Prevention, Hindrance, and the Duty of Cooperation

Case: Market Street Associates Limited Partnership v. Frey (1991; US 7th)

Notes
• JC Penney sells a lot of their property, and gets a lease back (needs the
money).
○ Still wants to use the property
○ Clause - if Penney wants to build a store for at least $250k, pension
trust will act in good faith to lend them the money
• 20 years later, Penney sends request to lend money, Pension trust says no, b/c
they only give loans for at least $7million
• Pg. 688 - for summary judgment, judge should look at facts of party opposing
summary judgment favorably. The judge here was wrong in that it looked that the
facts of the party requesting summary judgment favorably.
• Landlord says: when tenant asked for financing, and they didn’t mention the
lease that said if they refused the financing (they didn’t warn them), they wanted
this, so they could buy back the property at a price much less than market value,
b/c of the K provision that said they could buy it back at price sold for plus 6%
yearly interest. Basically, tenant trying to trick them. But maybe tenant really
wanted the financing.
• What is the remand about?
○ Determination of fact: did they actually want financing, or were they
hoping they would be rejected for financing so they could buy back the property.
○ Find out Orenstein's state of mind
§ We need remand to do this (even though they have all affidavits) b/c
appellate courts don’t decide factual issues
□ Factfinder determines factual issues: this is either a trial
judge (bench trial) or a jury
• Looks like opportunistic behavior - but pension trust should have read the lease
○ This is a very large company - they didn’t read the lease; say they were
being tricked. But they are a very large company.
○ There are no false statements here, no misrepresentations
○ You can trick during negotiations, but not during performance stage. A k
is a cooperative relationship.
§ If you do take advantage of a contracting parties mistake this can be
a misrepresentation. This is an opportunistic behavior. Especially if no cost to
correct other parties mistake.
§ Even large companies can make mistakes, but you are not allowed to
engage in opportunistic behavior b/c of this
• So Judge looks at it: What would the parties have negotiated if there was full
disclosure of the term?
○ So trust company can see the consequences of not giving the financing.
• Not cost effective to draft a K to include terms to cover anything that might
happen. So good faith is implied, and opportunistic behavior is prohibited.