Fursmidt v. Hotel Abbey Holding Corp.

Appellate Division of the Supreme Court of New York, First Department · 1958 · Contracts

Contractssatisfaction clausesterminationsatisfaction clausegood faith dissatisfactionbona fide dissatisfactionsole judge clausetaste and judgment

Facts

Plaintiff had long provided valet and laundry services at defendant's hotel and, on February 1, 1958, entered a three-year written agreement to continue those services in exchange for paying defendant $325 per month. Paragraph 5 stated that plaintiff's services had to meet defendant's approval and that defendant would be the sole judge of the sufficiency and propriety of the services. In September 1958, defendant told plaintiff to discontinue services as of October 1, and plaintiff left the premises; a third party then took over the concession and paid defendant $250 per month. Plaintiff sued for breach, claiming defendant had no right to terminate, while defendant asserted dissatisfaction with plaintiff's services and counterclaimed for damages.

Issue

When a contract provides that performance must meet one party's approval and that party is the sole judge of the sufficiency and propriety of the services, may the party terminate upon honest dissatisfaction alone, or must the dissatisfaction also be objectively reasonable? More specifically, was the trial court correct in submitting the reasonableness of defendant's dissatisfaction to the jury?

Rule

Satisfaction clauses fall into two categories. If the contract concerns operative fitness, utility, or marketability, satisfaction is measured by a reasonable-person standard. But if the contract concerns performance involving fancy, taste, sensibility, or judgment, the contract is literally enforced and the benefiting party's honest, bona fide dissatisfaction is sufficient; the jury should decide only whether the dissatisfaction was genuine or feigned, not whether it was reasonable.

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A boutique hotel in Miami enters a two-year contract with Lena Ortiz to provide a lobby florist service. The agreement states that arrangements must be "satisfactory to Seaview House, which shall be the sole judge of their suitability for the guest experience." After four months, the hotel ends the contract because management honestly believes the floral style clashes with the atmosphere it wants for guests.

If Lena sues for breach, what standard should govern the hotel's right to terminate?

Explanation. Where performance involves taste, sensibility, or judgment rather than operative fitness, utility, or marketability, the promisor's own honest dissatisfaction governs. A floral presentation aimed at guest atmosphere is closer to taste and judgment, and the 'sole judge' language reinforces literal enforcement. The jury's inquiry is whether dissatisfaction was bona fide, not whether it was reasonable.