Prima Paint Corp. V. Flood & Conklin Mfg. Co. - Background of The Case - Instant Dispute

Instant Dispute

Under this framework, in 1964 Prima Paint, of Maryland reached an agreement with Flood & Conklin, a New Jersey paint manufacturer, to purchase the latter's paint business for a percentage of receipts in annual payments of up to $225,000 over a six-year period. In return, Flood & Conklin agreed that its CEO, Jerome Jelin, would personally provide consulting services for Prima and that it would not sell to any of its former customers while the agreement remained in force. Two contracts governed the transaction; both had arbitration clauses.

One week after the contracts were executed, Flood & Conklin declared bankruptcy. In 1965, shortly before the first of its annual payments was due, Prima paid its first installment into an escrow account and told Flood's attorneys that it considered the consulting agreement breached. F & C responded with a notice of intent to arbitrate. Near the end of its permitted response period, Prima instead petitioned the Southern District of New York to rescind the contracts and enjoin Flood & Conklin from arbitration. Since that company had represented itself as solvent during the negotiations only to go bankrupt shortly after signing the deal, Prima argued, the contracts had been fraudulently induced and thus the arbitration clauses by extension could not be enforced.

Read more about this topic:  Prima Paint Corp. V. Flood & Conklin Mfg. Co., Background of The Case

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