Bonner v. Westbound Records, Inc. - 76 Ill. App. 3d 736, 31 Ill. Dec. 926, 394 N.E.2d 1303 (1979)

Rule:

Promissory estoppel may be relied upon to uphold a contract otherwise lacking in consideration or mutuality at the time of its execution, where injustice can be avoided only by enforcement of the promise.

Facts:

Westbound Records, Inc.’s (Westbound) business is making master recordings and selling them to others for production and distribution. The agreement between Westbound and The Ohio Players (the recording agreement) required The Ohio Players to make records exclusively for Westbound for a 5-year period. Bridgeport is in the business of owning and licensing copyrights to music compositions. The agreement between Bridgeport and The Ohio Players (the publishing agreement) provided that Bridgeport would employ The Ohio Players as authors and arrangers so long as the recording agreement was in existence, and that The Ohio Players would render these services exclusively for Bridgeport. Both agreements provided they were to be governed by and construed in accordance with Michigan law. The capital stock of both Westbound and Bridgeport was owned by the same person. In the 21 months immediately following the execution of the recording agreement, The Ohio Players recorded four single records and two albums for Westbound. In January 1974, five of The Ohio Players, the plaintiffs in this case, repudiated the recording agreement, and signed an agreement with Phonogram, Inc., and Unichappell (hereinafter collectively referred to as Mercury Records), competitors of Westbound, to record exclusively for Mercury Records under the "Mercury" label. On March 8, 1974, they filed this action seeking a judgment declaring that the recording agreement was invalid and unenforceable, and that, consequently, they were no longer obligated to record for Westbound. The defendants responded by filing a counterclaim. Thereafter, with leave of the circuit court, Westbound and Bridgeport filed a pleading in the action which they labeled a third-party complaint adding Mercury Records as third-party defendants. This pleading charged Mercury Records with tortious interference with the recording agreement by inducing The Ohio Players to breach their agreement with Westbound and to agree to record for Mercury Records instead. The circuit court held that two contracts dated March 24, 1972, between Westbound The Ohio Players were void and unenforceable.

Issue:

Did the circuit court err in holding that the two contracts were void and unenforceable?

Answer:

Yes.

Conclusion:

Initially, the court held that Westbound and Birdgeport were amenable to the Illinois long-arm statute, Ill. Rev. Stat. ch. 110, para. 16 (1973). The court noted that by choosing Illinois for its action against Mercury Records, with whom The Ohio Players currently had a recording agreement, Westbound subjected itself to the jurisdiction of Illinois courts in other actions involving issues identical with those raised in Westbound’s action. Contrary to the conclusion reached by the trial court, the court determined that consideration passed to the rock group when it accepted $ 4,000 to enter into the agreements. By making the advance, Westbound suffered a legal detriment and the rock group received a legal advantage. Therefore, under both Michigan and Illinois law, the payment constituted valid consideration. Disregarding the performance under the agreements, the conclusion that the parties intended to be and were mutually obligated was also compelled by the rule that the law implied mutual promises to use good faith in interpreting an agreement and good faith and fair dealing in carrying out its purposes.