Doral Hosiery Corporation v. Sav-A-Stop, Inc., Civ. A. No. 72-711.
| Decision Date | 28 March 1974 |
| Docket Number | Civ. A. No. 72-711. |
| Citation | 377 F. Supp. 387 |
| Parties | DORAL HOSIERY CORPORATION v. SAV-A-STOP, INC. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
C. Gary Wynkoop, Schnader, Harrison, Segal & Lewis, Philadelphia Pa., for plaintiff.
Thomas M. Kittredge, Morgan, Lewis & Bockius, Philadelphia, Pa., for defendant.
Plaintiff, Doral Hosiery Corporation, (hereinafter referred to as Doral) brought this action against the defendant, Sav-A-Stop, Inc., (hereinafter referred to as Sav-A-Stop) for damages resulting from breach of contract.
The plaintiff's Complaint contains two counts. The first count avers that Sav-A-Stop did not pay the full contract price for merchandise sold and delivered to it by Doral. The second count avers that Sav-A-Stop did not purchase a sufficient quantity of merchandise from Doral to satisfy the terms of the contract.
Presently before the Court is the Motion of the defendant, Sav-A-Stop, for partial summary judgment pursuant to Rule 56(b) of the Federal Rules of Civil Procedure. This Motion is directed to Count II of the Complaint.
An understanding of the chain of distribution in the women's hosiery industry and the relevant roles of the parties therein is necessary to an understanding of the legal issues raised by the defendant's Motion.
The chain of distribution in the women's hosiery industry includes a manufacturer, a service merchandiser, and a retail outlet store. In the case at bar, Doral is a manufacturer and Sav-A-Stop is a service merchandiser. A service merchandiser buys its line (brand) of hosiery from a manufacturer and sells it to a retail store as needed or, as alleged here, on a programmed sale basis. The programmed sale basis enables a service merchandiser to buy its line of hosiery from one manufacturer and induce its retail store customers to carry that line of merchandise. When a service merchandiser acquires a new retail store account, the service merchandiser often repurchases the retail store's existing inventory and replaces it with the programmed merchandise. In order to dispose of this non-programmed inventory the merchandiser resells it to the manufacturer. To induce the manufacturer to purchase such non-programmed inventory it is customary for the service merchandiser to agree to purchase its requirements of that manufacturer's line of products for a period of time sufficient to enable the manufacturer to recoup these losses with profits on subsequent sales to the service merchandiser. It is this kind of arrangement between a manufacturer and a service merchandiser which is the subject matter of the action.
Doral contends that it agreed to accept for credit, returns of non-programmed merchandise from Sav-A-Stop in exchange for Sav-A-Stop's promise to purchase a sufficient amount of hosiery from Doral to exhaust these credits.
Sav-A-Stop contends that this action is barred by the Statute of Frauds provision of the Uniform Commercial Code () Article II, 12A Pa.Stat.Ann. § 2-201.
Doral counters by producing six letters, appended hereto as exhibits A through F, which it contends are sufficient confirmation of a prior oral contract to overcome Sav-A-Stop's defense.
When, as here, both parties to the alleged oral contract are merchants, the formal requirements of the Statute of Frauds are:
(1) that within a reasonable time, there be a writing in confirmation of the oral contract;
(2) that the writing be sufficient to bind the sender;
(3) that such a writing be received;
(4) that no reply thereto has been made although the recipient has reason to know its contents.1
The reason for the provision that between merchants one must send written notice of objection to a writing received in confirmation of a prior oral contract is to deprive the party who fails to object the defense of the Statute of Frauds which otherwise would allow him the option of enforcing the contract if it were to his advantage or refuse to honor the contract if it were to his detriment.
Sav-A-Stop contends that the six writings fail to satisfy the requirements of the Statute of Frauds because: (1) they are not confirmations of a prior oral contract and (2) they are not sufficient against the sender because they contain no quantity term.
Thus, the issue before the Court is two fold: Do the writings evidence a prior oral contract and do they state the quantity of goods for which the parties contracted?
