Metro-Goldwyn-Mayer, Inc. v. Scheider

New York Court of Appeals · Contracts

ContractsOral contractsIndefinitenessGap-fillingIndustry customoral contractdefinitenessindefinite terms

Facts

The trial court found, after sometimes conflicting evidence, that the parties entered into an oral contract under which appellant agreed to be the principal actor in a pilot film and in the television series that might develop from it. Appellant performed in the pilot and was fully compensated for that work, but later refused to perform in the subsequent television series. The parties' negotiations extended over many weeks, with broad outlines and financial dimensions agreed to in September 1971 and additional important provisions negotiated over the following weeks, culminating in supplemental agreements in February 1972. The only essential term for which there was no articulated understanding was the starting date for filming the television series, and the trial court supplied that term based on established industry custom and practice known to both parties.

Issue

Whether the courts could uphold a finding that the parties had made a complete and enforceable contract even though one essential term, the start date for filming the television series, had not been expressly agreed upon. More specifically, the question was whether that missing term could be supplied by objective evidence of industry custom and practice.

Rule

Where parties have completed negotiations on what they regard as the essential elements of their agreement, and performance has begun on the good-faith understanding that agreement on unsettled matters will follow, a court may find and enforce a contract even though some elements were expressly left for future negotiation, so long as some objective method of determining those matters is available independent of either party's mere wish or desire. Objective criteria may be found in the agreement itself, commercial practice, or other usage and custom, and if the contract can be rendered certain and complete by reference to something certain, the court will fill in the gaps.

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

In Los Angeles, producer Dana Mercer and actor Leo Bennett orally agree that Leo will star in a pilot for a crime series and, if the network orders episodes, in the first season as well. They agree on compensation, episode minimum, billing, and exclusivity, and Leo films the pilot for pay; they never expressly state when season filming would begin, but both sides know the standard production window used in that segment of the television industry.

If Leo later refuses to appear in the ordered season, which is the strongest argument that an enforceable contract existed?

Explanation. The majority rule is that a court may enforce an agreement despite an unresolved term when the parties completed negotiations on what they regarded as essential elements, performance began on a good-faith understanding that the arrangement existed, and the remaining matter can be determined by an objective method independent of either party’s mere wish or desire. Here, the start date is the only unstated term and can be supplied by industry custom known to both sides. (Derived from Metro-Goldwyn-Mayer, Inc. v. Scheider (n.d.).)