Corthell v. Summit Thread Co.
132 Me. 94, 92 A.L.R. 1391, 167 A. 79 (1933)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A contract term promising "reasonable recognition," with the amount to be determined by one party, is enforceable if the contract also requires the determination to be made in good faith, as this obligates the party with discretion to pay a fair and reasonable value.
Facts:
- Robert N. Corthell, a salesman for the Summit Thread Company, entered into a five-year written employment contract with the company.
- The contract stipulated that in exchange for an increased salary, Corthell would turn over all his future inventions to the Summit Thread Company.
- Regarding compensation for these future inventions, the contract stated, "reasonable recognition will be made to him... the basis and amount of recognition to rest entirely with the Summit Thread Company at all times."
- A final clause in the contract provided that it was "to be interpreted in good faith on the basis of what is reasonable and intended and not technically."
- During the contract term, Corthell developed and turned over four new inventions to the Summit Thread Company.
- The Summit Thread Company accepted the inventions and obtained patents for three of them, making the company their owner.
- Corthell requested compensation for these inventions, but the Summit Thread Company never paid him.
- After the contract expired, Corthell's employment with the company was terminated.
Procedural Posture:
- Robert N. Corthell brought an action for breach of contract against the Summit Thread Company in a trial court.
- The Summit Thread Company entered a plea of the general issue, denying liability.
- The case was submitted to the Supreme Judicial Court of Maine on report for a final decision based on the evidence.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a contractual promise to provide "reasonable recognition" for future inventions, where the "basis and amount of recognition" is to "rest entirely" with the promisor, create an enforceable obligation to pay reasonable compensation when the contract also requires it to be interpreted in good faith?
Opinions:
Majority - Sturgis, J.
Yes. A promise to provide "reasonable recognition" creates an enforceable obligation to pay reasonable compensation when the promisor's discretion is limited by a duty of good faith. The term "reasonable recognition" indicates the parties intended to contract for fair payment, not an optional gratuity. While the clause giving the Summit Thread Company sole discretion over the amount would normally render the promise illusory, it is qualified by the separate clause requiring the entire contract to be interpreted "in good faith on the basis of what is reasonable and intended." This good faith requirement imposes a legal duty on the company to determine and pay the plaintiff the reasonable value of the inventions it accepted. The company was not free to do exactly as it chose; its promise was not purely illusory and is therefore enforceable.
Analysis:
This decision illustrates how courts can enforce contracts that appear indefinite by looking at the entire agreement to find contractual intent. It establishes that a general good faith clause can limit a party's discretion over a specific term, like price, thereby preventing the promise from being illusory and unenforceable. This ruling reinforces the judicial preference for upholding bargains where parties intended to be bound and where one party has already conferred a benefit upon the other. The case serves as a key example of how the duty of good faith can supply a standard of reasonableness to an otherwise vague term.
Unlock the full brief for Corthell v. Summit Thread Co.