Buttorff v. United Electronic Laboratories, Inc.

• Decision Date: 22 May 1970
• Citation: 459 S.W.2d 581
• Parties: 8 UCC Rep.Serv. 847 Gordon Stephen BUTTORFF, Appellant, v. UNITED ELECTRONIC LABORATORIES, INC., Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 581

459 S.W.2d 581

8 UCC Rep.Serv. 847

Gordon Stephen BUTTORFF, Appellant, v. UNITED ELECTRONIC LABORATORIES, INC., Appellee.

Court of Appeals of Kentucky.

May 22, 1970.

As Modified on Denial of Rehearing Nov. 13, 1970.

Kenneth L. Anderson, Woodward, Hobson & Fulton, Louisville, for appellant.

O. Grant Bruton, Middleton, Seelbach, Wolford, Willis & Cochran, Louisville, for appellee.

REED, Judge.

In this appeal we are confronted with several problems involving the law of contracts. The plaintiff appeals from the action of the circuit court by which a verdict in his favor in the amount of $14,197.50 was set aside upon the defendant's motion for judgment n.o.v.; a judgment was entered dismissing the plaintiff's claim; $2,697.50 had been paid by the defendant on a confessed judgment. We have concluded that the decision of the trial judge was partly correct but that the plaintiff should not have been deprived of the entire judgment in his favor; a retrial is necessary; confined, however, to the question of the proper amount of compensation to which the plaintiff was entitled. We, therefore, reverse the judgment and kremand the case for further proceedings as directed later in this opinion.

The plaintiff's action is for recovery of money allegedly due under an oral contract concerning the sale and marketing of a camera manufactured by the defendant and used primarily for security purpose by banks and other money-handling institutions as a protective device. The product is called 'Cam-eye.'

According to the plaintiff's evidence, in the latter part of January, 1961, he went to the office of the defendant, United Electronic Laboratories, Inc., for a job interview. He conferred with Mr. Rector, U.E.L.'s president at that time. It appeared that U.E.L. had successfully manufactured this product but had been unable to sell it. Plaintiff testified that he and Rector made an oral agreement sometime in the early part of February, 1961. It seems that plaintiff was initially associated with a man named Morton in the projected marketing of the camera but that a few months thereafter he and Morton concluded their relationship. Plaintiff says that his agreement with the defendant concerning the sale of cameras was reconfirmed in May of 1961.

Plaintiff's version of the agreement was that he was to develop a market for the sale of this product; he was to establish distributorships in each major population area. His pleadings recited that his compensation for his services was contained in the defendant's oral agreement to sell the product to him at a net price of $440 per camera, and that he would then resell the product to his customers at a price of $985, plus installation cost. Plaintiff's testimony, however, was that the orders for the product were always forwarded directly to the defendant which then shipped the purchased product to the customer and billed the customer direct. Upon collection from the customer, the plaintiff's commission, so to speak, computed at the difference recited herein, was remitted to him on several occasions by the defendant. The evidence for both parties also establishes that as to sales effected directly by plaintiff's efforts, the parties apparently reached an adjustment of proration where the actual sale price of the camera was less than $985, but where appears to be an issue between them as to the proper computation of the base price of the camera in certain instances where plaintiff's efforts directly effected the sale.

The plaintiff also testified that under the oral agreement he was to have an exclusive agency to sell or distribute this product unlimited as to territory. He was to receive, according to him, a commission on all cameras sold whether the sale was effected by him or not; he was also to receive an express percentage commission on the sale of all film furnished for use in all cameras sold during the period of the contract whether they were sold by the plaintiff or not. The plaintiff stated that this arrangement was to exist until the parties could agree on the terms of a written agreement to be thereafter executed. In substance, his testimony was that the arrangement between the parties was to exist until a negotiated, formalized, integrated agreement could be finalized.

The defendant, through the testimony of Rector, its then president, and the testimony of Jay who succeeded Rector as president, and the testimony of Manske, an attorney who represented plaintiff in negotiations about the terms of the written agreement, admitted part of the arrangement but vigorously denied other elements of the claimed oral agreement. In essence, defendant's proof sought to establish that the parties merely agreed to attempt to formulate a subsequent written agreement under which they could satisfactorily operate. According to defendant, no exclusive distributorship or agency was ever granted, principally because a sales quota which plaintiff would have to sell during a determined time period was the subject of difference between them.

