## Facts

- Trakloc International, LLC owned a patented construction partitioning system (“Trakloc”); On the Right Track, LLC (OTRT) was a sublicensee and Southeastern Metal, Inc. (SEM) was a licensee involved in distributing the product.
- Kamco Supply Corp. and affiliated entities (collectively, the Kamco parties) served as regional distributors under two 2005 distribution agreements.
- The agreements imposed minimum-purchase requirements: 15 million linear feet by December 31, 2005, and for 2006 an annual minimum of 164.4 million linear feet, including monthly minimum purchases of 8 million linear feet.
- The agreements also required the Kamco parties to use “best efforts” to market, sell, and distribute Trakloc and to increase sales volumes annually.
- The contracts included a no-oral-waiver/no-oral-modification clause requiring any waiver to be in a signed writing and stating that failure to demand strict performance would not constitute a waiver.
- The Kamco parties did not meet the 2005 minimum and failed to satisfy any monthly minimum purchase requirements for 2006.
- Despite the shortfalls, OTRT and SEM continued shipping product, did not issue a notice of default, did not invoke contract remedies, and allowed returns; OTRT also repurchased inventory from Kamco (about $47,709.92).
- By mid-2006, OTRT acknowledged there was no realistic possibility the Kamco parties could meet the 2006 annual minimum, yet it continued the business relationship without reserving rights in writing.
- Kamco sued for breach of contract; OTRT counterclaimed and SEM asserted third-party claims alleging, among other things, breach of the minimum-purchase and best-efforts obligations.
- After a nonjury trial, the Supreme Court dismissed OTRT’s counterclaims and SEM’s third-party claims; OTRT and SEM moved to set aside the judgment under CPLR 4404(b), and the motion was denied.

## Issues

1. Whether OTRT and SEM, through continued performance and acceptance of underperformance, prospectively waived enforcement of the 2006 minimum-purchase requirements.
2. Whether OTRT and SEM were equitably estopped from invoking the contracts’ no-oral-waiver clause to enforce the minimum-purchase provisions.
3. Whether OTRT and SEM proved a separate breach of the “best efforts” obligation and damages attributable to that breach.

## Decision

- The Appellate Division affirmed the order denying the CPLR 4404(b) motion, leaving in place dismissal of OTRT’s counterclaims and SEM’s third-party claims against the Kamco parties.
- The court held that the evidence supported a finding that OTRT and SEM prospectively waived enforcement of the 2006 minimum-purchase provisions.
- The court further held that OTRT and SEM were equitably estopped from relying on the no-oral-waiver clause given their conduct and the Kamco parties’ reasonable reliance.
- The court declined to disturb the trial court’s findings rejecting liability and damages on the asserted “best efforts” theory.

## Legal Principles

- Waiver may be inferred from conduct that is so inconsistent with an intent to enforce a contractual right that no other reasonable explanation exists; an express statement is not required.
- In a “relational” contract performed over time, a sustained course of dealing may support a finding of a prospective waiver of future performance requirements, not merely forgiveness of past breaches.
- A contractual no-oral-waiver/no-oral-modification provision does not necessarily bar a waiver defense where equitable estoppel applies.
- Equitable estoppel may prevent a party from enforcing a no-oral-waiver clause when that party’s conduct induces reasonable reliance by the counterparty, leading the counterparty to continue performance without expecting strict enforcement.
- Following a nonjury trial, the appellate court may render the judgment warranted by the facts while giving weight to the trial judge’s opportunity to assess witness credibility.

## Conclusion

The court upheld dismissal of claims seeking to enforce minimum-purchase obligations, concluding that OTRT and SEM’s prolonged acceptance of noncompliance—without default notices, remedies, or reservation of rights—supported a prospective waiver and estopped them from invoking a no-oral-waiver clause to impose strict compliance retroactively.


Kamco Supply Corp. v. On the Right Track, LLC, 149 A.D.3d 275 (N.Y. App. Div. 2d Dep’t 2017)