Consider the transaction as a whole... avoid the awful effects of poor contract drafting

Recently, in Epac Technologies Inc. v. John Wiley Sons Inc (2024), the New York Supreme Court, Appellate Division for the First Department, issued a decision dismissing Plaintiff's complaint based on Contract Repudiation.

The contract at issue was a Master Service Agreement (MSA) that the parties entered into for the printing of a series of books. In general terms a basic transaction. However, the language of the agreement was ambiguous and almost every provision included an obligation and an exception.

According to the Agreement John Wiley & Sons, Inc., a New Jersey-based education and research publishing company, would send printing orders to EPAC, utilizing its proprietary EPAC2 technology and printing system, and EPAC would then print the textbooks (the "Wiley Books") within five days of receipt of the content. ?Pursuant to the MSA, a five-year agreement, Wiley was required to make a set number of purchases each year (Minimum Purchase Requirements).

However, after two years into the agreement EPAC sold one of its facilities, the one where a substantial portion of the Wiley Books would be printed. The transaction resulted in EAPC no longer having ownership or control over the EPAC2 technology, and John Wiley & Sons, Inc. considering the contract as repudiated.

Thereafter, EPAC filed a lawsuit against John Wiley & Sons, Inc. for breach of contract. In summary, the Court explained that the John Wiley & Sons, Inc. motion to dismiss the complaint would be granted because EPAC, even though could have printed the books from another facility, under the terms of the agreement, EPAC repudiated the contract.

"A repudiation can be either ‘a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach’ or ‘a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach’?” (Norcon Power Partners v. Niagara Mohawk Power Corp., 92 N.Y.2d 458, 463 [1998], quoting Restatement [Second] of Contracts §?250). ?Put another way, “a party repudiates a contract ‘where that party, before the time of performance arrives, puts it out of his power to keep his contract’?” (Computer Possibilities Unlimited v Mobil Oil Corp., 301 A.D.2d 70, 77 [1st Dept 2002], lv denied 100 N.Y.2d 504 [2003] quoting Union Ins. Co. of Phila. v. Central Trust Co. of N.Y., 157 N.Y. 633, 643 [1899]; ?see also Princes Point LLC v. Muss Dev. L.L.C., 30 NY3d 127, 133 [2017]). ?“Besides giving the nonrepudiating party an immediate right to sue for damages for total breach, a repudiation discharges the nonrepudiating party's obligations to render performance in the future” (Computer Possibilities, 301 A.D.2d at 77 [internal citations omitted]; ?see also American List Corp. v. U.S. News & World Report, 75 N.Y.2d 38, 44 [1989]). ?Thus, if there were a repudiation, the rest of the case falls away, and Wiley would be entitled to summary judgment dismissing the complaint."

The decision does not change the current law or establish something in terms of contract law. However, a closer look at the underlying controversy the contract initially entered between the parties is particularly useful to show what deficient contract drafting looks like.

In general terms, the MSA was entered into to regulate a basic transaction. However, the language of the agreement was ambiguous and almost every provision included an obligation and an exception.

From this case, I extract the following lessons:

1. Before entering into an agreement consider the goals and considerations of the other parties. This is important not only to create good relationships with others but also because those are aspects that a judge will mostly consider to interpret the meaning of ambiguous clauses. This consideration will have an effect in the short and long term of the transaction and the contractual relationship between the parties.
2. Expectations from a transaction come in many forms, one of the most important is performance expectations. Performance expectations are related to obtaining what a determine result, but also to how is that result obtain. This means, that a party may be interested in negotiating not only what will be delivered but also how it will be delivered. What may be substantial for one party may not be substantial to the other. Therefore, clear communication and a proper written record of what the parties expect in terms of performance are crucial to managing controversies.
3. Termination, changes, and modifications to the transaction should be clearly regulated by the contract. This means that it should be clear: - The steps that are required from each party to make changes to the transaction. - The protocols or formalities that are required to have a clear understanding of the change and what are the new terms of the transaction. - The aspects of the transaction that cannot be modified. - The steps that are required to consider that a contract relationship has been terminated and there are no further expectations of performance.

Source: EPAC Tech., Inc. v John Wiley & Sons, Inc. (2024 NY Slip OP 00933)