Furthermore, defendant contended that the agreement to sell cameras did not commence in February of 1961, but rather commenced in May of 1961. The defendant admitted terminating the agreement to pay commission on sales effected by the plaintiff in March of 1962, for the express reason that plaintiff had not made sufficient progress in setting up a distributorship system. The letter of termination admitted owing plaintiff a commission on a particular sale and promised that the plaintiff's account would be brought up to date and that he would be paid the commission due.

The defendant first argues that there was no enforceable agreement between the parties because a contract between them was never formed. The problem presented is discussed by the late Judge Goodrich with his usual clarity and conciseness in Smith v. Onyx Oil & Chemical Co., 218 F.2d 104 (3d Cir.1955): 'If the parties intend not to be bound until a written memorial is executed by each, then they are not bound until that event takes place. On the other hand, although parties may intend to put their agreement in writing, it does not follow that they have not made a contract until the writing is completed and signed. * * * The emphasis of these two eminent writers (Williston and Corbin) is, it seems to us, inclined toward finding the formation of a contract prior to the signing of the document unless the parties pretty clearly show that such signing is a condition precedent to legal obligation. And since contract law has passed the formalism of elaborate doctrines pertaining to sealed instruments, it seems to us such emphasis is quite natural and quite correct.' (Parenthetical expressions supplied).

The evidence of both parties to the dispute here clearly shows to us that so far as the sale of cameras and the payment of commission were concerned, the signing of an agreement was not a condition precedent. The parties continued in this relationship for over a year. Cameras were sold and commission was paid. We think a contract was formed. The enforceability of it is another matter.

The defendant next asserts that the claimed agreement lacked mutuality of obligation in that plaintiff was obligated to do nothing. The question is thoroughly considered in Williston on Contracts, Third Edition, Sections 105 A and 1017 A. In David Roth's Sons, Inc. v. Wright and Taylor, Inc., Ky., 343 S.W.2d 389 (1961), we characterized the concept of mutuality of obligation as 'rather elusive.' In the instant case, when an obligation on the part of plaintiff to use his best efforts to sell the product is either found to be expressly agreed to as plaintiff says or if this obligation is necessarily implied and when it appears that the plaintiff agreed to not sell products similar to this one--then, even though the agreement be cancellable at the instance of either party, the parties were bound by mutual obligations in the respects enumerated for even a short period of time and the contract cannot be avoided by either party on this ground--particularly where the relief sought pertains to executed performance and not executory obligations. Cf. Fowler's Bootery v. Delby Shoe Co., 273 Ky. 670, 117 S.W.2d 931 (1938). We are of the opinion that the defense imposed by U.E.L. based on lack of mutuality of obligation is without merit.

The next argument advanced by the defendant and one on which it appears to place great reliance is that the agreement was unenforceable because of the 'sale of goods for the price of $500 or more' section of the statute of frauds which is now incorporated into the Uniform Commercial Code and is embodied as statutory law in Kentucky at KRS 355.2--201. Defendant argues that by the plaintiff's own pleadings the agreement between them was a sale of goods for a price of $500 or more. We are not so persuaded.

Anderson's Uniform Commercial Code, Vol. 1, Section 2--201:2, p. 93, points out that the pattern of the former Uniform Sales Act is continued in this new section except that the content of the writing is simplified, the exception of non-resellable goods is made more strict and the exception on giving something in earnest is deleted. Thus, we perceive no change in the basic law concerning whether a particular agreement is one for the sale of personal services or for the sale of goods.

Stone v. Krylon, Inc., 141 F.Supp. 785 (D.C.E.D.Pa.1956), held that where the agreement was for performance of certain personal services for the defendant corporation and the defendant corporation promised to grant the plaintiff an exclusive agency to sell certain goods, the contract was one for employment and the consideration for the services was not wages or salary but a valuable franchise. There the court refused to declare the agreement unenforceable by reason of U.C.C. 2--201.

In his consideration of the Uniform Sales Act which preceded the U.C.C. as the law in Kentucky, Williston said: 'A contract...