Sons of Thunder, Inc. v. Borden, Inc. 690 A.2d 575 (N.J.

1997)  
Ships and Liability Passing in the Night?  
Facts  
Borden, Inc., owned Snow Food Products Division, a leading producer of clam products. Wayne
Booker, a manager for Borden, asked Mr. Donald DeMusz to undertake the Shuck-at-Sea
program. Mr. DeMusz submitted a proposal that Mr. Booker and other executives approved.  
An internal company memo from Mr. Booker included the following paragraph along with a
description of how Mr. DeMusz’s purchase of a boat would save money:  
[W]e still have a significant mutual interest with DeMuse [sic]. His principal business will still
be in chartering the Snow fleet and in captaining Arlene. He needs a dependable customer for
the clams that he catches, either shell stock or meat. If we terminate our agreement with him, he
would have a hard time making the payments on his boat.  
Mr. DeMusz drafted a one-page contract, and Mr. Booker approved it with one small change.
Mr. DeMusz then formed Sons of Thunder, Inc., with Bill Gifford and Bob Dempsey in order to
purchase the second boat. The final contract was entered into on January 15, 1985, and included
the following provision:  
IT IS understood and Agreed to by the parties hereto that Snow Food Products shall purchase
shell stock from Sons of   
Thunder Corp. for a period of one (1) year, at the market rate that is standardized throughout
the industry. The term of this contract shall be for a period of one (1) year, after which this
contract shall automatically be renewed for a period of up to five years. Either party may cancel
this contract by giving prior notice of said cancellation in writing Ninety (90) days prior to the
effective cancellation date.  
Sons of Thunder Corp. will offer for sale all shell stock that is landed to Snow Food.   
In March 1985, Sons of Thunder bought a boat, the Sons of Thunder. The cost to rig and
purchase the boat was $588,420.26. Sons of Thunder sought financing from First Jersey National
Bank but was unable to ob- tain a loan until Mr. Booker told the bank representative that Mr.
DeMusz had a solid relationship with Borden and that although the contract could be terminated
within one year, Borden expected the contract to run for five years. Ultimately, Mr. DeMusz
obtained a $515,000 loan, which he, Mr. Gifford, Mr. Dempsey, and their spouses personally
guaranteed.  
For most weeks, the records show that Borden did not buy the minimum amount specified in the
contract. Problems continued and the relationship soured. When Borden discovered that a
$500,000 accounting error had actually overstated the benefits of the Shuck-at-Sea pro- gram,
Borden exercised its termination rights under the contract.  
Mr. DeMusz, stuck with a boat and a loan and no customer, filed suit. Borden moved for
summary judg- ment on the grounds that it had properly exercised its termination rights. The jury
found for Mr. DeMusz, the court of appeals affirmed, and Borden appealed.  
Judicial Opinion  
GARIBALDI, Justice 
The obligation to perform in good faith exists in every contract, including those contracts that
contain express and unambiguous provisions permitting either party to terminate the contract
without cause.  
Borden knew that Sons of Thunder depended on the income from its contract with Borden to pay
back the loan. Yet, Borden continuously breached that contract by never buying the required
amount of clams from the Sons of Thunder. Borden’s failure to honor the contract left Sons of
Thunder with insufficient revenue to support its financing for the Sons of Thunder.  
Borden was also aware that Sons of Thunder was guaranteeing every loan that Sea Work had
taken to finance the rerigging and purchasing costs for the [boat]. Thus, Borden knew that the
corporations were dependent on each other, and that if one company failed, the other would most
likely fail.  
The final issue is whether the jury’s assessment of $412,000, approximately one year’s worth of
additional profits, for the breach of the implied covenant of good faith and fair dealing was a
reasonable verdict. Specifically, can a plaintiff recover lost profits for a breach of the implied
covenant of good faith and fair dealing? We agree with Judge Humphreys that the jury’s award
of one year’s additional profits “is a reasonable and fair estimate of ‘expectation damages.’”
Moreover, we agree with the trial court that lost profits are an appropriate remedy when a buyer
breaches the implied covenant of good faith and fair dealing.  
Case Questions  
1. Explain the nature of the relationships between Mr. DeMusz and Borden.  
2. What impact does “good faith” have on termination of a contract?  
3. What are the damages when there is a lack of good faith in the termination of a contract?