Procedural Posture

Appellant lessee and cafe operator challenged a judgment of the Superior Court of Yolo County (California), which found in favor of respondent vending machine company in its action for damages for breach of contract.

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Overview

Respondent vending machine company and appellant lessee and cafe operator entered into a written contract whereby respondent granted a three-year concession for vending machine cigarette sales. The contract provided for commission changes on written notice. The next year, appellant demanded larger commissions than those provided for in the contract, which respondent refused. Appellant repudiated the contract and demanded that respondent remove its cigarette vending machine from her premises. Respondent did so and brought an action to recover damages for loss of profits that it would have earned during the remaining 25 month life of the contract. The trial court found in favor of respondent. On appeal, the court affirmed, concluding that respondent’s power to change the commission rates upon written notice would impose a duty upon it to exercise that discretion in good faith and in accordance with fair dealings and fix the commissions in such amount as the object of the contract is reasonably worth, so the contract was not illusory. The court also held that the evidence supported the trial court’s calculation of damages based on gross profits less some sales tax and commission.

Outcome

Judgment and damages in favor of respondent vending machine company was affirmed because the contract was not illusory where respondent had a duty to exercise its discretion on commission rates  in good faith and fix commissions appropriate for worth, and the trial court damage calculation method was supported by the evidence.