Drawing from established precepts of Massachusetts law that a judge may fill in an omitted contractual term consistent with the intent of the parties, a Massachusetts Appeals Court recently affirmed a trial court’s conclusion that the parties had agreed to commission payments for an indefinite period of time and as a result, the payments would continue for as long as the Defendant continued receiving revenue from the underlying customer.
In Prism Group, Inc. v. Slingshot Technologies Corporation, a dispute arose between Slingshot Technologies Corp. (“Slingshot”) and Prism Group (“Prism”), a one-person sales company Slingshot engaged to procure customers for Slingshot’s business of providing secure facsimile services in the healthcare industry. In email correspondence from the establishment of two customer accounts in question, the parties agreed that Prism would receive a commission of a percentage of the revenue Slingshot received from customers Prism brought in. At issue in this dispute were two lucrative client relationships that generated $9 million and $29 million for Slingshot, respectively. Despite Prism undisputedly completing its performance under the contracts, and Slingshot originally agreeing in email correspondence to pay Prism a set percentage of the revenues generated from these clients, Slingshot reduced and ultimately stopped paying Prism any commission, despite the ongoing nature of the underlying customer relationships.
Following a bench trial, the judge concluded that Slingshot owed Prism $4.1 million after breaching two agreements to pay commission at rates established at the start of two underlying client relationships. The key finding underpinning this result was the trial court’s determination that, absent an express provision governing the term of the commission payments, the court could supplement the parties’ agreement with a term and determined that the commission payments must endure as long as Slingshot continues receiving payment from the customers.
Rejecting Slingshot’s post-trial contention that agreements silent with respect to term are terminable at will, and further, that the trial judge erred by effectively creating unenforceable “perpetual” contracts, a Massachusetts Appeals Court affirmed that the contracts were subject to a reasonable duration given the parties’ agreements and intent. The Appeals Court concluded that the trial judge did not err in finding that Slingshot had agreed to a commission percentage of revenue based on email exchanges confirming the arrangement, and that a reasonable term would derive from the period of time Slingshot receives income from the customer, noting that “the term is indefinite. But the obligation has a defined end point, which is when Slingshot ceases receiving revenue from the client. That contingency could already have happened, or it could be years away, but it is reasonable to believe that it will happen.”
This result reinforces the principle that contracts can have enforceable indefinite terms tied to specific events and that once a party has completed its obligations under a contract, it is entitled to enforcement of its contracts as written. Indeed, it provides important guidance for businesses navigating similar agreements with indefinite terms.
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