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Party under New Ownership: Breach of Contract in New York?


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1/1/2016
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When entering into a contract with another party, both sides typically think very carefully of all of the possible scenarios that could play out when carrying out the terms of the agreement. One such potential occurrence is the sale of one party to the contract if that party is a business. Ideally, the contract will address, in clear terms, what happens in this event. Unfortunately, not all contracts contain clear provisions relating to the sale of a business or a majority of its assets. The end result may be a New York business litigation court battle.

Currently, Nathan’s Famous, Inc., the maker of the well-known Nathan’s hot dogs, is embroiled in just such a lawsuit. The company was sued for breach of contract when it terminated the agreement it had with one of its suppliers. Nathan’s argues that the supplier was sold without informing it of the ownership change. As such, Nathan’s asserts that it had the authority to terminate the agreement.

Nathan’s is currently appealing a New York court ruling that held in favor of the supplier, finding that the company had no grounds to cancel the agreement. The courts will consider whether the terms of the agreement clearly state that a change in ownership of the supplier constitutes grounds for termination of the agreement. The language must be:

  • Definite
  • Precise
  • No reasonable basis for a difference of opinion

For more information about ambiguous contract terms, contact an experienced New York business litigation lawyer today. Call our office at (888) 497-3410 for a free consultation.



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