In Midwest Energy Consultants, Inc. v. Covenant Home, Inc., a court held that a contract of indefinite duration is terminable at will. The plaintiff, Midwest Energy Consultants, Inc. (“Midwest”), assisted its clients in recovering past electrical overcharges and reducing future utility bills. On December 2, 1993, Midwest and the defendant, Covenant Home, Inc. (“Covenant”), entered into a written agreement where Covenant agreed to pay Midwest 50% of any refunds or credits Midwest received from Commonwealth Edison (“ComEd”) and 50% of any savings Covenant obtained for three years based on Midwest’s efforts.
After reviewing Covenant’s electrical bills and thirty years of ComEd’s billing and metering practices, Midwest determined that ComEd had overcharged Covenant more than $4.7 million. In October 1994, Midwest and Covenant presented ComEd with Covenant’s claim for the overcharges and demanded a refund.
ComEd rejected all but $81,400 of the refund. ComEd continued its investigation of the overcharges and the parties continued to negotiate a settlement of Covenant’s claims. In July 1996, the negotiations ceased because the parties were unable to agree on a proper refund. Midwest and Covenant agreed to hire attorneys to pursue Covenant’s claim against ComEd. After having been retained, one of the attorneys advised Covenant that Midwest had been discredited before the Illinois Commerce Commission (“ICC”) and recommended it terminate its contract with Midwest and that it retain another consultant on an hourly basis.
Midwest was unaware of Covenant’s attorneys’ advice and its retention of another consultant. Midwest was under the belief that Covenant was preparing to file its claim against ComEd. In January 1997, Covenant advised Midwest that it had retained another consultant and that Midwest was terminated. Midwest was later advised by Covenant that it was not going to share any refund it received from ComEd because Midwest had been terminated. Covenant ultimately did not receive a refund because it failed to file a timely proceeding against ComEd before the ICC, and thus, ComEd refused to offer any money to settle Covenant’s claim.
In January 2000, Midwest filed a complaint alleging that Covenant had breached its contract with Midwest by violating the implied covenant of good faith and fair dealing when Covenant replaced Midwest with another consultant. Midwest’s complaint also asserted a right to recover damages based upon the theory of quantum meruit. Since the contract was one of indefinite duration, the court held that the contract was terminable at will by Covenant and thus could be terminated for any reason. Because the duty of good faith and fair dealing does not override the right to terminate a contract at will, the court found Covenant could terminate the contract for any reason and at any time and thus had not breached its contract with Midwest.
The court also rejected Midwest’s quantum meruit claim. This doctrine is based on the principle that one party should not be unjustly enriched at the expense of another. A claim for quantum meruit, however, cannot arise when there is a contract. Since the parties had in fact entered into a contract, the court rejected Midwest’s argument.
As the Midwest Energy case demonstrates, where a contract has no duration it can be terminated at any time for any reason. If you have any questions regarding the termination of a contract, please contact a member of the firm.