Austin v. Loral Corporation

Austin v. Loral Corporation

1971 New York Court of Appeals

• Loral had contract with Navy for radar sets, subcontracted with Austin to manufacture gear component. Loral won second navy contract, asked for bids. Loral wanted only those parts on which Austin was the lowest bidder from Austin; Austin refused to follow through on first contract unless it was awarded contract to make all parts, not just ones on which they were lowest bidder. Austin also demanded increased price on earlier contract.
• Loral agreed to Austin’s demands as it was unable to find replacement subcontractor who could provide parts on time.
• Loral was subject to penalties (liquidated damages) if it did not make deliveries on time.
• Likely that a majority of Loral’s business was with government, thus risk was not only this contract, but most of its business.
• Court discusses issue of economic Duress –it finds that Loral did not have another option for contract, thus it had no choice but to submit, thus this was not a valid modification. UCC 2-209 does permit modification absent consideration, as long as party has free will to make decision.
• Dissent (following lower courts): found against Loral on the basis that it had not proved it had no other choice.

Conclusion

Notes

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References and Further Reading

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Author: international

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