## Facts

- In the early 1920s, New York City sought to prevent untreated sewage from entering streams feeding a reservoir in its Schoharie watershed water-supply system.
- Pursuant to statutory authorization, the City entered a 1924 agreement with the Town of Hunter and the Village of Tannersville to construct a sewer system serving the village and part of the town.
- The agreement required the City to construct a sewage disposal plant and related sewer lines and to bear the costs of construction, operation, maintenance, repair, and house connections.
- The agreement also stated that sewer lines would be extended when necessitated by future growth and building construction in the communities.
- The sewer system was completed in 1928; the City maintained it for decades and later funded rehabilitation and expansion work on the facilities.
- By the time of the dispute, the treatment plant was operating substantially beyond its design capacity, and the City asserted that additional load would cause inadequate treatment and threaten the water supply.
- Frederick R. Haines, a landowner planning approximately 50 residential lots, sought permits to connect new homes to the sewer system.
- The City denied the request, asserting the contract did not obligate it to expand capacity to serve substantial new development.
- Haines sued for declaratory and injunctive relief; the Town and Village intervened in support, contending the contract imposed a continuing obligation to expand facilities for future growth.
- The trial court and a divided intermediate appellate court ruled that the City was required to construct additional facilities to meet increased demand.
- The City appealed to the New York Court of Appeals.

## Issues

1. Whether the 1924 agreement obligated New York City to expand, replace, or build new sewage-treatment facilities to accommodate substantial increased demand from new development.
2. How to determine the duration of a continuing-performance contract that contains no express termination term, including whether it should be treated as perpetual or terminable at will.
3. Whether the contract’s “future growth” line-extension language required new connections when additional flow would overload treatment capacity and frustrate the agreement’s water-protection purpose.

## Decision

- The Court of Appeals reversed the lower courts.
- The court held the City remained obligated to operate and maintain the existing sewage plant and system.
- The court held the City was not required to expand the plant or construct new facilities to accommodate Haines’s proposed development or other substantial increased demands.
- The court upheld the City’s refusal to provide additional sewer service where added load would exceed capacity and compromise effective treatment.

## Legal Principles

- A contract is not construed to impose perpetual obligations absent clear language showing the parties intended indefinite duration.
- When a continuing-performance contract is silent as to duration, courts may infer that performance was intended to continue for a reasonable time, based on the agreement’s purpose and the parties’ likely intent.
- Performance terms are interpreted in context; an obligation to extend service for “future growth” may be limited where expansion would exceed existing system capacity and defeat the agreement’s central objective.
- In public-works agreements tied to a specific protective purpose, courts may limit implied obligations so the contract is not transformed into an open-ended commitment to finance indefinite future expansion for private development.

## Conclusion

The court limited the City’s contractual duty to maintaining and operating the existing watershed-protection sewage system, rejecting an interpretation that would require indefinite expansion to serve new development where the agreement lacked clear language imposing perpetual or unlimited capacity-growth obligations.


Haines v. City of New York, 41 N.Y.2d 769, 364 N.E.2d 820 (1977)