Philip Carey Mfg. Co. v. General Products Co.

• Decision Date: 27 May 1959
• Docket Number: No. 9955,9955
• Citation: 89 R.I. 136,151 A.2d 487
• Parties: THE PHILIP CAREY MANUFACTURING COMPANY v. GENERAL PRODUCTS COMPANY. Ex.
• Court: Rhode Island Supreme Court

Page 487

151 A.2d 487

89 R.I. 136

THE PHILIP CAREY MANUFACTURING COMPANY v. GENERAL PRODUCTS COMPANY.

Ex. No. 9955.

Supreme Court of Rhode Island.

May 27, 1959.

Edwards & Angell, Edward F. Hindle, Stephen A. Fanning, Jr., Ronald R. Lagueux, Providence, for plaintiff.

Semonoff & Semonoff, Judah C. Semonoff, Providence, for defendant.

PAOLINO, Justice.

This is an action of assumsit for breach of contract. It was tried before a justice of the superior court sitting with a jury and resulted in a verdict for the plaintiff in the sum of $28,948.32. The case is before us on the defendant's bill of exceptions to the denial of its motion for a directed verdict, to rulings granting the plaintiff's motions for a directed verdict on two counterclaims filed by the defendant, to a ruling denying the defendant's motions to submit to the jury its requests for two special verdicts, to the denial of certain instructions requested by the defendant, and to certain portions of the charge to the jury.

The declaration is in two counts. The first count alleges in substance that the parties entered into a contract on July 9, 1953, whereby plaintiff agreed to purchase from defendant 19,487 medicine cabinets, represented by defendant to be in its possession, at a price of $8 per cabinet; that at no additional cost the cabinets were to be stored by defendant in its warehouse and were to be shipped on plaintiff's order; that payment for such cabinets was to be made by plaintiff in six monthly installments beginning in July 1953; that plaintiff paid for the cabinets within such time; that thereafter it ordered out a certain number of the cabinets which defendant shipped accordingly; and that defendant failed to deliver the balance of 3,271 cabinets on plaintiff's order, by reason of which defendant was indebted to plaintiff in an amount equal to the purchase price paid by plaintiff for the 3,271 cabinets. The second count contains certain of the common counts.

In addition to the plea of the general issue defendant filed two special pleas, the first alleging that the cabinets were held at plaintiff's risk and the second alleging that defendant is and has been ready, able, and willing to deliver the balance of the cabinets. The defendant also filed two counterclaims. Thereafter plaintiff filed replications to the special pleas and pleas to the counterclaims.

Although defendant has filed numerous exceptions we shall consider only those which it has briefed or argued. Accordingly we shall only refer to such portions of the record as are pertinent to the issues raised by these exceptions.

The plaintiff is a manufacturer of steel medicine cabinets. The defendant is in the plastics business. In 1952, after prior negotiations, the parties entered into an agreement for the manufacture by defendant of plastic medicine cabinets to be sold to plaintiff. The agreement consisted of a purchase order dated January 11, 1952 signed and sent by plaintiff to defendant and the latter's letter of acceptance dated January 14, 1952. For the purposes of this discussion we shall accept defendant's interpretation of this agreement. The defendant claims that such agreement was a contract for the purchase of 25,000 cabinets in six months at $9 each and that it required plaintiff to order the same shipped out within such time at said price, to be paid for ' 1/10-net 30.' The agreement contained warranties relating to materials and workmanship. It provided that defendant was not to sell the cabinets which were covered by plaintiff's order to anyone except one other outlet for a period of six months after initial production shipments were made.

It appears from the evidence that plaintiff encountered certain difficulties in marketing the cabinets which it claimed were due in part to faulty construction, inadequate packaging and price. This situation resulted in plaintiff ordering shipped out from defendant's warehouse only about 5,500 cabinets in the period of approximately one and a half years from the date of the agreement. The defendant was disappointed at the scarcity of orders and in the latter part of 1952 the parties began to confer in person and by correspondence for the purpose of arriving at a mutually satisfactory solution of their difficulties. There is no doubt that thereafter the parties made serious efforts for their mutual benefit to solve these problems. In the correspondence and at the conferences they discussed mainly the questions of production and packaging improvement, storage arrangements, and insurance, price and method of payment. Throughout these discussions defendant represented to plaintiff that it had manufactured 25,000 cabinets in accordance with the January 1952 agreement and that it had in inventory 19,487 cabinets at the time these negotiations were being carried on.

