Hutton v. Monograms Plus Case Brief

Summary of Hutton v. Monograms Plus
Ct. of Appl Ohio [1992]

Types of Conditions-Conditions of Satisfaction

Relevant Facts: Hutton and MPI executed a franchise agreement where MPI sold a monogramming franchise to Hutton for $25,000. The terms specified a non-exclusive 10 yr license to Hutton to operate an MPI store, where Hutton was to market, and promote sales of T-shirts, jackets, etc. 2 weeks after the original agreement the parties executed an addendum providing that if Hutton were “unable to obtain financing suitable to him" w/i 90 days he would be entitled to a refund of the $25,000 franchise fee.

Legal Issue(s): Whether the trial court properly applied subjective standard in assessing franchisee’s satisfaction, and whether a genuine issue of material fact as to franchisee’s inability to locate financing precluded summary judgment for franchisee?

Court’s Holding: Improperly applied subj. standard and a genuine issue existed.

Procedure: Trial ct granted summary favor of Hutton using subj test; Reversed.

Law or Rule(s): Where a clause requires satisfaction as to such matters as commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed unreasonably. Whether the performance would satisfy a reasonable person. OBJ

Court Rationale: In this case the language failed to mandate that Hutton’s satisfaction be assessed subjectively. It does not state that his judgment was to be “sole, exclusive, or final." Nor did it impose a good faith limitation on his judgment. The addendum was a general satisfaction clause, and w/o more does not mandate the application of a subjective standard. Absent express contract language, ct look to the nature of the K as an indicator of which standard governs.

Generally, subjective standard for general satisfaction applies to contracts involving matters of aesthetic taste, feasibility of operation, or management, regardless of financial impact; the objective standard of the reasonable person is generally applied where commercial or financial matters are involved. In this case the evidence fails to establish that it would have been impractical to apply an objective standard to the addendum. Hutton presented no evidence of impracticability. Absent a showing of impracticability the ct must look to the nature of the K.

The franchise agreement was commercial in nature and pertained to financial concern. W/o express language or evidence of impracticability the nature dictated Hutton’s satisfaction had to be measured objectively.

Plaintiff’s Argument: Hutton’s satisfaction should be determined by whether he was actually satisfied with the financing available.

Defendant’s Argument: MPI – Because of the commercial value of the K, satisfaction should be measured by the satisfaction of a reasonable person.

militates – to have force as to evidence

Objective vs. Subjective satisfaction

(1) Objective satisfaction: The standard of what would be reasonable to the RP is applied to matters that are amenable to objective tests.

(2) Subjective standard: This standard is applied to matters of fancy, personal taste or judgment. The test is whether the person is actually satisfied.

(3) Third category: Good faith requirement attached to a subjective judgment: Normally objective evaluations (like a person’s credit) are moved into the subjective list because of the intent of the parties.

Which standard applies in a given transaction is a matter of the actual or constructive intent which is a function of the express language or the subject matter of the K.

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