Center Garment Co., Inc. v. United Refrigerator Co.

CourtUnited States State Supreme Judicial Court of Massachusetts
Citation369 Mass. 633,341 N.E.2d 669
Parties, 18 UCC Rep.Serv. 672 CENTER GARMENT CO., INC. v. UNITED REFRIGERATOR COMPANY.
Decision Date30 January 1976

Ephraim F. Horvitz, Fall River, for defendant.

Abner Kravitz, Fall River, for plaintiff.

Before HENNESSEY, C.J., and QUIRICO, KAPLAN, and WILKINS, JJ.

KAPLAN, Justice.

Center Garment Co., Inc., a franchise holder, as plaintiff, brought this action against United Refrigerator Co., its franchisor, as defendant, alleging that the defendant dommitted a breach of the franchise agreement by failing to furnish certain supplies when ordered. The defendant answered with a general denial. 1 The action was tried to an auditor ('facts not final'), and then, as to certain issues, was heard by a judge of the Superior Court sitting without a jury. The judge, on the basis of the auditor's findings of fact, which he accepted, and other evidence before him, made findings, rulings, and order for judgment, and finally entered judgment for the plaintiff for $4,600. 2 The defendant appeals.

1. Contract terms. The gist of the written contract of August 26, 1969, between plaintiff and defendant, as far as now relevant, was as follows. The plaintiff was to buy from the defendant a machine for the manufacture of plastic display signs for a price of $4,995. This was its outlay for a nonexclusive license during the term of the agreement--five years with possible yearly renewals--'to operate a 'Signman' business' in five counties in Massachusetts, using the defendant's trade designation 'Signman' and the good will and merchandising system associated with it. By § 5C of the contract the defendant 'agrees . . . (t)o make available to Franchise Holder a central purchasing program for materials, forms and supplies used in the sign business.' By § 6E the plaintiff 'agrees' as follows: 'In order to achieve uniformity and quality merchandising, Franchise Holder agrees to purchase plastic materials necessary for the operation of the sign manufacturing machine from (the defendant), or, in the alternative, agrees to submit to (the defendant) for approval as to quality, plastic of any other supplier. If material other than plastic furnished by (the defendant) is used the Franchise Holder agrees not to use the name 'Signman' to identify such product. Franchise Holder's failure to procure (the defendant's) approval of the quality of plastic used shall constitute a breach of this Agreement, since quality of material and performance is essential to the good will and reputation of the Signman System, and this Franchise shall thereupon terminate upon 30 days notice.'

2. Performance under the contract. Operations under the contract to the time of the events in suit ran thus. The plaintiff purchased the machine (including some material) from the defendant at the price stated. It advertised for salesmen to solicit orders for signs; eventually it had about 200 such salesmen, who were independent contractors working on commission. All of the plaintiff's signs were manufactured by means of the machine; most of its signs were fabricated of white acetate, a plastic. The plaintiff purchased the bulk of this plastic and other materials used from the defendant; only occasionally did it buy from others. Its business was only of modest size with annual gross sales running between $13,000 and $16,000.

On November 13, 1972, the plaintiff sent an order to the defendant for white acetate. Under date of November 28 the defendant informed the plaintiff that as 'we can no longer obtain a good quality of white acetate from our supplier, we are not going to carry this in stock any longer. Therefore, we will no longer be able to fill your orders for SA4220 White Acetate.' The plaintiff through its manager Richard P. Trieff protested in reply that 'you don't even let me know names of other suppliers. That's bad business and must be a violation of our contract.' There was evidence that Trieff called the defendant's franchise director Fred J. Applebaum on December 4 and was then told, in substance, that the plaintiff could check around locally and consult the 'yellow pages' to find suppliers of acetate. On December 19 the plaintiff cancelled some sixteen outstanding orders for signs and went out of business. It promptly commenced the present action. On December 28 the defendant wrote its franchise holders that it had secured a new supplier of acetate and would fill orders after January 15, 1973.

From the evidence before the auditor and the judge it appeared that about November 1, 1972, the defendant knew or should have known that its one supplier of acetate--it had not taken the precaution of locating a backup supplier--was unreliable as a source for the future. It did not make a serious effort to find another supplier until after November 27 when the failure of the regular supplier was confirmed.

There was, indeed, some general shortage of plastics including acetate at the time. Yet when the plaintiff tried by telephone to locate a supply of acetate in New England, it did find the material available in rolls (though not in sheets accommodated to its use). Presumptively the ability of the defendant, the larger buyer, to find sources, was greater than the plaintiff's (a reason for entering a franchise contract in the first place). When the defendant exerted itself it did find a substitute supplier, but the materials would not have reached the plaintiff until more than two months after it had submitted its order.

3. Breach. On findings generalized from the evidence, the judge held the defendant in breach of the contract. The defendant in its requests for rulings protested that there had been a misconstruction of the nature of the defendant's duty. It said that its agreement under § 5C to 'make available . . . a central purchasing program' amounted to no more than an undertaking as an 'agent' to use good faith and reasonable diligence to find a supplier for material which the franchise holder might order through the defendant; when the defendant had no relevant supplier, the franchise holder was free under § 6E to turn to an alternative source, the defendant, presumably, being bound not to withhold its assent to outside purchases unreasonably. The plaintiff, on the other hand, stressed the franchise holder's agreement under § 6E 'to purchase plastic materials . . . from (the defendant),' which implied a reciprocal obligation on the defendant's side to meet the franchise holder's requirements; it pointed to the fact that in practice it bought from the defendant, not through it; the alternative of § 6E was not, it said, an escape for the defendant but rather a franchise holder's option or privilege which in all events entailed the disadvantage that the product would be barred the benefits of association with 'Signman.'

The judge (and the auditor as well 3) favored the plaintiff's construction of the contract as one for the sale of the plastic on a 'requirements' basis. He proceeded to the question of the possible bearing of Uniform Commercial Code (G.L. c. 106) § 2--615, 'Excuse by Failure of Presupposed Conditions,' and then held, contrary to the defendant's requests for rulings, that the defendant was not excused. On the assumed construction of the contract, the judge was right. For the key question under § 2--615 is whether 'performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made' (§ 2--615(a)), and the failure of the defendant's supplier to perform was not such a contingency. See Mishara Constr. Co....

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    ...for damages caused by the non-breaching party's failure to complete performance. Center Garment Co., Inc. v. United Refrigerator Co., 369 Mass. 633, 638, 341 N.E.2d 669 (1976); Lease-It, Inc. v. Massachusetts Port Auth., 33 Mass.App.Ct. at 397, 600 N.E.2d 599. In contrast, a party's non-mat......
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  • In re ASPC Corp., Case No. 18-52736
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    ...therefore would have constituted a material breach excusing the performance of the Debtor. See Center Garment Co. v. United Refrigerator Co. , 369 Mass. 633, 341 N.E.2d 669, 673 (1976) (affirming trial court's decision that the franchisor's failure to provide supplies ordered by its nonexcl......
  • Dunkin' Donuts of America, Inc. v. Minerva, Inc., s. 90-3124
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