Murdock. Murdock sued Gifford for breach of contract. The General Term affirmed the lower court’s decision in favor of the defendant, Gifford. The case then went to the New York Court of Appeals.

    Issue(s)

    Whether the removal of fixtures from a property between the signing of a sales agreement and the closing date constitutes a breach of contract by the vendor, excusing the purchaser from their obligation to buy the property and precluding the vendor from claiming damages.

    Holding

    Yes, because the purchaser is entitled to receive the property in substantially the same condition it was in when the agreement was made, and the removal of fixtures constitutes a failure of performance by the vendor.

    Court’s Reasoning

    The court emphasized that the agreement to sell contained no reservations regarding the fixtures. “The defendant was entitled to the stores in the condition in which they were when bargained for, and his refusal to take them in an altered and inferior condition was not a breach of his contract.” The court acknowledged that in equity, the vendor might have been able to compel performance with a monetary adjustment for the removed fixtures. However, because the vendor (through the assignee) sought damages at law, strict compliance with the contract’s terms was required. The vendor’s failure to deliver the property in its original condition constituted a breach, thus barring the vendor’s (or assignee’s) claim for damages. The court distinguished between remedies at law (strict compliance) and remedies in equity (where compensation could potentially remedy the breach). Because the plaintiff sought legal damages, they had to show the vendor performed all conditions of the contract. Since the fixtures were removed, the vendor failed to perform.

  • Tipton v. Feitner, 20 N.Y. 423 (1859): Enforceability of Divisible Contracts After Partial Breach

    Tipton v. Feitner, 20 N.Y. 423 (1859)

    When a contract is divisible into distinct, separately enforceable parts, a party’s breach of one part does not necessarily preclude recovery for the other parts, especially when those parts have been fully performed.

    Summary

    This case addresses the divisibility of contracts and the impact of partial breach on recovery. Tipton sued Feitner for the price of delivered dressed hogs. Feitner argued that Tipton had breached the contract by failing to deliver live hogs as agreed. The court held that the contract was divisible, with payment for the dressed hogs contingent only on their delivery, not on the delivery of the live hogs. Therefore, Tipton was entitled to recover the price of the delivered dressed hogs, subject to a deduction for Feitner’s damages resulting from the non-delivery of the live hogs. The court emphasized that the key is whether the parties intended the performance of one part of the contract to be a condition precedent to the other.

    Facts

    Tipton agreed to sell Feitner both dressed and live hogs. The dressed hogs were to be delivered immediately, while the live hogs, coming from Ohio, were to be delivered later. Feitner refused to pay for the dressed hogs, claiming Tipton failed to deliver the live hogs.

    Procedural History

    Tipton sued Feitner to recover payment for the dressed hogs. The case was referred to a referee who found in favor of Tipton, deducting damages suffered by Feitner for the non-delivery of the live hogs. Feitner appealed, arguing that Tipton’s breach barred any recovery. The New York Court of Appeals reviewed the referee’s decision.

    Issue(s)

    Whether Tipton’s failure to deliver the live hogs constituted a breach that precluded him from recovering payment for the dressed hogs already delivered under the same contract.

    Holding

    No, because the contract was divisible, and payment for the dressed hogs was contingent only on their delivery, not the delivery of the live hogs.

    Court’s Reasoning

    The court reasoned that the contract was divisible because the agreement regarding the dressed hogs was distinct from the agreement regarding the live hogs, with separate prices and delivery times. The court stated that “the bargain respecting the several kinds of property, in regard to the payment for each, is to be taken distributively.” The court emphasized that there was no explicit condition making the delivery of the live hogs a prerequisite for payment for the dressed hogs. “The only condition upon which the payment for the former depended, was their delivery.” The court distinguished this case from those involving entire contracts, such as employment contracts for a fixed period, where full performance is typically a condition precedent to any payment. The court also noted that Feitner had a remedy for Tipton’s breach regarding the live hogs, which was properly addressed through a deduction in damages. The court thus allowed Tipton to recover for the delivered goods while ensuring Feitner was compensated for the breach. The court contrasted its holding with cases involving entire contracts, noting, “These cases proceed upon the ground that the contracts were entire in the sense that full performance of the services contracted for was, by the agreement of the parties, to be made before anything became payable by the employer.”