CYBERCHRON CORP. V. CALLDATA SYSTEMS DEVELOPMENT, INC.
47 F.3d 39 (2nd Cir. 1995)
NATURE OF THE CASE: Cyberchron (P) appealed from a judgment which awarded it damages on a
claim for relief sounding in promissory estoppel for certain costs incurred in reliance upon
statements and conduct of Calldata (D) its customer.
FACTS: Cyberchron (P) deals in customized computer hardware for military and civilian
use. Calldata (D) is a subsidiary of Grumman. P and D wished to do business relating to a
contract D had with the Marine Corps for ATACC. From 1989-1990, P and D were involved in
negotiations. They never really reached a contract as there were continual disputes over the
weight of the equipment and the penalties to be assessed P if they delivered a unit over
that proscribed weight. D did deliver a purchase order to P dated May 15,1990 that set forth
the weight requirements of the equipment and which also specified severe penalties for
exceeding that weight of 145 pounds. P never agreed to the terms of the purchase order but
had previously begun production of the equipment despite the absence of any agreement
regarding the matter. D encouraged P in its efforts to produce the equipment and in a letter
June 9, 1990 even insisted that P continue to perform its contractually binding obligations
under the purchase order. In July 1990, P submitted a progress payment of $495,207.58 which
was about 80% of claimed costs including overhead charges that were incurred by P through
July 20, 1990. At trial, D's business manager testified that the full amount of that invoice
would have been paid had D not been prohibited from making such payments by court order in
other related matters with Digital Equipment Corporation. Eventually, that court order in
the other case was vacated. An agreement between the parties was never achieved. On
September 6, 1990, D directed P to show cause why the purchase order should not be
terminated. P's detailed response letter was rejected and D terminated the purchase order on
September 25, 1990. This law suit resulted. The court found that D had commenced
negotiations with other supplier in August 1990 and entered into a contract with Codar for
equipment which was conceded to be inferior to the P design and weighed more. The court
found that no enforceable agreement ever existed between the parties based on the
disagreement on essential weight terms and penalties. P's contract claims were dismissed and
D's counterclaim based on contract was dismissed. P's claim of quantum meruit was also
dismissed; there was no benefit to D and no unjust enrichment. The trial court then awarded
P reliance damages of $162,824.10 for out of pocket labor and materials based on promissory
estoppel but gave no recovery of lost profits for admin and general overhead expenses. Both
parties appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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