Clause & Effect <b>Time-Buy Telecast Deals/Renewal Options

The U.S. District Court for the Southern District of New York found that a television-production company breached its obligation to in good faith negotiate a renewal option for a time-buy agreement for the airing of additional power-boat racing programs on the plaintiff's network. Network Enterprises Inc. v. APBA Offshore Productions Inc., 01 Civ.11765 (CSH). APBA Offshore Productions procured sponsorships and produced programming for offshore racing. The company entered into a time-buy agreement in August 2000 with the TNN cable channel for the telecast of 10 half-hour episodes of power-boat offshore national races. A renewal-option rider attached to the agreement stated:

'TNN hereby grants to Purchaser the option to exhibit up to thirteen (13) additional original Episodes over TNN's cable programming service from October 1, 2001 through December 31, 2001, under the same terms and conditions as this Agreement at a fee of Forty Thousand Dollars ($40,000.00) per Episode. The dates and times of such telecasts shall be mutually agreed to by the parties hereto. Such option shall be executed, if at all, by Purchaser delivering notice thereof to TNN which notice shall be received by TNN no later than March 1, 2001.'

A few months later, the parties began negotiating a contract to replace the original time-buy agreement, though Michael Weiss ' the owner of ABPA Offshore Productions (now without TNN's knowledge conducting business as the new corporate entity APBA Offshore Power Boat Racing LLC ['LLC'], formed by Weiss and several investors) ' sent a letter on March 1, 2001, exercising the option. But after a new agreement couldn't be reached, LLC decided instead to widen its TV-programming deal with the Speed Vision cable network. TNN responded with its breach-of-contract action, arguing that 'the solitary issue in this case is whether, pursuant to that exercised option, the parties reached an agreement as to the specific dates and times for the broadcast of Productions' programming in 2001.' The defendants claimed 'no binding contract exists since the parties never agreed upon the material terms of the Renewal Option Rider,' meaning 'the times, dates, and number of telecasts.' The district judge found:

'that Allweiss, having exercised the Renewal Option on March 1, 2001, had conversations with [Brian] Hughes[, TNN's Senior Vice President of Sports and Outdoors,] during July on the subject of the number, dates and times of the 2001 telecasts that would appear on TNN in fulfillment of that exercised option. It is reasonable to infer that such conversations took place at that time, because the Renewal Option provided that 'the dates and times of such telecasts shall be mutually agreed by the parties hereto,' with the programming to begin on Oct. 1, 2001, only 3 months away. I further find that Allweiss made statements to Hughes during those July conversations that, to put it no higher than this, caused Hughes to believe that Allweiss had agreed to the dates and times of the 2001 telecasts that TNN then included in the written [but unfinalized] Amendment [to the time-buy agreement] TNN sent to Allweiss on August 7.'

The district court cautioned, however, that on the renewal option the parties hadn't entered into what is know as a 'Type I preliminary agreement,' which is one that is 'complete, reflecting a meeting of the minds on all the issues perceived to require negotiation.' The court did find a 'Type II preliminary agreement,' that is one that 'does not commit the parties to their ultimate contractual objective but rather to the obligation to negotiate the open issues in good faith in an attempt to reach the objective within the agreed framework.'