Contracts II Case Law

Frigaliment Case

Defining “chicken” in the context of a contract between merchants. Does any bird that meets the anatomical definition of a “chicken” count, or only “young frying birds” and not “stewing chicken” aka “fowl”? Court found the broader definition of “chicken” to be applicable to the contract in question.

Trade usage: plaintiff alleges a trade usage of the term “chicken”. However, the evidence contradicted that position

White City Shopping Center v. PR

Does a quesadilla constitute a “sandwich” pursuant to the non-compete clause that PR (Panera Bread) agreed to in their lease with White City Shopping Center?

Language construed against the drafter, in this case PR. PR did not define sandwich in their contract, so it defaults to a generally accepted definition.

Pacific Gas v. G.W Thomas

Dispute about a contract indemnity clause. The trial court denied admission of extrinsic evidence to determine whether the indemnity clause was only intended to displace liability from third parties, on the basis that the contract had a “plain meaning” ergo non-ambiguous. The Supreme Court, hearing this case, denies that reasoning, as relegating the agreement to the “four corners” and construing a plain meaning is the court imposing their own judgement in lieu of the parties’ intent. As such, they remanded the case and ordered the admission of extrinsic evidence to define the ambiguity of whether the indemnity clause was intended to cover the defendant or only third parties.

Consolidated Rest. v. Westport

Defining “direct physical loss or damage” phrase in an insurance contract. The dispute centers on whether the presence of viral particulate of COVID-19 was a covered loss for the restaurant under the insurance provision. NY law leans towards a “four corners” approach and has a stricter bar for the admission of extrinsic evidence.

United Rentals v. RAM Holdings

Involves the private equity group Cerberus and a merger agreement. Dispute arose about whether specific performance was agreed upon under the contract in the event of breach. There are two contradictory terms in the contract, one which provides that URI has a right to specific performance, and one which prohibits equitable relief and limits damages. Because the section limiting equitable relief says that it is not appliable to the provision allowing equitable relief, it was plausible under the language of the contract that the two clauses could be reconciled.

However, because the defendants also present a plausible explanation reconciling the two terms in their favor, the court determined that the plaintiff had a duty to remedy the ambiguous language if it wanted to assert a right to specific performance. In sum, although the language of the contract was ambiguous, using the forthright negotiator principle, the court found that the parties communicated their subjective understanding of its provisions, and therefore the parties’ intent was to limit specific performance remedies.

Market Street Associates v. Frey

An exploration of the “implied covenant of good faith”. Market Street was accused of trying to “pull a fast one” on their leasor, GE, by inducing them to act to their own detriment to force them to sell back the property at a loss.

When determining whether to apply the good faith covenant, the court considers that there’s an element of adversity during the drafting period, but that once the contract is signed, there’s a general understanding of co-operation between the parties. The negotiation may be at arms length, but the fulfillment should be co-operative. The court considers the burden of good faith in a contract dealing to be less stringent than a fiduciary relationship between the parties, but one that can be met more easily than the bar for outright fraud. In order to determine whether Market Street intended to trick GE, the court remanded the case for a trial.

Oppenheimer Case

Straightforward conditions precedent case. The contract made explicit a condition precedent to transferring the sublease to the plaintiff written notice of work to be completed. When plaintiff only provided an oral assurance, they breached the contract, and the defendant had no obligation to turn over the property under the contract, because the explicit condition precedent did not occur.

Nichols v. Raynbred

1600s English case that illustrates the previous attitude, wherein the promises are independent of each other. Therefore, in the sale of a cow, the cow must be delivered even if the payment is not forthcoming, and the payment must be sued for as a seperate action.

Kingston v. Preston

Another condition precedent case.

Addie v. Kjaer

Sale of an island property to a rich person. The buyers did not provide marketable title, thereby breaching the contract. When the buyer missed their deadline to pay, the contract was dissolved with no penalty because neither side tendered performance before the deadline. However, the buyer could recover under restitution for the return of their deposit money.

Price v. Van Lint

Dispute about whether the promise to convey the property and the promise to pay the deposit were independent or mutually dependent promises. In this case, the promises were independent, and the defendant was liable for consequential damages that he incurred in reliance upon the promise of funding. (see Restatement 343). The court required a remittitur for the speculative damages regarding the potential profits of the plaintiff’s business conducted on the land, but allowed the rest of the damages regarding costs incurred in reliance on the promise.

K & G Construction v. Harris

Contract provided for construction work by the subcontractor to be done in a “workman like manner according to best practices”. The subcontractor negligently crashed the bulldozer into a part of the wall, which caused damages of $3,400. The contractor refused to pay the subcontractor, arguing this constituted a breach of contract. Subcontractor worked for another month, before walking off the job due to lack of pay. Contractor hired another subcontractor to finish the job for $450. The court found that the promises were mutually dependent in this case, meaning that one was conditioned on the other. Additionally, the contract specified that the subcontractor’s performance as a condition precedent to payment. The subcontractor’s breach was material because it caused significant monetary damage. The contractor, in allowing the subcontractor to continue working, treated its sloppy work as a “partial” breach, but the subcontractor refusing to show up constituted a “total” breach. In sum, the contractor was justified in the non-payment of the August installment in response to the partial breach, but because the subcontractor walked off the job, they’re liable for a “total” breach and need to pay the cover damages.

Strouth v. Pools