Computer Possibilities Unlimited, Inc. v. Mobil Oil Corp.

301 A.D.2d 70, 747 N.Y.S.2d 468, 2002 N.Y. App. Div. LEXIS 8840
CourtAppellate Division of the Supreme Court of the State of New York
DecidedSeptember 26, 2002
StatusPublished
Cited by32 cases

This text of 301 A.D.2d 70 (Computer Possibilities Unlimited, Inc. v. Mobil Oil Corp.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Computer Possibilities Unlimited, Inc. v. Mobil Oil Corp., 301 A.D.2d 70, 747 N.Y.S.2d 468, 2002 N.Y. App. Div. LEXIS 8840 (N.Y. Ct. App. 2002).

Opinion

OPINION OF THE COURT

Friedman, J.

The parties to this action entered into a contract requiring plaintiff, a software company, to offer its product to defendant’s franchisees at prices not exceeding those specified in the agreement. This appeal requires us to determine whether plaintiff repudiated this contract by secretly entering into an agreement with a third-party distributor that gave the distributor complete control over the prices to be charged for the product. We hold that such conduct constituted a repudiation of plaintiff’s contract with defendant. We further hold, given that plaintiff kept its repudiation secret from defendant, that defendant did not lose its right to elect to treat its contractual obligations as discharged by the repudiation even though it continued to treat the contract as in effect for five months after the repudiation occurred. Accordingly, since anything defendant did after the repudiation is not actionable as a breach, and any claim based on defendant’s alleged breaches prior to the repudiation is time-barred, Supreme Court correctly granted defendant summary judgment dismissing the complaint.

FACTS

The Parties

Plaintiff Computer Possibilities Unlimited, Inc. (CPU), a closely held New York corporation, is the developer and owner of “Servistat,” a computer software product that performs “back-office” data management functions for automobile service stations, such as inventory and accounting.

Defendant Mobil Oil Corporation (Mobil), a New York corporation, sells petroleum-based products to the public through a nationwide network of service stations. While many of these stations are directly owned by Mobil, approximately 3,200 Mobil stations are owned and operated by independent franchisees, who exercise a large measure of autonomy in running their businesses. Only the stations operated by franchisees (hereinafter dealers) are pertinent to this action.

[72]*72 The Endorsement Agreement

In 1990, Mobil undertook to identify a back-office computer software package to endorse for purchase by its dealers. To that end, in August 1990, Mobil issued a request for proposals to several software vendors, including CPU. CPU submitted a proposal to Mobil in September 1990. In December 1990, Mobil announced that it had selected CPU’s Servistat product as the software it intended to endorse. Thereafter, Mobil and CPU entered into an Endorsement Agreement, dated January 30, 1991.

The Endorsement Agreement provided that it would be in effect for three years, from January 30, 1991 to January 30, 1994. The opening recitations stated that both parties recognized that, notwithstanding Mobil’s endorsement of Servistat, Mobil dealers “operate as independent businesses and exercise sole discretion as to what, if any, data management system the dealer utilizes [sic],” and that Mobil was not representing to CPU that the endorsement would result in any number of subscriptions.

The Endorsement Agreement required Mobil, among other things, to “exclusively endorse” Servistat for use by Mobil dealers. In return, CPU agreed to offer to sell Servistat to Mobil dealers “at prices not to exceed” those specified in the Endorsement Agreement. The Agreement set forth maximum prices for the first year, subject to adjustment for inflation in subsequent years, based on the assumption of “minimum sales of 400 units in the first year, and a smaller but substantial number of sales in succeeding years of the Agreement.” The Agreement further provided that, if less than 300 units were sold during the first nine months, the maximum prices set forth by the Agreement would be adjusted upward by not more than 20%.

CPU’s Difficulties in Selling Servistat to Mobil Dealers

It is undisputed that CPU met with little initial success in marketing Servistat to Mobil dealers. In fact, nine months after the Endorsement Agreement went into effect, less than 50 sales had been made — far less than the number on which the Agreement’s prices had been based. The parties dispute the reason for these disappointing results.

CPU contends that, at the time of contracting, the parties had understood Mobil’s obligation to “exclusively endorse” Servistat to include having its Sales and Business Consultants (SBCs), who provide advice to Mobil dealers, promote Servistat [73]*73in the course of their regular contact with the dealers and pass on “sales leads” to CPU. CPU attributes the low sales figures for Servistat to Mobil’s failure to support Servistat through such efforts of its SBCs, as well as to certain other alleged breaches of the Agreement by Mobil.

For its part, Mobil denies that it had any obligation to require its SBCs to promote Servistat or to provide CPU with sales leads, pointing out that no such obligation was expressly set forth in the Endorsement Agreement, which contained a merger clause. It is Mobil’s position that the Endorsement Agreement made the marketing of Servistat CPU’s responsibility, and required Mobil to assist CPU’s marketing efforts only to the limited extent expressly spelled out in the Agreement. Mobil attributes the poor sales figures for Servistat to the dealers’ unanticipated lack of interest in computerizing the back-office operations of their cash businesses, among.other factors.

CPU’s October 1991 Marketing Agreement With MicroSource

On or about October 29, 1991, CPU entered into a Software Marketing and Distribution Agreement with nonparty Micro-Source Technologies, Inc. (MicroSource). Under the Micro-Source Agreement, MicroSource was appointed as the exclusive distributor of Servistat in the United States and Canada, with the exception of the New York City and Philadelphia areas.

As here pertinent, the MicroSource Agreement provided that MicroSource, not CPU, would control the prices customers would be charged for Servistat, and did not require Micro-Source to adhere to the pricing limits set forth in the Endorsement Agreement. Specifically, section 9 (d) of the MicroSource Agreement provided:

“prices and terms; trial sales. * * *
“d. Although CPU may publish a suggested resale price list, MICROSOURCE and Subdistributors have the right to determine their own resale prices, and CPU will not require that any particular price be charged * * (Emphasis added.)

In addition, the pricing schedule to the MicroSource Agreement provided special pricing to be applicable “to the extent MicroSource, in its sole discretion, elects to honor the CPU special pricing arrangement with Mobil * * *” (emphasis added).

At his deposition, Harry Stern, CPU’s president, admitted that, by signing the MicroSource Agreement, CPU had “lost control over the Mobil pricing” of Servistat. Similarly, Kenneth [74]*74Bender, a MicroSource vice-president, confirmed in an affidavit that, for sales to Mobil dealers subsequent to those Micro-Source had obtained at an October 1991 convention, “it was left to MicroSource’s discretion whether to honor * * * the special pricing arrangements agreed to by CPU and Mobil.”

CPU’s Representations to Mobil

Concerning the MicroSource Agreement

While the MicroSource Agreement was being negotiated, Mobil executive Joan Nowak sent CPU’s Harry Stern a letter, dated October 22, 1991, stating, among other things, the following:

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Bluebook (online)
301 A.D.2d 70, 747 N.Y.S.2d 468, 2002 N.Y. App. Div. LEXIS 8840, Counsel Stack Legal Research, https://law.counselstack.com/opinion/computer-possibilities-unlimited-inc-v-mobil-oil-corp-nyappdiv-2002.