Friday, June 10, 2005
A one-year term agreement under which the parties continue past the termination date becomes a contract at will and can be canceled by either party at any time, says a recent decision by the U.S. Court of Appeals for the Tenth Circuit.
In the case, Near North Insurance and Black Agents & Brokers Agency (BABA) entered into a one-year contract, under which BABA (a qualified minority-owned business) would represent it with Riverboats, the operator of floating casinos. Riverboats’ Indiana charter required it to place certain percentages of its business with minority-owned firms. Near North and BABA signed a one-year deal which provided it could only be renewed by both parties in writing. Under the deal, Near North sent invoices to Riverboats; Riverboats sent payment to BABA; BABA endorsed the checks and mailed them back to Riverboats; and Riverboats then mailed them to Near North.
Despite the one-year limit, the parties continued in this fashion for several years, until Near North decided to terminate the agreement. BABA sued Near North for breach of contract and racial discrimination, and also sued Riverboats, claiming it was a party to the contract.
The Tenth Circuit affirmed summary judgment, holding that while a contract can be implied from conduct, it will only be done where it appears the parties intended to contract. Here, there was no evidence that Riverboats intended to be bound to BABA in any way. The fact that Near North and BABA had continued their prior deal without executing a term extension indicated that they meant it to be terminable at will.
Black Agents & Brokers Agency, Inc. v. Near North Insurance Brokerage, Inc., 2005 U.S. App. LEXIS 9740 (7th Cir., May 27, 2005).