Feld v. Henry S. Levy & Sons, Inc.
373 N.Y.S.2d 102, 335 N.E.2d 320 (N.Y. 1975)
and Feld made a renewable one-year contract for the defendant to sell all
his bread crumbs to Feld (this is known as an output contract). Levy stopped making bread crumbs (and
dismantled his bread crumb making machine) before the end of the term of
the contract and Feld sued.
party could have canceled the contract with 6 months notice, but Levy
gave no notice.
sides moved for summary judgment, but both motions were denied.
argued that the contract did not require him to produce any bread crumbs,
only to sell all those that it did produce.When he stopped making bread crumbs, the contract was
§2-306 specifically states
that output contracts are held to mean a good faith
output that requires best
sides appealed to the Appellate Court, and the Trial Court's dismissal of
the motions for summary judgment were affirmed.Finally, both parties appealed to the NY Supreme Court.
NY Supreme Court upheld dismissal of the motions for summary judgment, and
remanded the case for trial.
NY Supreme Court found that there is a promise implied in the contract
for Levy to try in good faith to "keep crumbling."The question remains whether Levy
stopped crumb production in good faith.
The Court found that it would be bad faith for Levy to stop crumb production just because
their profits aren't as high as they expected, but it would be good
faith for Levy to stop crumb
production if they incurred losses from such production that were "more
question of which is the case, the Court says, is a matter for the
§2-306 states, "reasonable
elasticity in the requirements is expressly envisioned by this section and
good faith variations from prior requirements are permitted even when the
variations may be such as to result in a discontinuance.A shut-down by a requirements
buyer for lack of orders may be permissible, when a shut-down merely to
curtail losses would not."
this case, the Court might grant damages, and not specific performance if Feld wins, because it would be difficult to
monitor Levy's rebuilding of the bread crumb making machine.