Wagner Excello Foods, Inc. v. Fearn Intern., Inc.

Citation235 Ill.App.3d 224,176 Ill.Dec. 258,601 N.E.2d 956
Decision Date04 September 1992
Docket NumberNo. 1-91-1566,1-91-1566
Parties, 176 Ill.Dec. 258, 20 UCC Rep.Serv.2d 1221 WAGNER EXCELLO FOODS, INC., an Illinois corporation, Plaintiff-Appellant, v. FEARN INTERNATIONAL, INC., Defendant-Appellee.
CourtUnited States Appellate Court of Illinois

Norman P. Jeddeloh and Michael A. Kraft of Siegan, Barbakoff & Gomberg, Chicago, for plaintiff-appellant.

Barry T. McNamara and David P. von Ebers of D'Ancona & Pflaum, Chicago, for defendant-appellee.

Presiding Justice EGAN delivered the opinion of the court:

The plaintiff, Wagner Excello Foods, Inc., appeals from orders dismissing its complaints against the defendant, Fearn International, Inc. The first complaint alleged breach of contract and promissory estoppel. After that complaint was dismissed, the plaintiff filed an amended complaint alleging only breach of contract. That amended complaint was also dismissed.

Because the complaints were dismissed pursuant to section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1989, ch. 110, par. 2-615), the factual allegations of the complaints are taken as true. Our recitation of the facts is based on the complaints.

The plaintiff and the defendant entered into a five-year agreement on February 1, 1985. Under the terms of the agreement, the plaintiff agreed to manufacture for the defendant various pasteurized fruit drink concentrates with a juice content of less than 35 percent. The plaintiff was to manufacture the concentrates from formulas supplied by the defendant and was to package the concentrate according to the defendant's specifications.

The agreement contained minimum quantity purchase requirements: the defendant was to purchase 150,000 cases of concentrate of assorted varieties the first year, 300,000 cases the second year, and at least 450,000 cases in each of the final three years.

The agreement did not establish the price at which the concentrate would be sold. Instead, it provided that the plaintiff and the defendant would review the price per case of each product every four months. Thirty days before the end of each four month period, the plaintiff was required to notify the defendant of, and substantiate, any proposed price changes for the upcoming period. If the defendant failed to object to the proposed price change, the new price would go into effect. If the defendant objected, however, the plaintiff and the defendant would seek to "mutually agree" on the price change. If the plaintiff and defendant were unable to agree on a price, the agreement terminated 30 days after the end of the four month period. At the end of five years, the agreement would automatically extend on a year-to-year basis until one party terminated through written notice between 120 and 90 days before the expiration of the agreement or its extension.

After the agreement was signed, the plaintiff hired additional employees and bought equipment, including machinery, necessary to package the concentrate as the defendant instructed. The purchase of the equipment and additional employees cost the plaintiff $900,286. The plaintiff purchased the equipment and hired the additional employees "solely in contemplation of a continuing business relationship" with the defendant.

During the first year of the agreement, the defendant purchased only 28,823 cases of concentrate from the plaintiff, far short of the agreed 150,000 cases (19.2% of the required amount); in the second year, the defendant purchased only 35,927 cases (12% of the required amount); in the third year, the defendant purchased 40,196 cases (8.9% of the required amount).

Near the end of the third year of the agreement, the plaintiff and defendant executed a revised agreement on January 20, 1988. The revised agreement stated that it did not alter or modify the previous agreement except as provided in the revised agreement. The revised agreement stated that it evolved from several meetings between the parties and reflected "understandings between the parties as to pricing and other conditions" which were noted in the revised agreement. We judge that the primary purpose of the revised agreement was to establish a method for fixing orange juice concentrate prices.

Specifically, the parties agreed that "[c]oncentrate prices were rising with [o]range [juice] experiencing the largest increases * * * " and that the parties would "discuss pricing and conditions outside the calendar dates specified in existing agreements." The agreement also contained the following language:

"We are satisfied with the volume of sales we have achieved on juice products[;] however, Fearn believes passing cost increases on to its customers at the present time would hurt sales."