Finally, on July 3, 1953, as a result of the aforesaid negotiations, plaintiff wrote to defendant stating in substance that it accepted the following proposals which the parties had theretofore discussed at a conference held at defendant's office on June 23, 1953: A price reduction from $9 to $8 per cabinet for the 19,487 cabinets represented by defendant to be in inventory; assumption by plaintiff of insurance charges covering said cabinets; warehousing of the same by defendant at no cost to plaintiff; insertion by defendant of additional packing in each carton in inventory; payment by plaintiff for the 19,487 cabinets in six equal monthly payments beginning in July 1953; and continued warehousing and shipping after 1953 at no cost to plaintiff, if plaintiff had not sold all of the cabinets by the end of 1953.

On July 9, 1953 defendant wrote to plaintiff acknowledging receipt of the July 3 letter and accepting the proposals contained therein. Thereafter plaintiff made the monthly payments required by said contract and paid in full for the 19,487 cabinets which defendant had represented to be in inventory. It also appears that in July 1953 plaintiff covered the cabinets in question by insurance.

Following the exchange of letters in July 1953 plaintiff continued its efforts to market the cabinets and disposed of certain quantities from time to time. Finally, in the early part of 1956, plaintiff sold to Anthony Dumas for $32,000 the balance of 11,416 cabinets which, according to the representations made by defendant, were supposed to be in defendant's warehouse. These representations were based on defendant's sworn statements of physical inventories taken by it at various times. During the period from February 1956 to June 5, 1956 defendant shipped a quantity of cabinets in response to orders by plaintiff on behalf of Anthony Dumas. It appears that Mr. Dumas had sold the 11,416 cabinets to another purchaser. But on June 5, 1956 defendant was unable to deliver the balance of 3,271 cabinets which should have been in its warehouse, but in fact were not there.

The defendant acknowledged the shortage but was unable to explain it. However, it offered to replace the cabinets and informed plaintiff that it could do so within two or three weeks if plaintiff would furnish certain quantities of mirrors and cartons. On the other hand, if plaintiff would not furnish these, defendant stated it would procure them, and in that event it would be a matter of thirty days or so before shipment could be made. The plaintiff notified defendant that it would not accept any replacements since its customer had cancelled the contract with plaintiff. The parties failed to get together and subsequently plaintiff commenced the instant action.

Under point I, which is based on defendant's exception 7, it contends that the trial justice erred in denying the motion for a directed verdict. The defendant argues that the evidence fails to disclose that a binding contract was entered into in July 1953, as alleged in the declaration. In substance it claims that under the January 1952 agreement plaintiff was legally bound to perform all the promises which it undertook in the July 1953 arrangement; that consequently no legal consideration moved from plaintiff to defendant under said arrangement; that, lacking legal consideration, no binding or enforceable contract resulted from the July 1953 correspondence; and that therefore a verdict should have been directed for defendant.

We do not agree with this contention. Whatever may have been the obligations of the parties under the 1952 agreement, they clearly waived their rights thereunder and entered into a new contract. Hereafter this will sometimes be referred to as the 1953 contract. It is clear from the evidence that the difficulties encountered by plaintiff under the 1952 agreement resulted in part from faulty construction and inadequate packaging. The defendant acknowledged this and got together with plaintiff to correct the situation. The defendant, on the other hand, was vitally interested in creating a public demand for plastic cabinets and it suffered a financial hardship from plaintiff's alleged failure to withdraw the cabinets within six months.

Both parties forbore whatever legal claims they may have had against each other under said agreement and compromised their differences for their mutual benefit, each giving up rights which it claimed it had and each receiving benefits to which it may not have been entitled. This forbearance on the part of each was valid consideration to support the promises made in the July 1953 correspondence and resulted in a novation which extinguished the 1952 agreement. Both parties clearly assented to the new obligations. The adequacy of the consideration is not material. Salvas v. Jussaume, 50 R.I. 75, 145 A. 97.

As was said in Bicknall v. Bicknall, 27 R.I. 429, at page 430, 62 A. 976, at page 977: 'Novation is the substitution of a new obligation for an old one which is thereby extinguished. * * * Since novation is the extinguishment of one obligation and the foundation of another, it requires...