Law School Case Brief
Arbitron, Inc. v. Tralyn Broad., Inc. - 400 F.3d 130 (2d Cir. 2005)
Few principles are better settled in the law of contracts than the requirement of definiteness, and under New York law, if an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract. However, a price term is not necessarily indefinite because the agreement fails to specify a dollar figure, or leaves fixing the amount for the future, or contains no computational formula. Where at the time of agreement the parties have manifested their intent to be bound, a price term may be sufficiently definite if the amount can be determined objectively without the need for new expressions by the parties; a method for reducing uncertainty to certainty might, for example, be found within the agreement or ascertained by reference to an extrinsic event, commercial practice or trade usage. A price so arrived at would have been the end product of agreement between the parties themselves.
Arbitron, Inc. (Arbitron) collected listener-demographics data. It licensed a set of demographics to Tralyn Broadcasting, Inc.'s (Tralyn) predecessor, a corporation which owned just one radio station. That station was bought by Tralyn, which owned four other stations. The licensing agreement contained an escalation clause whereby Arbitron could increase the license fee if the radio station was bought by another entity which had other radio stations. Tralyn failed to pay the increased fee set by Arbitron. Arbitron filed suit against Tralyn, seeking to recover damages for breach of contract. The United States District Court for the Southern District of New York granted summary judgment in favor of Tralyn, and Arbitron appealed.
Was the escalation clause allowing Arbitron to increase the license fee if the radio station was bought by another entity that had other radio stations enforceable?
In reversing the district court's judgment, the court held that the escalation clause was not unenforceable due to vagueness. The court did not decide whether the Uniform Commercial Code covered licensing agreements for things like data but held that if it did, then the clause could be enforced under N.Y. U.C.C. Law § 2-305. The clause was enforceable under New York common law because it was not an "agreement to agree" on price but was a mechanism for objectively setting material terms in the future without further negotiations, and the parties had clearly intended that Arbitron would have the authority to adjust the fee.
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