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Fontaine v. Sidelines IV Inc.

Defendants did not breach their loan agreement with plaintiff by refusing to enter into a second loan, since the loan agreement did not obligate defendants to borrow additional funds.

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On August 13, 1996, Steven Katzenstein made an oral agreement with Charles E. Fontaine to borrow $100,000 at 18 per annum, repayable in sixty equal installments with a promissory note secured by the pledge of all stocks issued to Katzenstein in a corporation to be formed, Sidelines IV, Inc., which would lease and operate a sports bar. They further agreed that Fontaine would have the option to loan the defendants an additional $175,000 at 15 per annum, repayable in sixty months in equal installments; that if a second loan was made by Fontaine, then he would receive a consulting agreement for the sports bar of $50,000 per annum or 2.5 of the gross sales, whichever was greater, for the duration of the lease. This was memorialized in the executed Loan Agreement.

On August 14, 1996, Katzenstein received the $100,000 and executed this contract captioned Loan Agreement, which contained all the provisions and terms of their first loan and possible second loan, and the Promissory Note. However, Katzenstein refused to execute two additional contracts; one was only captioned “Agreement” and the other contract was captioned “Consulting Agreement.” Katzenstein refused to sign the additional contracts, because the percentage for the consulting fee had been increased from what they had previously agreed as this amount.

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