Scavenger, Inc. v. GT Interactive Software, Inc.
273 A.D.2d 60, 708 N.Y.S.2d 405, 2000 N.Y. App. Div. LEXIS 6328 (2000)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under a divisible contract, a party's right to payment for a fully performed portion is not impaired by its failure to perform other separate portions, and a claim for breach due to late delivery is waived when the other party requests significant modifications and then accepts and markets the delivered goods without objection.
Facts:
- Plaintiff and Defendant entered into a contract for Plaintiff to create and deliver four CD-ROM games.
- The contract contained separate production schedules and separate payment schedules for each of the four games.
- Plaintiff delivered two of the four CD-ROM games to Defendant.
- During the development of the two delivered games, Defendant requested that Plaintiff make significant modifications to them.
- After delivery, Defendant accepted and began marketing the two games it had received from Plaintiff.
- Plaintiff failed to deliver the remaining two games specified in the contract.
Procedural Posture:
- Plaintiff sued Defendant in the Supreme Court, New York County, a trial-level court.
- Plaintiff moved for partial summary judgment on its cause of action for guaranteed payments under the contract.
- The trial court granted Plaintiff's motion for partial summary judgment.
- A final judgment was entered in the trial court awarding Plaintiff $2,411,114.
- Defendant, as appellant, appealed the trial court's order and judgment to the Supreme Court, Appellate Division.
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 party's failure to deliver all products required under a divisible contract preclude recovery for the products that were delivered and accepted, when the receiving party requested significant modifications and subsequently marketed the delivered products?
Opinions:
Majority - Per Curiam
Yes. A party's failure to deliver all products under a divisible contract does not preclude recovery for the portions that were successfully delivered and accepted. The court held that the contract was divisible because it contained separate production and payment schedules for each of the four games, treating each game as a distinct performance. Therefore, the plaintiff's right to recover guaranteed payments for the two completed games was not impaired by its failure to deliver the other two. Furthermore, the court found that the defendant had waived any claim of breach for late delivery through its own conduct. By requesting significant modifications and then accepting and marketing the games without objection, the defendant's actions were inconsistent with an intent to enforce the original delivery timeline.
Analysis:
This decision reinforces the principles of divisible contracts and waiver by conduct in commercial law. It clarifies that when a contract can be broken down into corresponding pairs of performance and payment, a breach of one part does not automatically excuse the other party's obligations regarding the fully performed parts. The ruling also underscores the significance of a party's actions post-breach; a party cannot accept the benefits of a performance, such as marketing a product, and then later refuse payment by claiming a breach it implicitly accepted through its conduct. This precedent cautions parties to promptly and clearly object to any perceived breach, lest their actions be interpreted as a waiver of their rights.