To be a confirmation of a prior oral contract the writing needn't expressly state that it is sent in confirmation of the prior transaction, but it must state that a binding or completed transaction has in fact been made.2 In addition, "several writings may be considered in combination and the Statute of Frauds is satisfied if the writings so conjoined meet the requirements of the Code."3 Furthermore, we are mindful that "all that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction."4
The six writings obviously indicate an ongoing buyer-seller relationship predicated on a "real transaction." It is just as obvious from a reading of these writings that many terms of the transaction are unknown. This fact, however, is not fatal. The law is well-settled that ambiguous or missing terms of a contract may be shown by a course of dealing between the parties as well as the custom and usage of the trade.5 Although this fact is true, it is not true of a missing quantity term. The Code clearly states that "the contract is not enforceable . . . beyond the quantity of goods shown in such writing."6 Thus, whether the six writings evidence the quantities for which the parties contracted is the crucial issue before the Court.
"The requirement that the writing state a quantity is mandatory, and a writing which fails to do so does not satisfy the Statute of Frauds."7
An examination of the six writings reveals that the credits which Doral issued to Sav-A-Stop were apportioned on a price per dozen basis depending on the style of the hosiery purchased. For example, exhibit F states that Sav-A-Stop will receive a 50¢ credit per dozen of hosiery styles 974 and 970, and a 25¢ per dozen of hosiery style 3005. Exhibit F also states that as of June 23, 1971 Sav-A-Stop had amassed $26,730.32 in credits.
To support is position that the quantity term can be deduced from the six writings, Doral argues that if the total amount of credits is known, it takes but a simple mathematical equation to compute the quantity of hosiery necessary to exhaust the credits.
Unfortunately for Doral, this equation has too many unknowns for resolution. It is impossible to determine the total quantity of hosiery necessary to exhaust the credits when the amount of the credit per dozen varies with the style of the hosiery. Obviously, it would take twice as many dozen of style 3005 as style 974 or 970 to exhaust the same amount of credits.
Moreover, in paragraph 19 of their Complaint, Doral states that future sales to Sav-A-Stop could be apportioned among the various hosiery styles on a ratio of past sales. Such a speculative approach underscores the absence of a definitive quantity term.
For the foregoing reasons we conclude that there is no quantity term in the writings submitted by Doral. It follows therefrom that the requirements of the Statute of Frauds have not been satisfied. Therefore, the Motion of the defendant, Sav-A-Stop, for partial summary judgment as respects Count II of the plaintiff's Complaint is granted.
And now, this 28th day of March, 1974, it is ordered that the Motion of the defendant, Sav-A-Stop, for partial summary judgment as respects Count II of the plaintiff's Complaint is granted.
APPENDIX
EXHIBIT "A"
January 22, 1971 Mr. Sherrill W. Vance Sav-A-Stop, Inc 2001 Apperson Drive Salem, Virginia 24153
Dear Sherrill:
As per our conversation concerning your debit memo 13475 in the retail amount of $19,258.51, I have spoken to the people at Stevens and at Amerex, and we will take this return from you although, as I stated, some of this merchandise is not from any of the stores in the New York area. Since I don't want to belabor the issue, we will take it all in and give you credit for it.
Based on the fact that on panty hose you are averaging between cost and retail 60% mark-up, on this particular order your credit would be in the amount of $7,703.22. In order to give you credit in this amount, we will reduce your cost on Style 970 and Style 974 panty hose by 50¢ per dozen until we have issued you the proper credit.
On your order #021585 in the amount of 576 dozen, we will give you credit at 50¢ a dozen, which comes to $288 credit.
I will keep a running tabulation and let you know how you stand.
I trust this meets with your approval.
cc-Mr. H. J. Maletz
APPENDIX
EXHIBIT "B"
April 6, 1971 Mr. Frank P. Wilson, Jr West Texas Wholesale of Amarillo, Inc 6061 Plains Blvd., Box 2629 Amarillo, Texas 79105
Dear Frank:
As per our conversation concerning your return of assorted goods that you have picked up in a variety of stores, as listed below, we will do the following:
Item Quantity Total Retail
Panty Hose, 99¢ to $3.98 1,428 pair $ 2,391.59
Regular Hosiery, 49¢ to $2.95 1,086 pair 895.44
Assorted Regular Hose and Panty Hose,
29¢ to $2.98 10,135 pair 10,910.90
__________
$14,197.93
Using our formula of 60% markup, your cost on the above would be $5,679.20. We will allow you to amortize this...
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