Cardinal Stone Co., Inc. v. Rival Mfg. Co., 80-3439
| Citation | 669 F.2d 395 |
| Decision Date | 14 January 1982 |
| Docket Number | No. 80-3439,80-3439 |
| Parties | 32 UCC Rep.Serv. 1313 CARDINAL STONE COMPANY, INC., Plaintiff-Appellant, v. RIVAL MANUFACTURING COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
William J. Telzrow, Lawrence W. Smith, Wellsville, Ohio, for plaintiff-appellant.
Brett K. Bacon, Thompson, Hine & Flory, Cleveland, Ohio, Michael W. Lerner, Stinson, Mag & Fizzell, Kansas City, Mo., for defendant-appellee.
Before KENNEDY and MARTIN, Circuit Judges, and CECIL, Senior Circuit Judge.
Plaintiff-appellant, Cardinal Stone, appeals the District Court's grant of summary judgment in favor of defendant-appellee, Rival Manufacturing. This case involves an action on a sales contract between Rival, a manufacturer of slow cookers, a home appliance, and Cardinal, a ceramics firm which supplied a primary component, the internal cooking shell.
The contractual relationship arose in 1972 and consisted of twenty-two purchase orders worth several million dollars. However, only the last eight orders, dating from May 1976 to January 1977 are in issue. These orders were cancelled by Rival pursuant to a termination clause found at paragraph 18 of the standardized purchase order which read: "Buyer reserves the right to change or amend the specifications and to terminate this purchase order in whole or in part at any time ...." Cardinal argues that this clause did not give Rival the right to arbitrarily terminate these orders. Instead Ohio law, by its adoption of the Uniform Commercial Code, incorporates a term of good faith into the performance of every contract. When Rival's course of business is considered, it is apparent, according to Cardinal, that Rival violated this term. Hence paragraph 18 is of no effect and Cardinal is entitled to damages due to their detrimental reliance on Rival's assertions that their business would continue to flow to Cardinal.
The District Court held otherwise, finding that the degree to which the silent incorporation of the obligation to deal in good faith could override express terms was a question of law which question the court then resolved in Rival's favor. In addition, the court reviewed the exclusive remedy for termination provided for in paragraph 18 and decided it could be applied by the court itself as a matter of law because Cardinal presented no triable issue of fact under the clause's damage remedy. We find no error in the District Court's action and affirm.
The starting point in the interpretation of any contract are the express terms in the agreement. Cardinal argues, however, that Rival's seemingly unfettered right to terminate must be tempered by the good faith requirement of Section 1-203 of the U.C.C. as adopted in Ohio as O.R.C. § 1301.09. The court in Corenswet v. Amana Refrigeration, Inc., 594 F.2d 129 (5th Cir. 1979), faced a similar...
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