Bloor v. Falstaff Brewing Corp.
601 F.2d 609
Subject: "Best Efforts Clauses"
FACTS
-Plaintiff, a brewery, brought an action against another brewery based on a contract between the parties wherein plaintiff sold its business to defendant.
-The contract of sale provided that plaintiff would get a percentage of the sale proceeds and that defendant would use its best efforts to promote plaintiff’s former product.
-There was a liquidated damages clause in the contract which would be triggered in the event of a total breach by defendant.
-Defendant began to have financial difficulties and was forced to scale down on its advertising of plaintiff’s products.
-Plaintiff’s proceeds sharply declined and plaintiff brought suit.
-The court allowed plaintiff damages on the breach of best efforts clause but would not allow liquidated damages.
-The appellate court affirmed, holding that even in the face of extreme financial difficulty defendant was bound by the terms of its contract.
-The appellate court also refused to enforce the liquidated damages clause.
PROCEDURAL HISTORY
-The defendant appealed from a decision of the District Court for the Southern District of New York, which held defendant liable for breach of a contractual best efforts clause.
-Plaintiff appealed from dismissal of its breach of contract claim.
RULES
-When one follows policies that stress profit at the expense of sales volume, he/she breaches a contractual clause obligating him to use his “best efforts” to promote and maintain a high volume of sales of a particular product.
ANALYSIS
Is there difficulty of performance that arises from financial difficulty or economic hardship?
-Performance of a contract is not excused where the difficulty of performance arises from financial difficulty or economic hardship.
-Under New York law a “best efforts” clause imposes an obligation to act with good faith in light of one’s own capabilities.
CONCLUSION
-Defendant was not granted relief on its appeal for breach of its contractual best efforts clause. The appellate court affirmed dismissal of plaintiff’s breach of contract claim, stating that the liquidated damages clause did not apply in the absence of bad faith on the part of defendant.
601 F.2d 609
Subject: "Best Efforts Clauses"
FACTS
-Plaintiff, a brewery, brought an action against another brewery based on a contract between the parties wherein plaintiff sold its business to defendant.
-The contract of sale provided that plaintiff would get a percentage of the sale proceeds and that defendant would use its best efforts to promote plaintiff’s former product.
-There was a liquidated damages clause in the contract which would be triggered in the event of a total breach by defendant.
-Defendant began to have financial difficulties and was forced to scale down on its advertising of plaintiff’s products.
-Plaintiff’s proceeds sharply declined and plaintiff brought suit.
-The court allowed plaintiff damages on the breach of best efforts clause but would not allow liquidated damages.
-The appellate court affirmed, holding that even in the face of extreme financial difficulty defendant was bound by the terms of its contract.
-The appellate court also refused to enforce the liquidated damages clause.
PROCEDURAL HISTORY
-The defendant appealed from a decision of the District Court for the Southern District of New York, which held defendant liable for breach of a contractual best efforts clause.
-Plaintiff appealed from dismissal of its breach of contract claim.
RULES
-When one follows policies that stress profit at the expense of sales volume, he/she breaches a contractual clause obligating him to use his “best efforts” to promote and maintain a high volume of sales of a particular product.
ANALYSIS
Is there difficulty of performance that arises from financial difficulty or economic hardship?
-Performance of a contract is not excused where the difficulty of performance arises from financial difficulty or economic hardship.
-Under New York law a “best efforts” clause imposes an obligation to act with good faith in light of one’s own capabilities.
CONCLUSION
-Defendant was not granted relief on its appeal for breach of its contractual best efforts clause. The appellate court affirmed dismissal of plaintiff’s breach of contract claim, stating that the liquidated damages clause did not apply in the absence of bad faith on the part of defendant.
No comments:
Post a Comment