New York Business Litigation Attorney | New York Breach of Contract Attorney » anticipatory breach of contract

Suffolk County Court Upholds Validity of Non-Compete Agreement – For Now

Jonathan Cooper — Tue, 01 Sep 2009 18:35:36 +0000

In a decision that was published in this morning’s New York Law Journal, Justice Pines of Suffolk County denied the defendants-employees’ motion to dismiss their former employer’s claims seeking damages resulting from these employees’ solicitation of the company’s clients (or in legal terms, breach of contract, breach of fiduciary duty, and tortious interference) while they were still employed by the plaintiff. (That branch of the employees’ motion seeking to dismiss the employer’s request for an injunction, i.e., an Order barring them from continuing their solicitation of the plaintiff’s clients and current employees, was denied as well.)

The significance of this decision should be apparent: although New York’s courts generally look to invalidate non-compete agreements, in this case the Court went out of its way to hold that the plaintiffs’ claims should survive dismissal (at least at this introductory stage of the commercial litigation) because the non-solicitation agreement that the defendants-employees signed was not overly broad, and was legitimately tailored to protect the plaintiff-employer’s proprietary interests. (The defendants were barred from forming a competing business while still employed by plaintiff, or from soliciting the plaintiff’s customer base or employees in New York City, Nassau and Suffolk Counties for a 2 year period following termination.)

There is also an important lesson to be learned from this case: the plaintiff acted wisely in having a competent attorney draft their non-compete agreements. That modest investment a few years back may save them untold sums of money now.

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Chrysler Sues Former Partner Daimler in Breach of Contract

Jonathan Cooper — Thu, 27 Aug 2009 14:32:03 +0000

Yesterday, news outlets worldwide were reporting about the lawsuit that Chrysler filed last week seeking to compel Daimler to continue supplying them with components that are critical to completing the manufacture of the Jeep Grand Cherokee and Chrysler 300 models. At the same time, the news reports indicated that shipments had not stopped as yet. The natural question is this: if Daimler hasn’t stopped supplying the parts, how can Chrysler claim that Daimler should be held liable in breach of contract?

If you read between the lines, the answer is relatively straightforward: based upon Daimler’s actions, Chrysler believes that Daimler will halt distribution. Therefore, rather than wait until a full-blown crisis erupts, they have wisely taken pre-emptive action, and sued Daimler for their anticipatory breach of contract. (It is a common misconception that you have to wait until someone has actually broken your agreement before you can sue.)

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When It Becomes Clear That Your Small Business’ Partner Is Going To Breach Your Contract Under New York Law

Jonathan Cooper — Wed, 22 Jul 2009 20:10:24 +0000

As the economy continues to founder, it is becoming increasingly common for many businesses, however well-intentioned, to renege on contracts simply because they lack the liquid capital to honor those contracts. Consequently, a critical question facing the savvy and proactive small business owner is this: what can – or should – I do when the actions or inaction by the other side to this agreement make it apparent that they will breach the contract, i.e., before their obligation to perform under the contract has come due?

As a preliminary matter, and at the risk of stating the obvious, every circumstance is certainly different, and therefore requires its own analysis. But in order to conduct a proper analysis of this issue under New York law, the following factors should be borne in mind:

If this is a long-term contract involving the sale of commercial goods, the Uniform Commercial Code (UCC) has specific provisions dealing with how to handle an anticipatory repudiation or breach of the contract, including a “demand for adequate assurance”;
The question of what constitutes an anticipatory breach of the contract varies widely depending on the nature of the contract. For purposes of illustration, some of the more significant examples include the repudiation of a real estate sales contract, the breach of a commercial lease or the agreement between two utility companies for providing electrical power at certain pre-determined prices over a 25-year period.
As a general rule, the non-breaching party has the option of deeming the other party in breach of the contract and deeming void its own obligations under the contract, or the non-breaching party may continue to fulfill its end of the contract as if no breach of the contract by the other side was impending. Each choice presents its own calculated risks, particularly, but not limited to, the measure of damages that you, the non-breaching party, may incur and/or be entitled to recover, however.

In short, although there are many instances that do not require the assistance of a lawyer, given the complexity, sensitivity and importance of this issue, it certainly pays to consult an attorney if you are confronted with this problem.

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