Tac Amusement Co. v. Henry
238 So.2d 398, 1970 La. App. LEXIS 5032 (1970)
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Rule of Law:
A contract is unenforceable for lack of cause where one party's obligation is not for a determinate object, meaning the quality and quantity of the performance are so indefinite and left to the sole discretion of that party that the obligation can be satisfied with a derisive or insignificant performance.
Facts:
- Plaintiff and Defendant entered into a ten-year contract for the placement of amusement machines.
- The contract granted Plaintiff the exclusive right to install and operate coin-operated music or amusement devices on Defendant's premises.
- The agreement specified Plaintiff would install 'one or more' such devices, with the 'number and type' being within Plaintiff's 'sole discretion and at your option.'
- The contract included a liquidated damages clause stating that if Defendant breached, Plaintiff would be entitled to its average weekly share of profits multiplied by the number of weeks remaining in the term.
- The contract recited a $500 loan from Plaintiff to Defendant, for which a check was given but no promissory note was executed, and the purpose of the payment was disputed.
- Approximately seven weeks into the contract term, Defendant had Plaintiff's machines removed from the premises.
Procedural Posture:
- Plaintiff sued Defendant in a trial court for breach of contract, seeking contractually stipulated liquidated damages.
- The trial court found in favor of the Defendant and entered a judgment dismissing Plaintiff's suit on the merits.
- Plaintiff, as the appellant, appealed the trial court's judgment to the intermediate court of appeal.
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Issue:
Is a contract enforceable where one party's obligation is to provide 'one or more' devices of a type and number left to its 'sole discretion and option'?
Opinions:
Majority - Redmann
No. A contract is unenforceable when the object of an obligation is too indeterminate. The court reasoned that Plaintiff's promise was not for 'something determinate, at least as to its species,' as required by Louisiana Civil Code art. 1886. Because the number and type of machines were left to Plaintiff's sole discretion, Plaintiff could have fulfilled its obligation with a 'derisive performance,' such as providing a single, obsolete jukebox. Such an indefinite promise does not constitute a valid cause for Defendant's reciprocal obligation, rendering the entire contract unenforceable under Civil Code art. 1893. The court further noted that the liquidated damages clause was an unenforceable penalty, as it was grossly disproportionate to any conceivable actual damages, which should be measured by the minimum possible performance Plaintiff was required to provide.
Analysis:
This decision highlights the civil law concept of 'cause' and the requirement that a contractual obligation must have a determinate object to be enforceable. It establishes that a promise granting one party unfettered discretion over both the quality and quantity of its performance is illusory and cannot serve as the basis for a binding agreement. The ruling serves as a precedent against enforcing highly one-sided contracts where one party's commitment is so vague as to be meaningless. It also reinforces the principle that courts will strike down liquidated damages clauses that are not a reasonable estimate of actual damages but are instead punitive in nature.
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