The revised agreement provided that orange juice prices would be determined by the future prices as published by the Wall Street Journal on certain specified dates and that the agreement would expire on December 31, 1988, if notice of termination was given by November 1, 1988. If notice of termination was given after November 1, 1988, the agreement would expire 60 days after either party notified the other of termination.

In the ten months after the revised agreement was executed, the defendant purchased 32,078 cases (7.1% of the required amount of 450,000). On November 16, 1988, the defendant notified the plaintiff of its intent to terminate their relationship effective at the end of the year. Consequently, the defendant did not purchase any juice for what would have been the fifth year of the initial agreement.

On April 23, 1990, the plaintiff filed a complaint containing two counts: count I was a breach of contract claim which sought in excess of $3,000,000 for profits lost due to the defendant's failure to meet the minimum purchase guarantee over the entire five years of the agreement; count II was captioned "Quantum Meruit," but the parties now agree that it was actually a promissory estoppel claim. In this count, the plaintiff alleged that it had "expanded its plant, purchased additional equipment, and retained services of additional employees" in reliance on the defendant's "promises and representations with respect to volume of total business." The plaintiff alleged that as a result of this reliance, substantial additional costs were incurred, that the defendant knew of these additional costs, and that the defendant did nothing to prevent the plaintiff from incurring these costs. The plaintiff alleged that the initial agreement's exclusivity provision prevented it from reducing its dependency on the defendant and sought $900,286 in damages.

The defendant filed a motion to dismiss the complaint under section 2-615 of the Illinois Code of Civil Procedure. (Ill.Rev.Stat.1989, ch. 110, par. 2-615.) In response to the breach of contract claim the defendant contended that (1) the initial agreement between the parties was merely an agreement to agree as there was no fixed price and the agreement would terminate in the absence of an agreement on price by the parties; (2) the revised agreement constituted a novation of the original agreement; and (3) the plaintiff waived its right to enforce the minimum quantity terms of the agreement.

In response to the plaintiff's promissory estoppel claim, the defendant contended that the plaintiff had waived its claim or that the revised agreement's novation of the initial agreement barred recovery.

On October 24, 1990, Judge Alan J. Greiman entered an order dismissing both counts of the plaintiff's complaint. Judge Greiman found that the plaintiff had alleged a valid contract; that the revised agreement, however, either modified or supplanted the original agreement; and that the particular characterization of the revised agreement was not relevant because, whatever the characterization, the minimum quantity guarantees had been waived. He concluded that the plaintiff had no breach of contract cause of action for any sales prior to the revised agreement. He dismissed the contract claim but gave the plaintiff leave to amend to seek damages for sales after the revised agreement.

Judge Greiman then dismissed the plaintiff's promissory estoppel claim with prejudice. He determined that the plaintiff's reliance on the defendant's promise was not reasonable as a matter of law; he said that it was unreasonable for the plaintiff to expend almost a million dollars in reliance on such short-term contracts.

On October 31, 1990, the plaintiff filed an amended complaint that included only the breach of contract count, which strongly resembled the count dismissed by Judge Greiman, except for the amount of damages sought. In response to the plaintiff's amended complaint, the defendant filed a second section 2-615 motion and again contended that the initial agreement was merely an agreement to agree and that the quantity requirements contained in the agreement were modified by the revised agreement.

On April 15, 1991, Judge Jerome T. Burke dismissed the plaintiff's amended complaint with prejudice. Judge Burke found the minimum quantity requirements "did not survive the signing of the revised agreement." Judge Burke stated that the parties' course of conduct also supported a waiver of the minimum quantity requirements.

The plaintiff appeals Judge Greiman's order dismissing part of the contract claim and the promissory estoppel claim with prejudice and Judge Burke's order dismissing the remainder of the contract claim with prejudice. We will first address the appeal of Judge Greiman's order.

The defendant maintains that there was no contract of five years duration because the price was not settled at the time the agreement was made; instead, every four months the parties entered into a new contract when they agreed to a price. In substance, it is the defendant's position that the parties actually entered into an agreement to agree which was not a binding contract.

To be enforceable, a contract must show a manifestation...

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