Although, as the title of this article suggests, some things should be fairly obvious, when enough money is at stake, people will still try to throw stuff at the wall to see if any of it will stick.

In a case that they brought in Federal Court in Upstate New York, Opto Generic Devices Inc. (“OGD”) sued Air Products & Chemicals Inc. (“ACC”) for breach of contract and for consequential damages, asserting that it lost profits when the defendant did not buy its products. In this case, the defendant admitted that the parties had entered into a series of agreements that delineated the scope of work to develop certain products for plaintiff, and included a $400,000 agreement for license rights to these products. In light of the ongoing working relationship between the parties, and the exchange of nearly $1,000,000 between them with regard to the development of this product, the plaintiff was caught off guard when the defendant never actually bought the finished product.

But the plaintiff had one “small” problem with their case – while the contract set forth the parties’ responsibilities as to patent prosecution and maintenance, commercial rights and licenses (i.e., it was a development contract), there was absolutely no provision requiring ACC to buy any OGD products. Consequently, I can’t say I’m surprised that the Court dismissed this aspect of their breach of contract action.

You know the old saying about what happens when you assume something …

It’s just another example of the costs of failing to reduce your agreements to writing.

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In Bimini Boat Sales, Inc. v.  Luhrs Corp., plaintiff Bimini, a retail boat dealer, bought a fishing boat from boat manufacturer Luhrs, intending to resell the boat to the general public. Unfortunately for Bimini, after they received the boat from Luhrs, they discovered that the boat had several defects that were serious enough to render it unsaleable, which in legal terms is called “unmerchantable,” or unfit for its particular purpose.

Since the boat was considered “goods” under New York law, Bimini sued to recover under two different provisions of New York’s Uniform Commercial Code. First, Bimini sought to recover damages for Luhrs’ breach of the implied warranties of merchantability [UCC 2-314]; second, Bimini claimed entitlement to damages based upon the boat’s un-fitness for a particular purpose [ UCC 2-315]. Bimini also asserted that it was entitled to consequential damages for harm to their reputation and for loss of business.

In reversing that portion of the Suffolk County trial court’s order that denied plaintiff’s motion seeking judgment as a matter of law, the Appellate Division, Second Department held that plaintiff had proven that the boat was unmerchantable and not fit for resale to the public because it had “fundamental structural deficiencies” and design flaws which required extensive repairs and “design modifications.”

The significance of this decision, in my view, is the last part, however, wherein the appellate court affirmed the trial court’s dismissal of the plaintiff’s claims to recover damages for loss of business and damage to the plaintiff’s business reputation on the grounds the terms of the dealer agreement had expressly barred these claims.

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