MMWEC v. MASSPOWER

(Massachusetts Appeals Court)

• Upholding Parties' Contract Rights

NELF filed an amicus brief in support of MASSPOWER in this case before the Massachusetts Appeals Court.  The case involves construction of the termination provision in MASSPOWER’s power supply contract with MMWEC, which permits MMWEC to terminate the agreement only for a material breach that materially and adversely affects MMWEC.  Similar language, setting forth dual requirements of materiality and adverse effect, is used in termination clauses and other provisions in many corporate transactional, real estate, and commercial agreements.  Judge Gants issued a decision below, in the Superior Court’s Business Litigation Session, in which he effectively nullified the second requirement of the termination provision at issue—that the material breach have an adverse effect on the terminating party—by ruling that, by definition, any material breach of a material contract term adversely affects the non-breaching party.   Judge Gants further suggested that it would somehow be “irrational” to require demonstration of adverse effect beyond the loss of the contractual right inherent in the material breach.  As NELF argued in its brief, Judge Gants’s construction of the parties’ agreement is inconsistent with the plain language and obvious intent of such restrictive termination clauses and would introduce uncertainty into a great many contractual relationships based on agreements containing similar language.  NELF argued, moreover, that affirmance of Judge Gants’s decision could discourage the construction of major projects in the Commonwealth, including energy facilities, that depend on enforcement of contract obligations for payment of capital and financing costs and to provide returns on investments.