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Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp.

Court of Appeals of New York
705 N.E.2d 656 (N.Y. 1998)


Facts

Norcon Power Partners, L.P. (Norcon) (plaintiff), an independent power producer, entered into a twenty-five-year supply contract with Niagara Mohawk Power Corp. (Niagara) (defendant), a public utility company. In 1994, Niagara sent Norcon a letter stating that it expected Norcon’s costs to exceed $610 million in the next payment period. Niagara anticipated Norcon would not be able to pay and demanded assurances that Norcon would perform. Norcon sued Niagara, seeking a declaration that Niagara had no contractual right to demand assurance and a permanent injunction to stop Niagara from anticipatorily terminating the contract. The district court granted Norcon’s motion for summary judgment on the grounds that adequate assurances could be demanded only when a party is insolvent or the contract involves the sale of goods under the Uniform Commercial Code (UCC). Niagara appealed to the United States Court of Appeals for the Second Circuit, which certified the question to the Court of Appeals of New York whether a party has a right under state substantive law to demand such assurances if the other party is solvent and the UCC does not control the contract.

Rule of Law

Issue

Holding and Reasoning (Bellacosa, J.)

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