Cyberchron Corp. v. Calldata Systems Development, Inc. U.S. Court of Appeals (1995)


– Between 1989 – 1990- parties were involved in extended negotiations during which Cyberchron attempted to produce the equipment.
o No payment to Cyberchron, and no equipment delivered.
o They did not form a contract because they did not agree on the essentials of the deal: weight of the equipment, and penalty to be assessed if weight was exceeded. Proceeded anyways.
– May 15th, 1990 After preliminary negotiations, Calldata submitted purchase order with weight requirements.
o Cyberchron never agreed to the terms but commenced production, nonetheless.
– June 26th, 1990 – letter from Calldata to continue work in accordance with the purchase order.
– ***Mid July, 1990, (D) representative, directed Cyberchron to proceed as if there had been agreement on the weight issue, terms of the purchase order would be resolved later.*** THIS IS THE MAIN PROMISE…no reliance prior to this promise.
– July 30th, 1990, Cyberchron submitted a progress payment, 80% of claimed costs including over head charges incurred thru July 20th, 1990.
– Sept 6th, Calldata issued letter to (P) to show cause why purchase order should not be terminated – Sept 13th, (P) sent letter which was rejected by (D).
– Sept. 25th Calldata, terminated the purchase order for “default” purposes.
– Sept. 26th (D) commenced negotiations with alternate suppliers in August 1990, and entered into a contract on Sept. 26th, 1990 with an inferior company.
– Plaintiff wanted
o Recovery to extend to periods prior mid-July.
 Court rule NO – no promise sufficient, prior to mid-July to undergrid Cyberchron’s claim of primary estoppel.
– Wants overhead and shutdown expenses that were not included in the lower courts judgment.

Procedural History

– Both parties appealed.
o (P) wanted “shutdown costs.”
o (D) did not want any costs.
– District Court holdings
o No enforceable agreement due to know agreement on weight and penalties….contract claims were dismissed.
o No benefit to defendant, failure of plaintiff to fully perform and absence of unjust enrichment to the D.
o Awarded damages mid-July – September 15th, for reliance damages of $162,824.
 Denied recovery of lost profits or general overhead costs.
• Not specific from transaction, cyber offered wrong proof, but were speculative.
• Allowed recovery on materials purchased and labor costs.


– Did Cyber rely on Calldata enough to satisfy the primary estoppel?


– Yes.


– To fulfill the third requirement of “preventing injustice” an unconscionable injury is sometimes required.


– August, 1990, Calldata assured Cyberchron that if it did the work, the negotiation problem would be resolved.
o Work out purchase order requirements later on.
– Injury inflicted upon Cyberchron was unconscionable and believe that injustice can be avoided by only invoking primary estoppel.
– August, re-assured again that everything would be fine.
o August 8th-28th, re-assured again as if weights were approved.
– Appellate court ruled
o Terminated the agreement in bad faith – other company was worse than Cyberchron…also, already negotiating with another company while still working with Cyberchron.
 Abruptly terminated agreement after a year.
– Agree with court for reliance based upon primary estoppel, but vacate judgment and remand for re-determination of damages w/in this opinion.
– Appellate court allowed recovery on overhead and shutdown costs if it satisfies there rules?
o Need to evaluate it from the period between July 15th and September 25th..not the evidence of a six month period.


– Overhead costs
o No case law in NY
o Workable rule: allow recovery of reasonable overhead costs when it is shown that there is a demonstrable past history of business relations without requiring proof that a specific alternative project would have absorbed the overhead costs at issue.
o Only if they are allocated to SPECIFIC PROJECTS and not general costs of business
Holding, Promissory estoppel has three elements: clear and unambiguous promise, reasonable and foreseeable reliance by party to whom promise is made and an injury sustained by party asserting the estoppel by reason of reliance .
 Trial court didn’t give restitution (benefit conferred upon other party) or expectation (they never agreed to contract)…offer on the table was never accepted.

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