Sylvan Crest Sand & Gravel Co. v. United States – Case Brief
Sylvan Crest Sand & Gravel Co. v. United States, 159 F.2d 642 (2d Cir. 1945).
Facts: The United States (D) awarded bids to Sylvan Crest for the acquisition of tap rock for a project at Mollison Airport. The bids were submitted on form documents that, when read as a whole, demonstrated that the parties had intended that acceptance would create a binding contract. The contract however also had an ‘as required’ clause in it granting D the right to cancel the order. D neither provided delivery instructions nor canceled the order. P sued for breach of contract.
D moved to dismiss the action for failure to state a claim, or to grant summary judgment on the grounds that no genuine issue existed as to any material fact. The court granted summary judgment in favor of D and P appealed.
Issue: How is a clause in a contract that grants a party the right to cancel at any time interpreted?
Holding and Rule: A clause in a contract that allows cancellation at any time is to be interpreted as requiring reasonableness in its application.
That D had discretion to cancel the contract at any time does not mean that the contract was illusory or that D had unfettered discretion in canceling it. The court held that the words used in a contract should be construed to support the contract and not render illusory the promises of both parties. The court held that the agreement required D to give delivery instructions or notice of cancellation within a reasonable time after acceptance. A promise is not made illusory by the fact that the promisor has an option between two alternatives, if each alternative would be sufficient consideration if it alone were bargained for. The alternative of giving notice of cancellation within a reasonable time was sufficient consideration to support the contract.
Disposition: Reversed and remanded.