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Keywords

contractlawsuitinjunctionhearingmotioncorporationtermination clausegood faith

contractinjunctionmotiontermination clausegood faithspecific performanceseizure

Related Cases

Niagara Mohawk Power Corp. v. Graver Tank & Mfg. Co., 470 F.Supp. 1308, 26 UCC Rep.Serv. 1060

Facts

Niagara Mohawk Power Corporation entered into a contract with Graver Tank & Manufacturing Co. for the fabrication of a reactor primary containment steel plate liner for the Nine Mile Point Unit 2 nuclear power plant. After expressing dissatisfaction with Graver's performance and experiencing delays, Niagara Mohawk notified Graver of the contract's termination. Graver filed a lawsuit seeking to prevent the termination and enforce the contract, leading to a series of legal motions and hearings.

Niagara Mohawk has moved for an Order of Seizure, and Niagara Mohawk and Graver have each moved for a preliminary injunction, seeking specific performance as demanded in their respective Complaints.

Issue

The main legal issues were whether Niagara Mohawk had the right to terminate the contract under the unilateral termination clause and whether such a clause could be exercised in good faith.

Rule

The court applied the federal standard for granting a preliminary injunction, which requires a showing of probable success on the merits and possible irreparable injury, or sufficiently serious questions going to the merits with a balance of hardships tipping toward the party requesting relief.

The standard for determining whether to grant a preliminary injunction has been regarded as a procedural matter, and, therefore, the federal standard is controlling.

Analysis

The court found that Niagara Mohawk demonstrated a probability of success on the merits regarding the validity of the termination clause. It noted that while there is an implied covenant of good faith in contracts, the specific unilateral termination clause in question did not appear to be subject to such a requirement under New York law. The court concluded that Niagara Mohawk acted in good faith based on its dissatisfaction with Graver's performance and the efforts made to resolve the issues.

The Court is not aware of any New York cases which have considered the question of applying a requirement of good faith to the exercise of an unrestricted unilateral termination clause. Therefore, the Court must make its own determination as to what it thinks a state court would probably do if it were faced with the same case.

Conclusion

The court granted Niagara Mohawk's motion for a preliminary injunction, allowing them to terminate the contract except for the unilateral termination clause, indicating that they had shown probable success on the merits.

On January 29, 1979, the Court issued an Order, denying Graver's motion for a preliminary injunction and Niagara Mohawk's motion for an Order of Seizure, and granting Niagara Mohawk's motion for a preliminary injunction.

Who won?

Niagara Mohawk Power Corporation prevailed in the case because the court found that they had demonstrated probable success on the merits regarding the termination of the contract and acted in good faith.

Niagara Mohawk has shown a probability of success on the merits with respect to this particular issue.

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