Case Name: Linus G. Read, Respondent, v. Samuel R. Fox and Fox Security Company, a Foreign Corporation, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1907-05-10
Citations: 119 A.D. 366
Docket Number: 
Parties: Linus G. Read, Respondent, v. Samuel R. Fox and Fox Security Company, a Foreign Corporation, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 119
Pages: 366–368

Head Matter:
Linus G. Read, Respondent, v. Samuel R. Fox and Fox Security Company, a Foreign Corporation, Appellants.
First Department;
May 10, 1907.
Damages—when damages set by contract exclusive.
When parties/by contract specifically provide for the consequences of a breach, the remedy provided is exclusive. The parties may regulate their liability for themselves, and when they contract that a breach of the contract shall have a . certain effect, which is inconsistent with the existence of a larger remedy, they '• have made the law for themselves in the particular case.
Thus, when a contract provides' that as a penalty for the breach ."thereof an agency assigned shall revert ,to the assignor, he is not entitled to money damages.
Appeal by the defendants,, Samuel B. Fox and another, from an interlocutory judgment' of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of. the county of New .York, on the ,19th day of December, 1906) upon the decision of the court, rendered after a trial-at the New York Special Term, overruling the defendants’ separate demurrers to the complaint, upon tlie grounds that the complaint does not state facts sufficient to constitute a cause of action.
John M. Harrington, for the appellants.
Asa Bird Gardiner, for the respondent.

Opinion:
Scott, J.:
The action .is for damages for breach of. a contract. - The'contract is attached to and made part of the complaint., It appears that plaintiff had an. agency contract with, the Warren Electric Manufacturing Company of S'andusky, 0., and the purpose of the contract was to provide for transferring that agency'contract to. the Turbine Engineering Company which was apparently controlled by .the defendants.» - . '
The contract provided that-300 shares of the stock of the Turbine Company should be transferred to plaintiff (which .was done), and that a voting trust should be. created controlling a majority of the . stock and that four directors of the Turbine Company should be named by plaintiff and three by tlto defendant Fox.'
It appears from the complaint that all those preliminaries were carried out, and that shortly after the execution of., the agreement (September 11, 1905) the plaintiff assigned his agency contract with the Warren Electric Company to the Turbine Engineering Company, of which he was thereupon elected manager (and subsequently president) at a salary of $500 per month, this being in accordance with the contract, which assured him that salary until February 11, 1910. Section 5 of the contract provided, among other things, that " said assignment of said (agency) contract shall be conditional upon the Turbine Engineering Co. faithfully carrying out the requirements of said agency contract, and that in the event of the Turbine Engineering Company's failtire to do so, or in the event of the Turbine Engineering Company for any reason going out of existence, then the said agency contract shall revert back to said" Bead."
The 8th clause of the contract, which is the one the defendants are accused of breaking, reads as follows: "This memorandum of agreement contemplates that all the necessary capital to conduct the business of the Turbine Engineering Company and its representation of the Warren Electric' Manufacturing Company shall be furnished or caused to be furnished by S. B. Fox or the Fox Security Company, and that failure to furnish said necessary capital shall constitute failure on the part of the Turbine Engineering Company in its proper representation Of the Warren Electric Manufacturing Company."
The breach alleged is that after February 15, 1906, the defendants neglected and refused to furnish the necessary capital to continue the business of the Turbine Engineering Company, in consequence of which it became indebted to its employees, and for telephone charges and office rents, and that a judgment was obtained against it and its assets were sold, and it was prevented from continuing business. That in consequence of this failure to furnish capital, plaintiff lost his promised salary until February, 1910, was injured in his reputation as a business man, and his 300 shares of stock in the Turbine Company were rendered valueless, and for these damages he seeks to recover. '
Assuming "that the 8tli clause of the contract contained a definitive promise on the part of the defendant to furnish the necessary capital, the contract itself provides what consequences shall flow from a refusal to do so. It shall " constitute failure on the part of the Turbine Engineering Company in its proper representation of the "Warren Electric Manufacturing Company" (section 8),. and if the Turbine Engineering Company shall fail to faithfully carry out " the requirements of- said- agency contract" with the Warren company, " then the said, agency contract shall revert back to said Bead " (section'5). • .
Under well-established principles, when parties by tlieir contract specifically provide for the consequences of a breach, the remedy thus provided is exclusive. Parties' are allowed to regulate their Toss and liability for themselves, "and where -they contract that a breach of a contract shall have" a certain effect which is inconsistent with the existence of the larger remedy, they will be lield to have made" the law for themselves in the particular case, and that is often extended to mercantile-contracts.
. The judgment should be reversed, with costs, and the demurrers sustained, with costs, with leave to plaintiff to amend the, complaint upon payment of costs in this court and-in the court below.
Patterson, P. J.,. Ingraham, Laughlin and Clarke, JJ., concurred;
Judgment, reversed, with costs, and demurrers sustained, with costs, with leave to plaintiff to amend on payment of . said costs.