Spa Time, Inc. v. Bally Total Fitness Corporation

00-3669 (U.S. Dist. Ct. D. N.J. 2001) (Unpublished)

Opinion Date: February 16, 2001
Business Law
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CONTRACTS; PERPETUAL DURATION—A contract for perpetual duration is disfavored in the law; therefore it is treated as one where the parties have continued to perform after its expiration and is terminable at will.

A company that installed broadcast systems alleged that its customer was in breach of an agreement between them. Apparently, the installation company believed that it had the right to provide “perpetual in-club announcements to be broadcast over” the public-address systems within its customer’s premises. The Court stated that “[i]n New Jersey a contract for a ‘perpetual’ duration is treated similar to a contract that has expired, but where the parties continue the relationship. As a general rule, if the parties to a contract continue dealing with each other after the expiration of its stated term, their dealings proceed on an at-will basis. ... Consequently, such a contract is terminable at any time, and for any reason, at the election of either side.” Further, the New Jersey Supreme Court has noted that “perpetual contract performance is not favored in the law and such a finding is to be avoided unless there is a clear manifestation that the parties intended it.” The Court, on the record presented, held that no reasonable juror could find a clear manifestation that the parties intended to enter into a perpetual contract. In addition, the Court looked at the condition within the agreement itself, which called for the installer’s services to be supplied “until [the installer] and the [property owner] entered into a national agreement.” This provided further reason for the Court to reject the notion that the parties had entered into a perpetual contract.

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