Court Opinion

ID: 5764492
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:20:15.897496+00
Date Added: 2024-06-11T08:41:36.922493
License: Public Domain

Steuer, J. P.
(dissenting). Plaintiff had two patent applications pending in regard to a machine called the Dataprinter. On June 25,1964, the parties entered into a contract whereby plaintiff assigned all its rights in the said machine. In return defendant agreed to pay $3,000 on execution of the contract; $7,000 on issuance of either of the two patents; and royalty payments in the minimum amount of $10,000 a year. As regards the last of these undertakings, defendant agreed to manufacture a limited quantity of these machines as improved by the pat*15ented features for the purpose of testing. If defendant, in its sole judgment, decided that if the machine would be useful in its business it would retain the rights to the machine. If not, the agreement was to be deemed' cancelled except for the payments already provided to be made, and all patents, models and the like ‘ ‘ forthwith ’ ’ reassigned to plaintiff. It was further provided that: ‘ ‘ Such determination or option by Farrington to accept or reject the Dataprinter shall be made or exercised on or before June 1, 1965.”
Pursuant to the agreement the applications were assigned and working models, drawings and the like were delivered to defendant and defendant made the down payment. Subsequently a patent was issued on the application. Defendant did not pay the stipulated amount of $7,000. Nor did it by June 1, 1965, indicate any determination as to whether to retain or reject the patent. It did not assign the patent to plaintiff or deliver any of the working models, drawings or other material that it was obligated to return if the agreement was to be deemed cancelled. A year having expired, plaintiff brought suit for the installment of $7,000 and for the minimum royalty of $10,000 for the year. As to the first item, plaintiff has had judgment. Special Term denied summary judgment as to the second item, and this is the subject of this appeal.
It is defendant’s contention, sustained by Special Term, that defendant’s failure to act by June 1, 1965, constitutes neither acceptance nor rejection of the option to retain the rights in the machine under its contract. In appraising the correctness of this determination the intention of the parties as provided for in the agreement must be realized. Defendant bought and owned the invention. It had however an option to disaffirm the sale and relieve itself of the obligation of further payments. To exercise that option it had to do certain things by a certain date, namely, June 1, 1965. The question is therefore not whether a failure to do those acts indicates an acceptance (actually there was nothing to accept) but whether its option to cancel expired and the obligation previously undertaken became invulnerable. It is in this light that the significance of the date should be examined.
A date for performance in a contract may or may not have absolute controlling effect depending upon a variety of circumstances (Ballen v. Potter, 251 N. Y. 224). In this respect an option occupies a peculiar position. Generally an option is in the form of an irrevocable offer. The exercise of the option is the acceptance of that offer. The date is one of the terms of the offer. It is elementary in the law of contracts that an acceptance *16must be in accord with the terms of the offer. An acceptance beyond the specified date is not in the terms of the offer and constitutes no acceptance. It is for this reason that Williston says: “Therefore 1 whether the question arises either at law or in equity it is settled that “time is of the essence of an option.”’ ” (6 Williston, Contracts [3d ed.:], pp. 212-213.) And this has been very strictly adhered to (Page v. Shainwald, 169 N. Y. 246 — where the option date was January 1). The same is true when the option, as here, is for cancellation (Lester v. Jewett, 11 N. Y. 453; Taylor v. Blair, 59 Hun 347). “ Where a contract contains a reserved option for its termination, cancellation, or rescission at a specified time period or date, the time period so specified is of the essence, and the option cannot be exercised after the time period or date thus specified has gone by.” (10 N. Y. Jur., Contracts, § 423, pp. 440-441.)
Here the inept phrasing of the contract" has confused the issue. There was no option to accept or reject. There had already been acceptance by transfer of the patent application, the necessary models and drawings and payment of the down price. What was left was an option to cancel by performance of certain acts by a certain date. The date having passed without performance of these acts, the option to cancel lapsed and defendant continued to be bound by the contract.
The order should be reversed, on the law, and summary judgment granted to plaintiff.
Capozzoli, Tilzer and McGtverk, JJ., concur with McNally, J.; Steuer, J. P., dissents and votes to reverse and grant summary judgment to plaintiff, in opinion.
Order entered on June 5, 1967, affirmed, with $50 costs and disbursements to the respondent.