Fixed Term Contract Indefinite Duration In California
In Mangini v. Wolfschmidt, Ltd. (1961) 192 Cal. App. 2d 64 [13 Cal. Rptr. 503], the court observed that an express provision that the contract shall continue as long as the plaintiff performed was valid, and that the contract was not terminable at will but only for cause. (Id. at pp. 73-75.)
In Burgermeister Brewing Corp. v. Bowman (1964) 227 Cal. App. 2d 274 [38 Cal. Rptr. 597], the court observed that the contract between the parties "created a beer distributorship for an expressly agreed-upon term, to wit: as long as Bowman [the distributor] should continue to use his best efforts to promote and solicit the sale of the brewery's products and 'took care of the territory'. . . ." (Id. at p. 277.) the Burgermeister court held this contract was not terminable at will. (Ibid.)
Against this backdrop Consolidated Theatres, Inc. v. Theatrical Stage Employees Union (1968) 69 Cal. 2d 713 [73 Cal. Rptr. 213, 447 P.2d 325], which the parties agree is the preeminent authority here, entered the stage.
In Consolidated Theatres the Supreme Court implicitly acknowledged the rule that a contract could expressly provide for continued performance, then discussed the consequences of its failure to do so.
The Consolidated Theatres court, at 69 Cal. 2d at page 727, cited with approval Warner-Lambert Pharm. Co. v. John J. Reynolds, Inc. (S.D.N.Y. 1959) 178 F. Supp. 655, affirmed (2d Cir. 1960) 280 F.2d 197, which involved a contract of indefinite term for the plaintiff's payment of royalties, based on the amount of Listerine it manufactured and sold, to the successor in interest of the mouthwash's inventor.
The Warner-Lambert court upheld as plain and unambiguous the express contractual obligation to pay the royalties so long as the plaintiff continued to manufacture and sell the product:
"The mere fact that an obligation under a contract may continue for a very long time is no reason in itself for . . . giving it a construction which would do violence to the expressed intent of the parties." (Warner-Lambert, supra, 178 F. Supp. at p. 661.)
The court also noted there was "nothing unreasonable or irrational" in "contracts which provide no fixed date for the termination of the promisor's obligation but condition the obligation upon an event which would necessarily terminate the contract"--here, the plaintiff's ceasing the sale of the well-known breath freshener. ( Id. at pp. 661, 663.)
"In construing contracts which call for continuing performance or forbearance but which contain no express term of duration, it is first necessary to determine whether the intention of the parties as to duration can be implied from the nature of the contract and the circumstances surrounding it.
Thus, in some cases the court by referring to the nature of the contract and the totality of circumstances is able to determine that the obligations of the contract were impliedly conditioned as to duration upon the occurrence or nonoccurrence of some event or situation." (Consolidated Theatres, supra, 69 Cal. 2d at p. 725.)
"California courts have not hesitated" to imply an ascertainable term of duration when reasonably possible. (Id. at p. 727.)