Klein v. PepsiCo, Inc.

Eugene V. Klein (Klein) (plaintiff), who was interested in purchasing a used G-II corporate jet, learned from Patrick Janas (Janas), the president of Universal Jet Sales, Inc. (UJS), that PepsiCo, Inc. (Pepsico) (defendant) was selling such a jet. Klein authorized Janas to make an offer on the jet, with the proviso that the sale be subject to a factory inspection satisfying Klein and the execution of a definitive contract. After negotiation, Janas accepted a price of $4.6 million offered by PepsiCo and sent copies of proposed agreements to the parties. Although some defects were found at the inspection, most were cured during the inspection and the rest PepsiCo later agreed to have repaired. Two days before the deal between Klein and PepsiCo was supposed to close, PepsiCo’s chairman directed that the jet be taken off the market. After Pepsico's failure to comply with the demand by UJS for delivery of the Pepsico jet, an action was commenced in federal district court. The district court judge found that a contract had been formed, and since Pepsico agreed to make the repairs, the condition of a satisfactory inspection was met. Despite finding that money damages could be awarded to make Klein whole, the district court directed specific performance of the contract under the Uniform Commercial Code (UCC), as enacted in Virginia, relying on evidence that it would be very difficult and expensive to obtain a similar jet. Klein also testified that he would not want to purchase another G-II because the price had increased and he planned to purchase the plane for resale at a profit. Pepsico appealed.