Canister Co. v. National Can Corp.

• Decision Date: 04 March 1946
• Docket Number: No. 309,365.,309
• Citation: Canister Co. v. National Can Corp., 63 F.Supp. 361 (D. Del. 1946)
• Parties: CANISTER CO. v. NATIONAL CAN CORP. CANISTER CO., Inc., v. SAME.
• Court: U.S. District Court — District of Delaware

63 F. Supp. 361

CANISTER CO. v. NATIONAL CAN CORP.

CANISTER CO., Inc., v. SAME.

Nos. 309, 365.

District Court, D. Delaware.

November 17, 1945.

As Amended December 13 and 27, 1945.

Motion to Vacate or Amend Denied March 4, 1946.

Hugh M. Morris (of Morris, Steel & Nichols), all of Wilmington, Del., for plaintiff.

William S. Potter and Collins J. Seitz (of Southerland, Berl & Potter), all of Wilmington, Del., for defendant.

Motion to Vacate or Amend Denied March 4, 1946. See 64 F.Supp. 808.

LEAHY, District Judge.

This is an action for damages for breach of contract for failure of defendant¹ to deliver certain sets of metal ends² to be used for fibre body metal-end one-gallon paint cans. Diversity and requisite amount establish jurisdiction.

The alleged agreement upon which the action is based, as well as certain other agreements which preceded it, were not reduced to writing and were made in New York. In its answer defendant pleaded, among other defenses, that there was no contract between the parties and that if there were a contract between the parties it was unenforceable because it offended the New York Statute of Frauds. By order of the court, the defenses of no contract and Statute of Frauds were tried to the court without a jury as separate issues under Rule 42 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.

At the trial plaintiff offered testimony of six oral agreements³ between the parties touching on sets of metal ends for one-gallon fibre-body paint cans. Each of these agreements was made after this country entered the present war. Shortly thereafter the War Production Board began issuing metal conservation orders, restricting the use of metal. For civilian uses the packaging of paints was regarded as subject to such conservation orders. The restrictions upon the use of metal for civilian purposes were progressively made more drastic until, by order of February 18, 1943, paint can materials were restricted to fibre body and blackplate ends, and, of this, 50% of the bottoms were required to be made from frozen blackplate or blackplate rejects.

Prior to our entry into the war and before the issuance of the War Production Board's metal conservation orders, National made all-metal paint cans. Canister had never made all-metal cans but had made composite containers having a body of fibre or paper and metal ends. It appears to have been one of the first companies in this country to manufacture such composite containers.

From early in 1941 until April 3, 1943, Gieg was president of National and Gwathmey was president of Canister. The evidence supports the conclusion that each was aware of the effects of the metal conservation orders upon the business of their respective companies; i. e., adverse to National and beneficial to Canister. The threatened contraction of National's business from normal approximated 50%. Accordingly, it had immediate need of creating business to replace that of making all-metal cans which the conservation orders had spragged. These orders of necessity increased the demand for composite paint cans. The market need for such cans was estimated to be around 150,000,000 a year. This demand was greatly beneficial to Canister because it possessed the "know how" of the manufacture and supply of such cans. The evidence shows that both Gieg and Gwathmey were of opinion that the composite can was the only favorable substitute for the banned all-metal paint can. The short of the matter is that National wanted to sell metal end parts and Canister wanted to buy them. For business reasons, National could not competently make composite cans and Canister could not manufacture the metal end parts in sufficient quantity to satisfy the demand for such composite containers.

It was on the basis of this detailed situation that Gieg and Gawthmey started to make arrangements for the exploitation of both companies' mutual operations. Some time in July, 1942, Gieg and Gwathmey started their conferences. After samples had been submitted to Canister, National was requested to survey the situation and be prepared to tell Canister whether it could supply to Canister "several million or more of sets of metal ends". On September 9, 1942, National sent to Canister a recapitulation of prices for metal ends and also a statement of National's charge for changing its dies to correspond with the changes requested by Canister.

