Opinion ID: 202487
Heading Depth: 3
Heading Rank: 3

Heading: The year of the terminable event -- 2002 or 2003?

Text: Abbott argues in the alternative that, even if Hancock could withhold its 2004 payment in light of Abbott's failure to forecast spending the Aggregate Spending Target through 2004, Hancock could not cancel its 2003 payment. Abbott rests this argument on wording in the same section of the contract that allowed Hancock to stop paying if Abbott did not reasonably demonstrate in its Annual -18- Research Plan, its intent and reasonable expectation to expend on Program Related Costs during the Program Term an amount in excess of [the Aggregate Spending Target]. The wording states: For the avoidance of doubt, [Hancock's payments] for the Program Year in which [an event that allows the termination of payments] occurs shall still be due and payable. Abbott says that Hancock stopped paying on the basis of events that happened in 2003 and that the 2003 payment was therefore still due. In response, Hancock says that the event allowing it to terminate its payments was Abbott's December 2002 2003 Preliminary Annual Research Plan, which failed to manifest any intention by Abbott to spend the Aggregate Spending Target on the joint project by the end of 2004. We agree with the district court that Hancock was not required to make a 2003 payment. Abbott argues that the December 20, 2002 document cannot be considered a ground for termination for two reasons: because it was marked Preliminary and because it did not include any statement of planned spending for 2004. Neither of these rationales is convincing. Hancock was not obligated to wait for an annual research plan labeled Final. When Abbott sent Hancock the 2003 Preliminary Annual Research Plan in December 2002, it also said that the 30-day period for Hancock's payment was running, a sure indication that Abbott considered its yearly reporting obligations -19- to be complete.6 This demand for payment conformed to Abbott's practice from the previous year of treating a Preliminary annual plan as the Annual Plan required by the contract. Additionally, Abbott gave no indication that another plan, which might indicate satisfactory planned spending for 2004, was coming. Abbott also says that the December 2002 document was not a terminable event because it did not contain any projections for 2004. This argument fails in light of the contractual language and Abbott's later admissions. As we discussed above, the contract allowed Hancock to terminate its payments if Abbott did not demonstrate in its Annual Research Plan its intent and reasonable expectation to spend at least the Aggregate Spending Target in joint funds on the project during the Program Term. The 2003 Preliminary Annual Research Plan, submitted in 2002, plainly did not demonstrate any intention by Abbott to spend the Aggregate Spending Target through 2004. Actually, due to the computer glitch, the document did not demonstrate a plan to spend anything at all in 2004. But -- as Abbott later admitted -- even if the document had been complete, it would have shown the estimated 6 Under the contract, Abbott was supposed to send Hancock the Annual Research Plan at least forty-five (45) days prior to the start of each Program Year and the Status Report no later than thirty (30) days before the last day of each Program Year. Hancock was not expected to make its payments any earlier than December 1 of the year in which they were due. The contract allowed Hancock to delay its payments until 30 days after it had received both the Status Report and the Annual Research Plan. -20- spend for 2003 had dropped to [approximately the same amount as in the 2003 Preliminary Annual Research Plan] and for 2004, it was at [an amount that when added to the spending for 2001, 2002 and 2003 was less than the Aggregate Spending Target]. Given this admission by Abbott, Abbott's 2003 Preliminary Annual Research Plan, submitted in December 2002, failed to manifest the company's intent to spend the required amount through 2004. As Hancock points out, it was not relieved of its payment obligations merely because another party failed to correct a computer glitch. If Hancock had requested clarification of the December 20, 2002 plan, Abbott would have stated that it no longer planed to spend the Aggregate Spending Target by the end of 2004. The district court provided a slightly different gloss on the same conclusion that the terminable event happened in 2002, relying on the principle of contract interpretation that if possible, effect must be given to all of the language so that provisions which appear to be conflicting or inconsistent may be reconciled and harmonized. In re Halas, 470 N.E.2d 960, 964 (Ill. 1984). We also find the district court's analysis persuasive.7 As the district court concluded: 7 While the district court suggested that there was an ambiguity to resolve in this analysis, the district court also stated that the issue translated into a contractual interpretation argument and required no parol evidence. Because a careful reading of the contract itself resolved the issue, there was no need to resolve any ambiguity. -21- [I]t is clear [from the contract language] that the parties intended Abbott to present an [Annual Research Plan] prior to the start of each Program Year that would include . . . budgets for the remaining Program Years in the Program Term. Thus, the parties intended that the [Annual Research Plan] for 2003 would be submitted to Hancock in 2002 and it would include . . . budgets for 2003 and 2004. As a result . . . Abbot's failure to demonstrate its intent and reasonable expectation to expend at least [the Aggregate Spending Target by the end of] 2004 [] took place in 2002, not 2003. (Emphasis added.) To hold otherwise, the district court reasoned, would allow Abbott to obtain two Program Payments (for 2002 and 2003) for the price of one payment obligation termination. As the district court emphasized, the contract gives Abbott one yearly Hancock payment for each conforming year of Abbott's performance. The contract would be subverted if Abbott could require an extra payment by Hancock merely because it was late in submitting complete projections.