Contracts

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7^th Circuit Court of Appeals

Case Name: Beach Forwarders, Inc. v. Service by Air, Inc.

Case No.: 22-1217

Officials: Sykes, Chief Judge, and Flaum and Lee, Circuit Judges.

Focus: Contracts

In 2010, defendant Service by Air (Service) engaged plaintiff Beach Forwarders (Forwarders) as its representative through a contractual arrangement. The original Agreement spanned three years, supplemented by a renewable one-year extension clause, alongside a mutual understanding that either party could choose not to renew. In 2013, an amendment was introduced, indicating that the Agreement would perpetually renew for successive one-year terms, unless Service, at its sole discretion, notified Forwarders about its intent to terminate the Agreement 30 days before each annual expiration. Notably, this amendment did not alter the clause in the Agreement asserting that Service wouldn’t be deemed in default unless Forwarders formally reported a significant breach and allowed Service an opportunity to rectify it, following which Forwarders could proceed with termination. Moreover, the amendment indicated that termination of the Agreement by Forwarders for any other reason would be treated as a termination without specific cause.

Forwarders initiated legal action seeking a declaratory judgment that the amended Agreement could be terminated without restriction. Service acknowledged that the amended Agreement had an indefinite duration, a scenario where Illinois law presumes the contracts to be terminable at will. However, Service contested this presumption by highlighting the Agreement’s provision, asserting that Forwarders could only terminate if Service failed to promptly address a material breach after notification. The court, in considering the pleadings, ruled in favor of lawful termination. The Seventh Circuit upholds the judgment. The amended Agreement lacks a distinct statement that termination can exclusively occur based on specific conditions or events. Service has not sufficiently disproven the presumption under Illinois law, which assumes that contracts of indefinite duration are terminable at will.

Affirmed

Decided 08/07/23

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