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Cox v. SNAP, Inc. - 859 F.3d 304 (4th Cir. 2017)

Rule:

Under the prevention doctrine, if a promisor prevents or hinders fulfillment of a condition to his performance, the condition may be waived or excused. For the prevention doctrine to apply, a party need only show that the other party materially contributed to the non-occurrence of the condition.

Facts:

In 2006, SNAP, a Virginia corporation, sought to expand its business in the field of federal procurement by contracting with Curtis Cox, a Maryland resident and the president of C2 Technologies, an established government contracting firm. On January 12, 2006, the parties executed a memorandum of understanding (MOU) in which Cox agreed "to promote and market [SNAP] in exchange for obtaining an equity stake" in the company. Under the terms of the MOU, Cox and C2 Technologies agreed to provide various forms of assistance to SNAP. Among other things, they agreed to use their best efforts to help SNAP obtain specific contracts, to consider SNAP for any potential leads, and to provide SNAP with approximately $240,000 worth of marketing support and assistance. In return, the MOU provided that SNAP will issue a non-qualified stock option to Cox granting him the right to purchase 308 shares, representing 5% of the total authorized shares of stock of SNAP. The contract announced SNAP's intention to execute a stock split, under which Cox's options would increase proportionally. SNAP did not issue the non-qualified stock option to Cox despite repeated demands. Thereafter, Cox filed suit for breach of contract against SNAP in Virginia state court. In August 2016, the parties filed cross-motions for summary judgment. SNAP contended that the contract did not grant Cox any stock options but merely memorialized SNAP's promise to issue the options in the future. On the other hand, Cox contended that the contract itself issued the options and therefore gave him the right to require SNAP to repurchase those options. The district court granted summary judgment to Cox. The court reasoned that the plain language of the contract showed that SNAP issued the stock options to Cox and that the contract did not require any further steps as a condition precedent before those options issued.

Issue:

Under the contract, did SNAP issue the stock options to Cox, thereby justifying the grant of summary judgment to Cox?

Answer:

Yes.

Conclusion:

Even if issuing the stock options was a condition precedent to SNAP's obligation to repurchase, the corporation excused that condition by breaching its promise to issue the options, and so the prevention doctrine doomed its case because SNAP controlled whether the options issued, it had a contractual obligation to issue the options, and, by refusing to do so, SNAP plainly forfeited its right to rely on their issuance as an unfulfilled condition precedent to its obligation to repurchase the president of the contracting firm's options.

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