Jay Dreher Corporation v. Delco Appliance Corp.

• Decision Date: 06 December 1937
• Docket Number: No. 53.,53.
• Parties: JAY DREHER CORPORATION v. DELCO APPLIANCE CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

93 F.2d 275 (1937)

JAY DREHER CORPORATION v. DELCO APPLIANCE CORPORATION.

No. 53.

Circuit Court of Appeals, Second Circuit.

December 6, 1937.

Epstein & Brothers, of New York City, for appellant.

John Thomas Smith, of New York City (Albert M. Levert, of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

This is an appeal from a judgment dismissing a complaint at law for insufficiency upon its face. The plaintiff alleged that he and the defendant had entered into a contract in writing on January 2, 1933, which they later modified in certain particulars, and which the defendant repudiated on April 28, 1933. The action was for the damages suffered by the breach; and the result turns upon the meaning of the contract, which so far as material is as follows. The defendant, a manufacturer, "grants to Distributor," the plaintiff, "the franchise to sell" certain of its products "and repair and replacement parts within the following territory", which "it is agreed that Company," the defendant, "may at any time reduce, enlarge or otherwise change." The plaintiff "accepts the above franchise to sell * * * and agrees to make all sales hereunder in accordance with this agreement." He "further agrees to work and develop to the satisfaction of Company the aforementioned territory and not to sell" certain of the products "or repair and replacement parts outside thereof." "This agreement shall continue in force and govern all relations * * * until cancelled. * * * Either party may cancel or terminate this agreement at any time, with or without notice." The defendant "reserves the right to sell any of its products to the United States or any Foreign Government or any Department or Bureau thereof" and "where the Delco-Appliance Product is installed permanently in the territory of Distributor, the gross profit * * * will be credited to Distributor in whose territory the Delco-Appliance is installed. On portable installations the profit will be retained by Company." The plaintiff is to "see that" government installations in his territory go forward promptly and that all repairs are promptly made. The defendant also reserves the power to sell its products to the General Motors Corporation, or its affiliates, and a general power to sell as it pleases to "manufacturers or national users for their use." The plaintiff agrees not to sell products which are to be installed in other countries and to "turn over prospects for such sales to Company." "All orders * * * received * * * by Company are subject to acceptance by Company" and the defendant agrees "to fill accepted orders as promptly as practicable," but the plaintiff "expressly releases Company from liabilities for any loss or damage arising from failure of Company to fill any orders of Distributor." The plaintiff agrees to "provide and maintain at his own expense an efficient installation and maintenance service on all" products "installed in the aforesaid territory" and "to see that all necessary repairs * * * are promptly made." He also "agrees to maintain a place of business, display room and service department * * * to have his books audited * * * by a competent accountant or auditor, and to furnish a certified copy of such audit" to the defendant. The plaintiff "in accepting this agreement agrees to work and develop to the satisfaction of Company said territory and in doing so agrees to appoint Dealers, Salesmen and other Representatives to sell" the products. The contract is to be governed by the law of New York, and the defendant reserves the power to change its models and prices at pleasure. The complaint alleged that after this contract had been executed on January 2, 1933, the parties agreed to eliminate the mutual power of cancellation, and that the defendant's power to modify the plaintiff's "territory" should not "materially alter the allotment specified."

Although the judge did not write any opinion, we assume that his reason for dismissing the complaint was because the contract lacked mutuality, or definiteness, or both. In this, as it seems to us, he failed to consider the scope of our decision in Moon Motor Car Co. of New York v. Moon Motor Car Co., 29 F.2d 3. We did not there decide that the manufacturer impliedly promised to furnish all the cars that the dealer promised to take. The dealer's promise was therefore not an essential factor in the result; it was the manufacturer's undertaking not to employ any other dealer in the territory that was the "detriment" and the consideration; and the only question which can arise as to the promise of the defendant at bar is whether it intended to "grant" an exclusive "franchise." In terms it did not do so, but that was what it meant, and what the plaintiff expected. A priori it may be possible to have two dealers in the same territory, but the reservation to the defendant of the power to sell to enumerated persons was quite unnecessary, unless the plaintiff was to be an exclusive dealer; and there would have been no need for a cancellation clause, if the defendant had been able to sell as it pleased within the territory. Moreover, it was most unlikely that the plaintiff should have been held to his territory, if it was not to be truly his. Such being the defendant's promise, there was consideration for it moving from the plaintiff. He agreed to "work and develop the territory," to engage salesmen and the like, "to provide and maintain at his own expense an efficient installation and maintenance service," "promptly to attend to all repairs," and, as we have just said, not to...