Austin Instrument, Inc. v. Loral Corp.

29 N.Y. 2d 124, 272 N.E. 2d 533 (1971)

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Nature of the Case

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Facts

D was awarded a $6,000,000 contract by the Navy for the production of radar sets. The contract contained a schedule of deliveries, a liquidated damages clause applying too late deliveries and a cancellation clause in case of default by D. D solicited bids awarded Pa subcontract to supply 23 parts. That party commenced delivery in early 1966. In May 1966, D was awarded a second contract for the production of more radar sets and again went about soliciting bids. P bid on all 40 parts but P told D that it would refuse any awards unless it got all 40 instead of just the parts on which it was the lower bidder. The very next day P told D that it would cease deliveries of the parts due under the existing subcontract unless D consented to substantial increases in the prices provided for by that agreement -- both retroactively for parts already delivered and prospectively on those not yet shipped -- and placed with P the order for all 40 parts needed under D's second contract. P did stop delivery. D was in a panic and solicited 10 manufacturers of precision gears. It found none who could deliver on time. D caved into P's demands. After P's last delivery under the second subcontract, D notified it of its intention to seek recovery of the price increases. P sued D to recover an amount in excess of $17,750 which was still due on the second subcontract. D then sued P claiming damages of some $22,250 -- the aggregate of the price increases under the first subcontract -- on the ground of economic duress. P was awarded the sum it requested, and D's complaint against Austin was dismissed on the ground that it was not shown that 'it could not have obtained the items in question from other sources in time to meet its commitment to the Navy under the first contract.' The Appellate Division affirmed. There was no dispute over the facts but a severe conflict in the application of the law to the facts.