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GLeS, Inc. v. MK Real Estate Developer & Trade Company

2011 WL 1769818 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

CONTRACTS; GOOD FAITH AND FAIR DEALING — Where a party’s inability to perform under a contract is caused by the other party’s disputes with someone else, failing to pursue its own performance may not be a breach of the implied covenant good faith and fair dealing.

A distributor of a major brand of gasoline sold products to a New Jersey gasoline retailer pursuant to a sales agreement. Six invoices for fuel were never paid. The distributor had electronically billed and faxed its invoices to the retailer. In addition, the retailer would receive a copy of the bill of lading for each fuel shipment from the driver of the fuel delivery truck. Pursuant to the sales agreement, the retailer was required to notify the distributor, in writing, of any dispute within 30 days of receipt of the distributor’s invoice. The retailer never notified the distributor in writing or otherwise of any dispute over the invoices.

Pursuant to an addendum to the sales agreement, the retailer was to receive certain fuel manufacturer income incentives related to the fuel’s branding. The addendum required the retailer to pay for all re-branding signs and other materials, and for the distributor to supply all labor to install the items. The distributor was responsible for ordering the branding materials and installing the materials.

The distributor sued, and the lower court found that the retailer owed the amounts on the invoices. It also held that the distributor had not acted in bad faith by delaying in sending the invoices, and no delay impeded the retailer’s ability to verify the amount billed. It found that the retailer never disputed any invoice, timely received or otherwise. The Court also awarded interest and attorney’s fees as provided in the sales agreement.

The retailer had filed a counterclaim, alleging the distributor had breached the agreement and breached the implied covenant of good faith and fair dealing because it did not receive the branding incentives. The Court found that the retailer failed to prove its allegations. The record indicated the distributor’s efforts to complete its part of the re-branding work were impeded by the retailer’s disputes with another supplier. The Court held the retailer could not now seek to hold the distributor accountable for the retailer’s own interference with the process.

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