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January 4, 1983


Kevin Thomas Duffy, D.J.

The opinion of the court was delivered by: DUFFY



 Stanley Stahl decided in the Spring of 1979 to spend his vacation in his old home state of Vermont. While there he stopped in to see a neighbor he had known since 1969, Joel Spiro. The conversation between the two men quickly turned to business, and a subject of mutual interest: computers. Stanley Stahl was vice-president of Stahl Management Corporation ("Stahl Management"), a company engaged in managing residential and commercial real estate. Spiro, a defendant herein, operated Conceptions Unlimited ("CU"), another defendant, which was in the business of selling computer hardware, and developing and selling application computer software. *fn1"

 Stahl's interest in computers dated back to early 1978 when he and his brother Michael Stahl, the president of Stahl Management, decided that their company could conduct business more efficiently and profitably if certain information were computerized. In particular, Stahl was interested in computerizing information relating to fuel oil management, building maintenance, service orders, and monthly rent bill mailings. By the time Stahl and Spiro met in 1979, Stahl Management had reviewed several hardware/software packages on the market, and had determined that its requirements could best be met through use of a business application minicomputer system.

 The initial conversation between Stahl and Spiro soon led to discussions in greater depth concerning CU's capability to develop the necessary software for Stahl Management. As the Summer of 1979 progressed, Michael Stahl entered the negotiations with Spiro and CU. Finally, in July of 1979, CU provided Stahl Management with a proposal entitled the "Charter." Plaintiff's Exhibit 1. A contract was executed by Michael Stahl and Joel Spiro soon thereafter on September 26, 1979. Plaintiff's Exhibit 2. Under the contract plaintiff was to pay $30,000 for the computer software developed by Spiro and CU. Simultaneously with the contract signing, Spiro signed a letter provided by Stahl stating that all contractual work had to be supervised by Spiro, and that in the event of CU's breach of the contract, Spiro was personally liable for up to $30,000 in damages. Plaintiff's Exhibit 4. Spiro signed the guarantee letter.

 The contract provided, inter alia, that CU would provide Stahl Management with a two-phase system. Phase I included several functions: a method of recording repair complaints from tenants, an update repair file, a request information function to print various reports on repairs, a purge completed repairs function, a file management function, fuel transactions' programs, and a system for printing rent bills. Phase II, which was only outlined in the contract, required programs concerning accounts receivable, tenants status inquiry and reporting, arrears inquiry and reporting, dispossession list, vacancy list, and tenant history. The specifics of the Phase II programs were to be worked out after the completion of the Phase I functions. CU also supplied Wang computer equipment to Stahl Management as part of the agreement for an additional cost of $45,500.

 The contract stated that the fuel consumption programs of Phase I were due by November 1, 1979. The balance of the Phase I functions were to be provided by March 1, 1980. Phase II functions were to be operational by January 1, 1981. By November 1, 1980, however, Spiro had encountered unforeseen obstacles in attempting to create the fuel consumption program. The programming was proving to be more difficult than he had originally envisioned. Spiro, therefore, notified Stahl Management of his difficulties, and subsequently delivered a revised program in late November. According to plaintiff, this new program did not meet contract specifications; according to defendants, plaintiff requested functions in the program not previously required by the contract. In the ensuing months, Spiro delivered several revamped fuel consumption programs, the last one in March or April of 1980. After this last fuel consumption program delivery, Spiro and CU did nothing further under the contract. Stahl Management brought this suit on March 23, 1981, against the defendants alleging breach of contract, breach of warranty, fraud, and misrepresentation. It is undisputed that Spiro and CU did not deliver the rest of the Phase I programs, nor any of the Phase II programs as required by contract. Thus, because CU failed to complete the contract, the crucial inquiry at a two and a half day bench trial before me was whether CU has a valid defense to its apparent contract breach.



 Defendant's two principal defenses at trial were accord and satisfaction *fn2" and rescission. *fn3" I find that defendants have failed to prove either defense.

 A. Accord and Satisfaction

 An accord and satisfaction is an agreement between two parties under which one party accepts a stipulated performance by the other party in discharge of an unresolved obligation by the latter party. Rein v. Wagner, 268 N.Y.S.2d 659, 662, 49 Misc.2d 683, modified on other grounds, 269 N.Y.S.2d 578, 25 A.D.2d 356 (1965), aff'd, 18 N.Y.2d 989, 224 N.E.2d 728, 278 N.Y.S.2d 223 (1966). "To establish an accord and satisfaction, [there] must [be] an intention to discharge the old obligation when the new one has been performed." Id. (citation omitted). In the instant case, defendants argue that the plaintiff agreed to discharge defendants of their contractual duty to deliver the balance of the Phase I and Phase II programs in return for defendants' supplying all of the "additional" requested functions in the fuel consumption program without any additional compensation. The defendants, however, have the burden of proving their affirmative defense of accord and satisfaction, Reilly v. Barrett, 220 N.Y. 170, 173, 115 N.E. 453, 454 (1917), a burden they have not met.

 Defendants do not have any written documents to support their defense. *fn4" Instead, they rely principally on defendant Spiro's testimony at trial. I found this testimony neither persuasive nor credible. For example, at trial Spiro claimed that this putative agreement was reached at some uncertain date in February. In their post-trial brief, however, the defendants inconsistently now allege that the accord and satisfaction occurred "about December." Defendants' Post-Trial Memorandum at 2.

 Defendants also presented a witness, Lawrence Johnson, a CU employee, in support of their claim that plaintiff agreed to terminate the contract at a meeting in April, 1980. Johnson, however, admitted that termination of defendants' contractual duties was never explicitly or directly discussed during the meeting. He testified that Michael Stahl essentially stated that "we hope it works the way you said it would"; and Spiro replied "you need any help, give me a call." The ...

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