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Court Allows Breach of Contract Lawsuit To Sail

Court Allows Breach of Contract Lawsuit To Sail

The Appellate Division of the Supreme Court of NY, first department allowed a lawsuit against The Golden Gate Yacht Club (GGYC) to proceed on its breach of contract claims in the case of African Diaspora Maritime Corporation v. Golden Gate Yacht Club.

Background

The America’s Cup competition is one of the most prestigious sailing competitions in the world. Under the rules of the competition, the current Champion yacht club must agree to the rules and conditions of the next competition with a Challenger yacht club that issues a formal challenge. GGYC is the current champion and the formal Challenger is a club known as CNR. GGYC is responsible for much of the administrative work involved in setting up the next America’s Cup competition. One of those responsibilities includes setting criteria for the inclusion of other challenging yacht clubs besides CNR, criteria that must be developed with CNR’s input.

One such other challenging club is the African Diaspora Maritime Corporation (ADM). GGYC posted the “Protocol governing the 34th America’s Cup” and ADM attempted to submit an application, pursuant to GGYC’s stated guidelines, to enter the competition. When GGYC rejected ADM’s application, ADM sued.

Breach of Contract Claims

In previous posts we have discussed breach of contract cases that have occurred “downstream” (ie after the contract was entered into by both parties) cases that involved certain actions that may have breached the contract.

One of the fundamental questions in any breach of contract case is, “did a valid contract exist?” In the previous cases, both sides agreed that a valid contract existed. Here, the dispute hinges on whether a contract between GGYC and ADM existed at all.

For a valid contract to exist, there must be both an offer and an acceptance. These two elements, in whatever form they take, indicate that both sides mutually agreed to be bound to the deal.

Here, GGYC wanted the case to be dismissed for failure to state a valid claim. They were in effect arguing that a valid contract never existed between them and ADM because there was never a valid offer and acceptance.

The “Protocol”

GGYC’s argument was that the Protocol mentioned above was a contract only between itself and CNR. The posting of application criteria was akin to soliciting bids to apply. Under New York Law, a bid is an invitation to make an offer. Thus ADM’s application was actually (in GGYC’s view) an offer to join the competition. Since GGYC actually rejected ADM’s application, there was no (in GGYC’s opinion) acceptance and thus a valid contract never existed. If no valid contract existed, the court must dismiss the case.

ADM had a different interpretation, illustrative of the kind of issues that commonly arise in contracts cases. ADM viewed the Protocol as an offer to ALL yacht clubs, and the submission of an application satisfying the criteria in the Protocol was its own acceptance. So the case hinges on the question of whether ADM’s application was actually an offer or an acceptance.

The Decision

The court decided that ADM did make a case for a contract existing. Under Sargent v. NY Daily News, the rules of a contest do constitute a contract offer and the participant’s entry into the contest constitutes an acceptance. The court then remanded the case back to the lower courts to determine whether a breach of contract occurred.

If you have any questions about situations where a contract may exist, including a contest or sweepstakes, or any other concerns about a potential breach of contract, it is important to retain an experienced attorney who understands contract law and breach of contract claims. Please do not hesitate to contact our office for a consultation.

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