This issue arises on a motion for a new trial after a trial before me which resulted in a judgment for plaintiff in the sum of $513.93 on the main suit, and a judgment for plaintiff, also, on the counterclaim.
The principal question raised is one of law, dealing with the effect of a contract provision authorizing termination upon five days written notice. It is uncontradicted that such notice was not given by plaintiff. Defendant's contention is that the notice provision makes it the exclusive method for terminating the contract, and therefore plaintiff had no right to terminate the contract. There is no case in New Jersey on the subject and analysis of decisions outside this jurisdiction reveals a conflict of authority.
Although I rendered an oral opinion analyzing the facts in the matter, reference to the factual context is necessary for a proper understanding of the problem.
On January 29, 1970 plaintiff Young Travelers and defendant Felsen entered into a "franchise agreement." The agreement is an elaborate instrument which licenses Felsen in the establishment of children's summer day camps, according to a system developed and promoted by Young Travelers.
The contract was drawn by Young Travelers. It contains elaborate provisions regulating licensee's conduct. Among
other things, it requires licensee to make an initial cash payment, giving him a choice of various methods. In this case licensee chose Schedule F which required him to pay $1,000: $250 on execution of contract; $250 on start of training to be supplied by Young Travelers; and $500 on the first $3,000 of sales, plus varying percentages of net profits. This payment was to be made by depositing the fund in a joint checking account, to be drawn upon by the joint signatures of licensor and licensee.
Beginning with the date of this agreement or March first, whichever is later, and continuing until June 30 of each year, the licensee shall use his best efforts in the time before and/or after the time spent in his usual occupation to solicit business for the forthcoming summer's operation and to perform all other preparations necessary to the beginning of the summer's operations. * * *
The Contract contains two specific methods of termination: one, for failure to pay licensor a minimum amount of profit, in which case licensor has the right to terminate by written notice; the other, the provision involved here:
XXIII. RIGHTS AND OBLIGATIONS OF THE PARTIES ON TERMINATION
(a) If the Licensee shall become in default under any finance or security agreement, deed of trust or lease covering the Franchise and any tangible or intangible property used in the conduct and operation thereof, or shall be adjudicated a bankrupt, or shall make an assignment for the benefit of creditors, or if a receiver shall be appointed to take charge of the Licensee's affairs, or if the Licensee shall default in the performance of any covenant or agreement made hereunder, as to standards of operation, failure to obtain consent of the Licensor where required hereunder, payments of amounts due hereunder or otherwise, and such default shall not be remedied to the Licensor's satisfaction within five (5) days after notice of such default, then the Licensor may thereupon terminate this Agreement and all rights hereunder of the Licensee, but such termination shall not affect the obligations of the Licensee to take action or to abstain from taking action after termination hereof, in accordance with this Agreement.
Young Travelers' complaints about Felsen fall into three categories:
First, that he failed to make the payments required by Schedule F of the contract. Payment of $250 on signing is admitted, but Young Travelers denies that the second payment of $250 due at commencement of training was ever made. Training commenced in February. Felsen concedes that the second payment and the opening of the joint account did not occur until March or April 1970. Felsen says that he had oral permission to delay the second payment and the opening of the joint account. My decision does not rest on this point, and the issue of credibility need not be resolved.
Second, that Felsen failed to use his best efforts to further the purposes of the contract. The evidence as to this is clear. Felsen was obligated, in order to make the contract profitable for both parties, to enroll campers for the summer season. In all, Felsen procured 19 contracts. Of these, 5 were executed in March, 12 in April, none in May, and 2 in June.
Felsen's attitude to the contract is of importance. Approximately April 20 he met with his attorney, Barry Mandelbaum, to discuss means for getting out of the contract because he wanted to take a position in another field. As the result Mandelbaum wrote Young Travelers a letter dated April 29, 1970 in which he said that he wished to discuss with Young Travelers "the contract and its termination." The evidence indicates also that even prior to this Felsen had ...