Three lessons in Viacom v Wixon Jewelers: (1) Beware of breaches in multi-year ad contracts. (2) Testify carefully because what you say may be used against you. (3) Thank goodness for appellate courts. Here are the facts.
- In 2005 Viacom signed three one year sales contracts with Wixon Jewelers for space on a trivision. The first contract was for $4,050/month ($1,350/face for for all three trivision spaces) from January 2004 to January 2005; the second contract was for $4,050/month for January 2005 to 2006; the third contract was for $4,050/month for January 2006 to January 2007.
- The Viacom trivision malfunctioned 25 times during the first year of the contract, often for days at a time. In May 2007, Viacom offered Wixon a 50% reduction for June and notified that it was probably going to convert the trivision to a static billboard. In August Wixon stopped making payments.
- In November Viacom told Wixon it would convert the trivision to a static billboard and offered Wixon a new contract at $4,050/month for the static billboard.
- Wixon countered that the billboard contract should be $1,350/month because only one face was involved. Viacom rejected the counter and removed Wixon’s ad.
- Viacom sued Wixon for failure to pay the contract from August on. Wixon countersued for damages due to breach of contract and asked for a refund of $10,125 of the $26,235 it had paid under the contract
- In November 2009 a New York Supreme Court excused Wixon from paying Viacom because the faulty trivision constituted breach of contract. The Supreme Court went on to award damages of $142,800 to Wixon. A Viacom account executive had testified under deposition that the market value of the static billboard was $10,000/month. The Supreme Court remarkably took $10,000/month market value mentioned by the Viacom account exec less the $4,050/month Wixon had agreed to pay and considered the surplus of $5,950/month as damages due Wixon through the remaining life of the contracts!
- In March 2011 a New York Appellate Court vacated all damages, stating that Wixon had “failed to present any evidence of damages resulting from the breach.”
Insider’s take: Get your multiyear ad contracts right because damages can add up to a huge number the longer the contract is. If you are ever deposed just answer the questions with short direct answers: Yes. No. I don’t know. What you say can be used in surprising ways. The Viacom account executive may have been throwing out a $10,000/month fair market value under deposition to show how reasonable Viacom was being with Wixon by agreeing to rent the billboard for $4,050. The New York Supreme Court wanted to use the $10,000/m0nth figure to compute damages for a breached ad contract.
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