Contracts II, Pages 822–825

Feld v. Henry S. Levy & Sons, Inc.

Court of Appeals of New York, 1975

Facts:

Plaintiff ran a bread baking business and entered into an agreement with defendant to purchase all bread crumbs made in its factory for one year, requiring six months notice to cancel the agreement. After eleven months and selling 250 tons of bread crumbs, defendant realized that it was "very uneconomical" to continue producing bread crumbs. They then dismantled their bread crumb oven and repurposed the room. At different times defendant told plaintiff that they would resume bread crump production if the price was raised from 6¢ to 7¢ per pound.

Procedural History:

Special Term denied plaintiff's motion for summary judgment on the issue of liability and defendant's motion for summary judgment of dismissal. The appellate division confirmed.

Issue:

Did the agreement carry an implication that defendant was obligated to make bread crumbs for the full term?

Rule:

Reasoning:

The contract allowed canceling the contract if it became unprofitable, but required six months notice, which would allow plaintiff to find a new supplier. Since it was only a small part of defendant's business, he would have been justified ceasing production if it was pushing him to the verge of bankruptcy, but it was not so canceling the agreement was not in good faith.

Holding:

[D]efendant was expected to continue to perform in good faith and could cease production of the bread crumbs . . . only in good faith.

Judgment:

Affirmed without costs.

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