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Austrian Airlines Oesterreichische Luftverkehrs AG v. UT Fin. Corp. - 567 F. Supp. 2d 579 (S.D.N.Y. 2008)

Rule:

To establish a breach of contract claim, a plaintiff must demonstrate (1) the making of a contract, (2) the plaintiff's performance, (3) the defendant's breach, and (4) the plaintiff's damages.

Facts:

During the 1990's, United Technologies Corporation (“UTC”) was anxious to have plaintiff Austrian Airlines specify jet engines made by one of UTC's affiliates for use on new aircraft being ordered by Austrian. It entered into a complex deal pursuant to which Austrian agreed to do so, and a UTC affiliate, defendant UT Finance Corporation ("UTF"), agreed to buy a particular used aircraft from Austrian some years in the future for a price in excess of $ 30 million. The aircraft purchase agreement ("APA") made UTF's obligation to consummate the purchase contingent on satisfaction of a myriad of conditions. After the 2001 terrorist attacks on the World Trade Center and the Pentagon, however, UTF became  anxious to avoid buying an aircraft for far in excess of its market value and insisted on strict compliance with the contractual requirements. Austrian failed in major respects to satisfy the conditions precedent to UTF's obligation to purchase, and UTF rejected delivery. Plaintiff seller Austrian brought this action for breach of contract, claiming primarily that UTF's alleged desire to avoid what had become a disadvantageous deal led it to reject the aircraft in bad faith. Defendant buyer UTF moved for judgment of dismissal.

Issue:

Where an aircraft purchase agreement provided that time was of the essence and plaintiff seller failed to tender the aircraft in conformity with the delivery conditions, was defendant buyer entitled to dismissal of the breach of contract action and recovery of reasonable attorneys' fees and other costs?

Answer:

Yes

Conclusion:

The United States District Court concluded that plaintiff seller Austrian failed to establish that defendant buyer UTF breached the APA by rejecting the aircraft. The Court held that Austrian failed to prove that it had satisfied the conditions precedent to UTF's obligation to purchase at any relevant time. 

The parties' contract provided that time was of the essence. Plaintiff seller contended that it was not obliged to tender the aircraft by March 31, 2004, because the buyer waived its right to enforce timely delivery. The Court found that the buyer's willingness to accept a delay in delivery was contingent on an agreement for financial compensation. No such agreement was reached. Therefore, the seller failed to prove that the buyer waived its right to enforce timely delivery, under N.Y. U.C.C. Law § 2-209(4). Accordingly, the seller breached the contract when it failed to tender the aircraft in conformity with the delivery conditions by March 31, 2004. The seller could not have succeeded on its breach of contract claim even if the buyer had waived its right to timely delivery because the seller failed to establish that the buyer breached the contract by rejecting the aircraft. The seller failed to prove that the buyer acted in bad faith when it rejected the aircraft because the buyer could have rejected the aircraft if the seller failed to satisfy the delivery conditions in any way, no matter how insignificant, and two unapproved auxiliary center fuel tanks affected the aircraft's airworthiness.

The United States District Court granted defendant buyer's motion for judgment of dismissal on partial findings. The Court held that the buyer, as the prevailing party, was entitled to recover its reasonable attorneys' fees and other costs incurred in defending itself. Because Austrian failed to establish that UTF breached the APA, it was not entitled to recover any damages or litigation costs. 

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