Wednesday, December 18, 2013

VRT, Inc. v. Dutton-Lainson Company case brief

VRT, Inc. v. Dutton-Lainson Company case brief summary
530 N.W.2d 619 (1995)

Appellant buyer sought review of a judgment of the District Court for Adams County (Nebraska), which ruled in favor of appellee seller in its action seeking a declaration that the buyer was obligated to pay past-due and future royalties pursuant to a contract between the parties. The buyer argued that the seller had not substantially performed its obligations under the contract.

The seller retained an attorney to file a patent application on certain patient care equipment, and thereafter entered into a contract with the buyer for its purchase of the seller's assets including its patent on the patient care equipment in exchange for royalties from sale of the equipment. The parties subsequently learned that the attorney failed to file the patent application and that because of the late filing the patent would not issue. When the buyer failed to pay any royalties under the contract, the seller brought an action seeking a declaration of its rights to past and future royalties. The trial court ruled that the buyer was obligated to pay the royalties.


  • On appeal, the court reversed, holding that: 
  • 1) the attorney was the agent of the seller; 
  • 2) the misrepresentation of the seller's attorney was therefore imputable to seller; 
  • 3) because the essence of the contract was the buyer's ability to manufacture, market and distribute the patient care equipment subject to the patent application, the seller had not substantially performed its obligations under the contract; and 
  • 4) the seller was precluded from the relief sought under the contract.
The court reversed the judgment of the trial court in favor of the seller in its declaratory judgment action against the buyer seeking past and future royalties under a purchase and sale contract. The court remanded the matter to the trial court for dismissal of the seller's action.

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