Shell Oil Co. v. Marinello

In 1959, Frank Marinello (plaintiff) entered into an agreement with Shell Oil Company (defendant) to lease and operate a Shell service station. At the same time, Shell and Marinello entered into a dealer agreement that provided that Shell would supply Shell products to Marinello for resale at the Shell service station operated by Marinello. The lease was regularly renewed. In 1969, the lease was renewed for a three-year term from April 1969 through May 1972, becoming a year-to-year lease after May 1972. The lease was subject to termination by Marinello at any time with ninety days’ notice and by Shell at the end of the three-year period with thirty days’ notice. The dealer agreement was likewise regularly renewed to coincide with the time period of the lease agreement and was subject to termination at any time with ten days’ notice. In April 1972, Shell notified Marinello that it was terminating the lease and dealer agreements effective May 1972. Marinello sued. The court sided with Marinello, ruling that the lease and dealer agreement contained an implied covenant by Shell not to terminate the agreements without good cause. The court also held that Marinello had substantially performed obligations to Shell required under the agreements and that Shell did not have good cause to terminate the agreements. Shell appealed.