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Beanstalk Grp. v. Am Gen. Corp. - 283 F.3d 856 (7th Cir. 2002)

Rule:

Written contracts are usually enforced in accordance with the ordinary meaning of the language used in them and without recourse to evidence, beyond the contract itself, as to what the parties meant. This presumption simplifies the litigation of contract disputes and, more important, protects contracting parties against being blindsided by evidence intended to contradict the deal that they thought they had graven in stone by using clear language. It is a strong presumption, motivated by an understandable distrust in the accuracy of litigation to reconstruct contracting parties' intentions, but it is rebuttable, by two principles of contract interpretation. The first is that a contract will not be interpreted literally if doing so will produce absurd results, in the sense of results that the parties, presumed to be rational persons pursuing rational ends, are very unlikely to have agreed to seek.

Facts:

Plaintiff Beanstalk Group, as agent, entered into a contract with defendant manufacturer, AM General Corporation, that appointed the Beanstalk Group to obtain licenses to use the AM General's trademark. The agreement made  the sole and exclusive non-employee representative of the manufacturer AM General for the purpose of licensing the trademark and entitled the Beanstalk Group, as agent, to a percentage of the gross receipts. Subsequently, Defendant AM Generalentered into a joint venture agreement with the defendant General Motors Corporation, which would not compensate the Beanstalk Group for any license agreements entered into after the effective date of the joint venture agreement. The Beanstalk Group sued, claiming that because it transferred the trademark, it was entitled to the same percentage of the consideration from the joint venture. The district court granted defendants' motion to dismiss, and Beanstalk Group appealed.

Issue:

Did defendant violate its contract with plaintiff Beanstalk Group when it refused to compensate the latter for any license agreements?

Answer:

No.

Conclusion:

The United States Court of Appeals for the Seventh Circuit that Beanstalk Group's business was merchandising trademarks, not being a business broker. It had nothing to do with the joint venture and did not know about it until after it took place. There was no breach of contract because the manufacturer, as owner of the trademark had veto power over any license agreements that the agent proposed.

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