Sun Printing & Publishing Ass'n v. Remington Paper & Power Co.
235 N.Y. 338 (1923)
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Rule of Law:
For a contract to be enforceable, all essential terms must be sufficiently definite. An agreement that leaves material terms, such as both price and the duration for which that price will apply, to be determined by future negotiation is merely an 'agreement to agree' and is therefore unenforceable.
Facts:
- Sun Printing and Publishing Association ('Sun Printing') contracted to buy 16,000 tons of paper from Remington Paper and Power Company ('Remington Paper') to be delivered in monthly installments from September 1919 to December 1920.
- The contract specified fixed prices for deliveries from September through December 1919.
- For the remainder of the contract period (January to December 1920), the contract stated that the 'price of the paper and length of terms for which such price shall apply shall be agreed upon by and between the parties.'
- This future price was capped, stating it was 'in no event to be higher than the contract price for newsprint charged by the Canadian Export Paper Company to the large consumers.'
- After fulfilling deliveries through December 1919, Remington Paper notified Sun Printing that it considered the contract imperfect and refused to make any further deliveries.
- Sun Printing demanded that Remington Paper continue to deliver 1,000 tons per month for the remainder of the term at the maximum price set by the Canadian Export Paper Company standard.
Procedural Posture:
- Sun Printing and Publishing Association sued Remington Paper and Power Company in the New York Supreme Court, Special Term (trial court).
- The Special Term granted Remington Paper's motion to dismiss the complaint, finding the contract unenforceable.
- Sun Printing, as appellant, appealed to the Appellate Division of the Supreme Court (intermediate appellate court).
- The Appellate Division reversed the Special Term's order, holding that the contract was enforceable.
- Remington Paper, as appellant, appealed that decision to the Court of Appeals of New York, the state's highest court.
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Issue:
Does a contract for the sale of goods that leaves both the price and the duration for which that price will apply to future agreement, with only a maximum price cap established, constitute an enforceable contract?
Opinions:
Majority - Cardozo, J.
No. A contract is not enforceable when it leaves essential terms like price and the duration of that price open for future agreement. The provision setting a maximum price does not cure the indefiniteness of the term for which that price would apply. The parties agreed to establish both a price and a term length in the future, not that the price would fluctuate monthly with the Canadian standard. Because agreement was needed on two material points, and agreement was not reached, the contract was merely an 'agreement to agree' and was inchoate. The court cannot impose a 'reasonable' term or otherwise rewrite the contract for the parties, as they left a gap unfilled.
Dissenting - Crane, J.
Yes. The contract should be considered enforceable because the parties clearly intended to be bound to a sale of 16,000 tons of paper, and the court should endeavor to give effect to that intent. The maximum price ceiling provided by the Canadian Export Paper Company standard created a sufficiently definite price term; the buyer was willing to pay the highest possible price the seller could demand. The court could have resolved the lack of a specified duration by implying a reasonable term, such as applying the Canadian price on a month-to-month basis or for the remainder of the contract term. To allow the seller to escape its formal obligations based on this ambiguity gives legal sanction to a deliberate breach of contract.
Analysis:
This decision solidifies the common law principle that for a contract to be valid, its essential terms must be definite or objectively determinable. It underscores the judiciary's reluctance to 'make a contract' for the parties by supplying material terms that were explicitly left for future negotiation. The case serves as a crucial precedent distinguishing between a valid option contract, where only one party's performance is conditional, and an unenforceable 'agreement to agree,' where mutual consent on key terms is still required. It pressures commercial parties to ensure that pricing mechanisms in long-term contracts are comprehensive, addressing not just the price itself but also the duration for which it applies.
