Opinion ID: 1625752
Heading Depth: 1
Heading Rank: 2

Heading: Breach-of-Contract Issues.

Text: Cook and Webster alleged that Pundzak had failed to comply with the terms of their exclusive agency agreement by failing to use his best efforts to promote Willard & Rafert. There was evidence that Cook and Webster's income had diminished in the years just preceding their suit, and that Pundzak had intentionally withheld Cook and Webster's services from potential clients in order to favor another Pundzak client. The jury agreed. Pundzak complains that (1) a suit for breach of a best efforts clause in an agency agreement cannot be maintained when another remedy such as termination of the agency agreement is available, and (2) Cook and Webster's evidence of damages was insufficient because they failed to show their decreased earnings were the proximate result of any breach. A. The exclusive agency agreement provided that either party could terminate the agency relationship on sixty days' notice. Cook and Webster claim that Pundzak intentionally withheld his best efforts, largely because of the conflict of interest on the part of Pundzak, and this cost Cook and Webster a substantial amount of income. While Pundzak disputes the factual support for this claim, he argues primarily that it is not permitted as a matter of law. Pundzak argues that Cook and Webster's remedy was to terminate the agency agreement, not to accept the benefits of Pundzak's performance over a period of years and then sue Pundzak because Pundzak should have done more. In other words, Pundzak seems to argue that, because Cook and Webster had a remedy to prevent damages in the future by terminating the agreement, they are precluded from recovering damages for any past failure to perform. If we were to accept this argument, we would deny Cook and Webster, as a matter of law, any damages for Pundzak's breach of contract and would in effect ignore those cases that allow a suit for breach of best-efforts provisions. Here, the best-efforts requirement is expressed in the parties' agreement. In many cases, however, such agreements are merely implied by law and yet are uniformly recognized by the courts. See, e.g., Permanence Corp. v. Kennametal, Inc., 908 F.2d 98, 100-02 (6th Cir.1990); Bailey v. Chattem, Inc., 684 F.2d 386, 396 (6th Cir.1982); Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91, 118 N.E. 214, 214 (1917). See 3 Corbin on Contracts § 568, at 331 (1960): In any commercial agreement in which the compensation promised by one to the other is a percentage of profits or receipts, or is a royalty on goods sold, manufactured or mixed, there will nearly always be found an implied promise of diligent and careful performance in good faith and of forbearance to make performance impossible by going out of business or otherwise. Pundzak's argument that a termination of the agency agreement is Cook and Webster's sole remedy was specifically rejected in Kennedy v. Engelhard Industries, Inc., 288 F.2d 642, 646 (3d Cir.1961). There is nothing in the exclusive agency agreement that suggests that termination is the sole remedy for a breach of the agreement, and we reject Pundzak's argument that we should apply such a rule as a matter of law. B. Pundzak contends that Cook and Webster knew the amount of their income for the years in question, accepted the benefits of their relationship, and are therefore estopped from claiming damages for diminution of income. Cook and Webster introduced evidence of their attempts to remedy the problems through ongoing complaints to Pundzak about his lack of performance. The jury was instructed on estoppel, and they resolved the issue against Pundzak. There is sufficient evidence to support that finding, and that is conclusive on this issue. C. Pundzak argues that Cook and Webster failed to present substantial evidence that any failure of Pundzak to use his best efforts was the proximate cause of damages. At most, he argues, Cook and Webster showed a decrease of income between 1986 and 1990. Cook and Webster's evidence was that they had earned $20,000 less in each of those years than they had in preceding years. The jury set the amount at $15,000 per year. Pundzak argues that no evidence was presented that further engagements for Cook and Webster's spots could have been obtained through better efforts by Pundzak. The jury found otherwise. There was, for example, substantial evidence that Pundzak failed to pursue the account with Casey's stores in a diligent manner. While Pundzak responds that since Casey's was ultimately obtained [as a client] that issue was irrelevant to damages, this ignores the fact that past income from Casey's had been lost; income from the Casey's account at a later date cannot compensate Cook and Webster for what they had lost in the past. We reject Pundzak's proximate cause argument.