Exercise of Reserved Discretion Case: Parties: Feld v. Henry S. Levy & Sons, Inc.

(1975; NY) Plaintiff - Feld (buyers) Defendant - Levy (seller)

Procedural History: Both sides moved for summary judgment, but both motions were denied. Both sides appealed to the intermediate appellate court, and the trial court’s dismissal of the motions for summary judgment were affirmed. Finally, both parties appealed to the Court of Appeals of New York. Facts: Parties entered into a 1-year renewable contract where D sold "all bread crumbs it produced" to P. K states that there must be a 6 month notice of cancellation. D stopped producing bread crumbs, because it was not economically feasible to continue to do so. P sued, but D argued that K said D only had to sell what they produced, and they didn’t produce any. Issue: May a promise be implied on the part of the seller to keep making bread crumbs for the entire length of the contract? Holding: The dismissal of the motions for summary judgment is upheld and the case will proceed to trial. Reasoning: The court finds that there is a promise implied in the contract for the defendant to try in good faith to keep producing. The question remains whether the defendant stopped crumb production in good faith. The court finds that it is bad faith for the defendant to stop crumb production just because their profits aren’t as high as they expected, but it is good faith for the defendants to stop crumb production if they incurred losses from such production that were “more than trivial”. The question of which is the case, the court says, is a matter for the factfinder. Notes • Bread crumbs to sell for 6 cents per pound • 6 months notice of cancellation w/o any reason ○ Why is this beneficial? - lessens the risk of engaging in the transaction. Neither party would want to be locked in for a long term, in the event the profits aren't what is expected. • Canceled, w/o giving notice. ○ Reason: making bread crumbs is not economically feasible. ○ How is this determined? § if just less profits than expected, then they canceled in bad faith § But if they suffered a huge loss (that are more then trivial), then good faith, and could cancel w/o 6mo. notice. □ More than trivial ® Threat of bankruptcy ® Imperiling of the entire existence of the business □ Why would courts, as a policy, say this is ok? - we don’t want to make parties perform Ks where doing so would make them go out of business, etc. Then they're no good to anyone; can't perform rest of K anyway) ○ D agreed to a higher price. § No numbers to show actual cost, profits lost, etc. § Why doesn’t court remand to get these figures? □ If you deny summary judgment, you don’t have to remand, b/c it will go through anyway • At trial, need to determine if losses were more than trivial - good faith, or

less than trivial - bad faith. ○ Is there evidence that company was losing money on this transaction? § Difference btwn actually losing money, and not making as much as they would if selling to someone else. § This is an output K - put best efforts to produce and only sell to that buyer □ UCC recognizes output Ks as valid. □ Although qty not definite, Courts will enforce output Ks. ® Lady duff - exclusivity implies good faith and best efforts