## Facts

- Coastal Aviation, Inc., a distributor using a dealer network model, negotiated with Commander Aircraft Co., an aircraft manufacturer, to become an exclusive dealer/distributor for certain territories.
- The parties engaged in extended discussions concerning territories and business terms such as discounts, profit margins, and marketing.
- After a meeting between Coastal’s executives and Commander’s president, Commander sent a letter stating that it had requested an executive to “reserve New York and New Jersey for Coastal until we finish our discussions.”
- Coastal treated this and related communications as creating an option/right to exclusive territories while negotiations continued and planned its business in reliance on that understanding.
- Commander later assigned many of the territories Coastal sought to other dealers and ultimately informed Coastal that remaining territories were reserved to others.
- Coastal sued in federal court seeking over $5.3 million in damages, primarily lost profits, for alleged breach of an exclusive dealership/option arrangement.
- After a two-day bench trial, the court entered judgment for Commander on all claims.

## Issues

1. Whether Commander’s “reserve” letter and related communications created an enforceable option or “firm offer” under N.Y. U.C.C. § 2-205 obligating Commander to hold or grant exclusive dealership territories.
2. Whether the parties otherwise reached a sufficiently definite agreement, with mutual assent and intent to be bound, to form an enforceable exclusive dealership contract.
3. If liability existed, whether Coastal proved lost-profit damages with reasonable certainty.

## Decision

- The court entered judgment for Commander on all claims after a bench trial.
- The court held that the communications were part of preliminary negotiations and did not constitute an enforceable option, firm offer, or exclusive dealership contract.
- The court further held that Coastal’s lost-profit evidence was speculative and failed to establish damages with reasonable certainty.

## Legal Principles

- A U.C.C. § 2-205 firm offer requires a signed writing by a merchant that provides clear assurance an actual offer will be held open; provisional “reservation” language tied to ongoing discussions may not qualify.
- Contract formation under New York law turns on objective manifestations of intent to be bound and sufficient definiteness of material terms; complex dealership arrangements commonly require agreement on key commercial terms before enforcement.
- Lost profits must be proven with reasonable certainty; projections for an unestablished relationship without reliable grounding in performance history or market data are generally unrecoverable as speculative.

## Conclusion

The court concluded that the parties’ negotiations never ripened into a binding exclusive dealership or option agreement and that, even if some obligation were assumed, Coastal failed to prove lost profits with the certainty required for recovery; judgment was therefore entered for Commander.


Coastal Aviation, Inc. v. Commander Aircraft Co., 937 F. Supp. 1051 (S.D.N.Y. 1996)