Napsco International v. Tymshare

Citation: Napsco Int'l, Inc. v. Tymshare, Inc., 556 F. Supp. 654 (E.D. La. 1983)

Factual Background
Napasco International, Inc. (“Napasco”) a manufacturer of chemical products, was looking for a new computer system by which it could manage its inventory and finances. Napasco was interested in receiving a large bank loan, and as a condition of the loan, Napasco would have to provide the bank with timely financial statements &mdash; something it could not do with its current manual system of financial calculation.

Napasco contacted Tymshare, Inc. (“Tymshare”) a remote computer services company, to get information about its “Manufacts” accounting system]. Tymshare conducted surveys and research regarding Napasco’s needs, and it presented Napasco with a comprehensive proposal. The proposal outlined the specifications of the Manufacts system and what it would do for Napasco’s problems, detailed the installation process and timeline, and listed the modules to be installed and itemized the cost of each module. The last page of the proposal was entitled “Acceptance” and required both parties to provide signatures to evidence consent. Napasco and Tymshare represenatives signed the proposal and Tymshare began the installation process.

The proposal set a deadline for installation of the system’s inventory module. When Tymshare began modifying the module to the specifications requested by Napasco, it realized that it may not be able to make these modifications in the time and for the price Napasco wanted. Arguments ensued between the two companies and Tymshare’s supervisor Chris Busch contacted Napasco’s comptroller and told him that “in the best interest of both parties” installation of the modules would not be continued. No money had been paid by Napasco to Tymshare.

On June 8, 1981, Napasco filed suit against Tymshare for breach of contract.

Trial Court Proceedings
The District Court held that Napasco and Tymshare had entered into a valid contract when the proposal was signed and that the contract was breached when Tymshare notified Napasco that it was not going to continue with the module installation. The Court reasoned that because there was a valid contract, Tymshare had a duty to respond to Napasco’s requests for modifications because it was the party with greater expertise. Since Tymshare had spent time researched Napasco’s needs and problems it should have known whether or not it was capable of competently addressing those problems.

Further, the Court held that the breach was not done in bad faith because there was no evidence to suggest bad faith and both parties worked “diligently” toward implementation of the Manufacts system.

Finally, the Court declined to award damages for Napasco’s loss associated with Tymeshare’s failure to provide a proper inventory control and cost control system. The Court reasoned that since Napasco was not entitled to recover because it failed to provide an adequate estimation of damages. However, the Court held that Napasco was entitled to damages for certain out-of-pocket and unreimbursed expenses it incurred throughout the installation process. The Court reasoned that time expenses for Napasco employees working with Tymeshare employees, money for employee travel expenses and other costs associated with the module installation were recoverable.