Between the middle of November, 1942, and the end of the first week in February, 1943, contracts for 3,000,000 sets of metal ends had been orally ordered by Canister and acknowledged by National. The agreement made in February, 1943, was for 1,000,000 sets and preceded the meeting at which the alleged capacity agreement was made. Just prior to February 17, 1943, Gieg learned that the deadline of February 15, 1943, fixed by the War Production Board orders for composite paint cans, would be removed by a new order of that body. He so advised Gwathmey, and the conference of February 17, 1943, at the Ritz-Carlton Hotel in New York followed. Gwathmey testified that a capacity agreement⁴ was entered into at the conference. Canister's commitments were becoming greater all the time and it was thought better to have a capacity arrangement rather than to be continually ordering another million sets. The only limit on what National was to supply was placed at 100,000 sets a day. This was greatly in excess of its existing production at the time Gieg and Gwathmey held their conference at the Ritz-Carlton Hotel, but defendant was to furnish plaintiff up to 100,000 sets per day as soon as it could get into such production. Gwathmey testified that Canister had the right to terminate the contract on 30 days notice, subject only to the responsibility for such parts as were partially made. The sets were to be of good commercial quality for the industry and the design and size were to be the same as the ends previously delivered by National to Canister. In fact, it appears that the sets were to be struck from the same dies that were specially designed for Canister or from perfect replicas of them.

Gieg, who was called as a witness by defendant, confirms most of Gwathmey's testimony. With respect to the Ritz-Carlton conference, he testified that there was a definite understanding that whatever National was able to make Canister would take, up to 100,000 per day, and that Gieg, on behalf of National, agreed to turn out 100,000 per day as fast as possible. In other words, both Gieg and Gwathmey agreed that Canister was to get all of National's capacity up to 100,000 sets per day. On this most important aspect of the agreement there is, then, no dispute. Gieg testified that Mr. Murphy⁵ of National was cognizant of everything that he did with Gwathmey. Gieg also agreed with Gwathmey as to the price and terms of payment. Gieg's testimony was not very clear relative to the 30 day termination provision which Gwathmey testified was agreed to. But that vagueness is more apparent than real. Gieg's testimony has been interpreted to mean that there was a provision for Canister to cancel upon 30 days' notice, subject to the condition that Canister take certain material, if any were on hand at the time, from National. The basis for this interpretation is that both Gwathmey and Gieg agree upon every other salient term of the agreement and Gieg in this respect does not flatly contradict Gwathmey. His testimony on this point, at most, is equivocal. Although it was not expressed with particularity at the Ritz-Carlton conference, it appears to have been the understanding of the parties that National could terminate the agreement upon the revocation by the War Production Board of the metal conservation orders banning the all-metal paint cans which National had made before the first of the WPB orders became effective. Canister did not exercise any right to terminate the capacity agreement and the War Production Board had not, until January 3, 1944, removed the ban upon the manufacture of all-metal cans for paint. National, on April 13, 1943, repudiated the oral agreement on February 17, 1943, and re-affirmed that repudiation by its letter of May 8, 1943.

Plaintiff contends that the agreement resulting from the conference at the Ritz-Carlton Hotel constituted a capacity contract and that the oral agreement for the 3,000,000 sets was necessarily merged into that capacity contract. It argues further that the capacity contract does not offend the New York Statute of Frauds⁶ and claims that that is the proper statute of frauds to consider. Defendant, on the other hand, contends that there was no contract because (1) there was an absence of contractual intent, because (2) the alleged agreement is too indefinite, because (3) there was no meeting of minds, because (4) Gieg had no authority to enter into the contract as alleged and finally because there was a failure to comply with Conservation Order M-81; but, if there was a contract it offends the New York Statute of Frauds.

The no-contract issue will be discussed first, and all the specific reasons urged by defendant to support that issue will be considered together. This will be followed by discussion of the other two main issues raised by defendant, i. e., the New York statute of Frauds and the pertinency of WPB Conservation Order M-81.

1. The parties entered into a contract.⁷ It is true that mutual assent is an essential prerequisite⁸ of the formation of a contract. But the test as to whether there is mutual assent is objective and does not depend upon the undisclosed intentions of the parties.⁹ Since the test is objective, the formation of a contract does not require "the meeting of the minds" of the parties.¹⁰ Despite early dicta to the contrary, this view is now almost universally accepted. One writer (8 Can.B.Rev. 299, 300) has said that: "The expression consensus ad idem so often quoted in contract cases does not necessarily mean that...