Haines v. City of New York

New York Court of Appeals · Contracts

Contractsimplied durationreasonable timecontinuing performancenot perpetualnot terminable at willsurrounding circumstancesparty intent

Facts

In 1924, after legislation authorized such agreements, the City of New York contracted with the Town of Hunter and the Village of Tannersville to construct a sewage disposal plant and sewer system to prevent untreated sewage from polluting Gooseberry Creek, which fed the City's reservoir. The City agreed to pay all costs of construction, operation, maintenance, and repair, and to extend sewer lines when future growth and building construction necessitated it. Decades later, the plant was operating substantially beyond design capacity, and the City asserted that additional loadings would cause inadequate treatment and harm its water supply. Plaintiff, a landowner planning a 50-lot residential development, sought permission to connect new houses to the system, and the City refused on the ground that it was not obligated to expand the plant or build a new one.

Issue

When a contract for continuing performance contains no express duration term, was the City's obligation under the 1924 agreement perpetual, terminable at will, or enforceable for an implied reasonable duration? If the contract remained in effect, did its promise to extend sewer lines require the City to enlarge the existing plant or construct new sewage facilities to accommodate substantial increased demand?

Rule

If a contract does not expressly state its duration, courts may examine the parties' intent and the surrounding circumstances to supply a duration term when one may be fairly and reasonably fixed; in that event, the contract is neither perpetual nor terminable at will, but continues for a reasonable time. The scope of performance is limited by the agreement's terms as reasonably construed, and a promise to extend existing service lines does not, without more, require construction of new facilities or expansion of a plant where doing so would overload the system.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In 1935, the City of Fairmont entered an agreement with the nearby Town of Alder Glen to build and operate a stormwater filtration basin to keep runoff from entering Fairmont's drinking-water lake. The contract required Fairmont to pay construction, operation, and repair costs but said nothing about duration. Ninety years later, Fairmont announces it may stop operating the basin next month because the contract has no end date.

If Alder Glen sues to enforce the agreement, which is the strongest argument under the governing rule?

Explanation. When a contract for continuing performance lacks an express duration term, a court may look to the parties' intent and surrounding circumstances and imply a duration that can be fairly and reasonably fixed. If that can be done, the contract is neither perpetual nor terminable at will. Here, the basin was created to protect Fairmont's drinking-water source, which provides a basis for implying a reasonable duration tied to that purpose. (Derived from Haines v. City of New York (n.d.).)