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Note: In connection with a Trademark License Agreement (Agreement), Honeywell International, Inc. (Licensor) granted Northshore Power Systems, LLC (Licensee) an 8 year exclusive license to use of its name on residential power generators. The Agreement contained various schedules regarding royalty payments. Paragraph 3.4 required Licensee to post a US$3.5 million standby letter of credit in favor of Licensor.

When Licensee failed to fulfill many of its obligations under the Agreement, including tendering the required standby, Licensor sued it for breach of contract. On Licensee's motion to dismiss, the Supreme Court, New York County, Fried, J., denied the motion regarding the failure to tender a standby.

Licensee argued that the claim for failure to tender a standby should be dismissed because the payments that were to be secured by the standby were current and therefore the failure to tender the standby resulted in no damages to the Licensor.

The Judge ruled that New York law provides that failure to provide a contractually-required letter of credit gives rise to breach of contract and damages. The Judge concluded that Licensor stated a cause of action for breach of the Agreement and alleged damages from Licensee's failure to tender the standby and is arguably entitled to pursue vesting and pro rata damages resulting from that failure.

[JEB/nso]

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