Opinion ID: 4462158
Heading Depth: 2
Heading Rank: 2

Heading: Breach of Contract: The 1998 Agreement

Text: The trial court dismissed plaintiff’s breach of contract claims against the State Defendants under the 1998 Agreement because it concluded that “the 2013 -13- INTERSAL, INC. V. HAMILTON Opinion of the Court Settlement Agreement was a novation of the 1998 Agreement and that Plaintiff’s rights under the 1998 Agreement have been extinguished.” We affirm. “A novation is the substitution of a new contract for an old one which is thereby extinguished.” Carolina Equip. & Parts Co. v. Anders, 265 N.C. 393, 400, 144 S.E.2d 252, 257 (1965) (citing Tomberlin v. Long, 250 N.C. 640, 109 S.E.2d 365 (1959)). “The essential requisites of a novation are a previous valid obligation, the agreement of all the parties to the new contract, the extinguishment of the old contract, and the validity of the new contract.” Tomberlin, 250 N.C. at 644, 109 S.E.2d at 367–68 (citation omitted). Further, in determining whether a later contract is a novation of a prior contract, [t]he intent of the parties governs. . . . If the parties do not say whether a new contract is being made, the courts will look to the words of the contracts, and the surrounding circumstances, if the words do not make it clear, to determine whether the second contract supersedes the first. If the second contract deals with the subject matter of the first so comprehensively as to be complete within itself or if the two contracts are so inconsistent that the two cannot stand together a novation occurs. Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 526, 379 S.E.2d 824, 827 (1989) (citing Wilson v. McClenny, 262 N.C. 121, 136 S.E.2d 569 (1964); Tomberlin, 250 N.C. at 644, 109 S.E.2d at 367–68; Turner v. Turner, 242 N.C. 533, 89 S.E.2d 245 (1955); Bank v. Supply Co., 226 N.C. 416, 38 S.E.2d 503 (1946)). Here, neither plaintiff nor the State Defendants have argued before this Court -14- INTERSAL, INC. V. HAMILTON Opinion of the Court that either the 1998 Agreement or the 2013 Settlement Agreement are invalid.3 Further, plaintiff and the State Defendants both agreed to the 2013 Settlement. Therefore, if the parties intended the 2013 Settlement Agreement to be a novation of the 1998 Agreement, it extinguished the 1998 Agreement. See Tomberlin, 250 N.C. at 644, 109 S.E.2d at 367–68; Whittaker Gen. Med. Corp., 324 N.C. at 526, 379 S.E.2d at 827. The words of the 2013 Settlement Agreement themselves “make it clear . . . the second contract supersedes the first.” Whittaker Gen. Med. Corp., 324 N.C. at 526, 379 S.E.2d at 827. Specifically, the 2013 Settlement Agreement states that it “supersedes the 1998 Agreement, attached as Attachment A, and all prior agreements between D[N]CR, [plaintiff], and Nautilus regarding the QAR project.” (emphases added). Because the language of the 2013 Settlement Agreement so clearly demonstrates the parties’ intent that it would function as a novation of the 1998 Agreement, our analysis can end with the plain wording of the agreement. See Whittaker Gen. Med. Corp., 324 N.C. at 526, 379 S.E.2d at 827 (stating that a court will look to the circumstances surrounding the second agreement to determine whether it is a novation “if the words [of the agreement] do not make it clear” (emphasis added))). 3 In its brief, plaintiff points to the State Defendants’ second affirmative defense in their answer to plaintiff’s original complaint, in which the State Defendants appear to have asserted that certain paragraphs of the 1998 Agreement and the 2013 Settlement Agreement are unenforceable because they are against public policy. However, plaintiff does not actually argue that either agreement is invalid, and neither do the State Defendants. -15- INTERSAL, INC. V. HAMILTON Opinion of the Court Because the 2013 Settlement Agreement was a novation of the 1998 Agreement, plaintiff’s breach of contract claims arising from the 1998 Agreement are “extinguished.” See Carolina Equip. & Parts Co., 265 N.C. at 400, 144 S.E.2d at 257 (citing Tomberlin, 250 N.C. at 644, 109 S.E.2d at 367). Accordingly, we affirm the decision of the trial court to dismiss plaintiff’s breach of contract claims under the 1998 Agreement.