EI Du Pont De Nemours & Co. v. Claiborne-Reno Co.

• Decision Date: 25 April 1933
• Docket Number: No. 9610.,9610.
• Citation: 64 F.2d 224,89 ALR 238
• Parties: E. I. DU PONT DE NEMOURS & CO. v. CLAIBORNE-RENO CO.
• Court: U.S. Court of Appeals — Eighth Circuit

89 ALR 238, 64 F.2d 224 (1933)

E. I. DU PONT DE NEMOURS & CO. v. CLAIBORNE-RENO CO.^*

No. 9610.

Circuit Court of Appeals, Eighth Circuit.

March 20, 1933.

Rehearing Denied April 25, 1933.

Willis J. O'Brien and John N. Hughes, both of Des Moines, Iowa (Hughes, O'Brien & Faville and J. M. Parsons, all of Des Moines, Iowa, and C. M. Spargo, of Wilmington, Del., on the brief), for appellant.

John L. Gillespie, of Des Moines, Iowa (Gillespie & Moody, of Des Moines, Iowa, on the brief), for appellee.

Before KENYON, GARDNER, and SANBORN, Circuit Judges.

SANBORN, Circuit Judge.

The parties will be referred to in this opinion as the Du Pont Company and the Reno Company.

The Du Pont Company brought suit against the Reno Company for $5,989.88, part of which was for goods sold and delivered, and part for a balance due upon a promissory note. The Reno Company admitted this indebtedness, but set up a counterclaim for $350,000 damages for breach of contract. The case was tried to a jury, which returned a verdict in favor of the Reno Company for $41,588.12. From the judgment entered upon the verdict, the Du Pont Company has appealed.

The Reno Company had been, from the 23d day of October, 1924, until the 1st day of December, 1930, the sole distributor in the state of Iowa of certain products manufactured only by the Du Pont Company, and intended mainly for the finishing, refinishing, and polishing of automobiles. These products were referred to as Duco. The original contract between the parties, which was made in 1924, had been several times renewed, with slight variations, prior to October 1, 1927. On that date a contract substantially similar to those which preceded it was entered into. It was in the form of a letter prepared by the Du Pont Company and accepted by the Reno Company. We set it forth in full:

"September 1, 1927. "Claiborne-Reno Co., 1023 Locust St., Des Moines, Iowa.

"Gentlemen: This will confirm our agreement whereby you will act as sole distributor of our Spray Duco, Spray Thinner, Blue Diamond Undercoats and Rubbing Compounds to automobile refinishing shops and furniture refinishing shops in the following territory, with the exception of such shops as we may find it necessary to serve direct because of their connection with manufacturing or industrial consumers of Duco materials.

"Entire State of Iowa.

"It is understood and agreed that this contract is entered into upon the following conditions:

"That it is our intention and desire to continue under this agreement so long as your services, in our judgment, prove satisfactory.

"That our object is to secure as rapidly as possible sufficient distribution of our Duco finish process to satisfactorily cover the territory in question among responsible refinishers who are in a position to provide adequate facilities to enable them to turn out first-class work.

"That the sale of our material or process will not be limited by being connected with the sale or use of any other material, apparatus or process in which you are or may become interested, such as air brush equipment, upholstery, materials, hardware, accessories, et cetera.

"That you will endeavor to have your customers refrain from the use of competitive products, and that under no circumstances will such products be used in your shop.

"That you will not use, teach or recommend processes of application and finishing not approved by us.

"That you will not grant exclusive rights for the use of our Duco Finish or process to any refinisher in any given territory without our written approval. In this connection it is understood that we wish to avoid the granting of exclusive rights so far as possible, as our experience has shown that refinishers do more satisfactory work when they know they do not have a monopoly in the district they are serving.

"That you will provide satisfactory facilities for instruction and demonstration in the use and application of our materials, and process to your customers and furnish them with whatever service may be necessary to enable them to turn out first-class work. In those cases where you consider it necessary to make a charge for demonstration and instruction services it should not exceed the approximate cost to you, and in no cases should charges be made which may appear to be a premium or license fee for the use of our process or materials.

"That you will co-operate with us in formulating sales promotion plans by supplying statistical information that we may need from time to time.

"That we will furnish materials to automobile refinishing shops in your territory only on orders approved by you.

"That freight will be allowed on shipments to your warehouse, but that no freight will be allowed on shipments made by us direct to your customers.

"That all materials will be billed to you at current list prices with freight allowances as specified in preceding paragraph, and in consideration of your services under this agreement we will allow you a discount of 25 per cent.

"That your prices to your customers will not exceed our invoice list prices to you f. o. b. your city, plus an additional 10c per gallon on items sold by the gallon and 1c per pound on materials sold by the pound to cover your own warehouse and handling expense, except the following: On 244 Line Duco, 259 Line Duco, and 235 Line Duco you may add 25 cents per gallon to our invoice list price instead of 10c per gallon.

"That our invoices shall be rendered promptly after shipments are made and shall be payable on the following terms: Invoices dated 1st to 15th inclusive, less 1 per cent discount on last day of current month or net without discount on 15th of following month; invoices dated 16th to 31st inclusive, less 1 per cent discount on 15th of following month or net without discount on last day of following month.

"That no discount is to apply on drums which are charged extra and returnable for corresponding credit F. O. B. Parlin, if returned in good condition within four months from date of shipment.

"That this agreement does not include Duco and Thinner prepared for brush application.

"That this agreement cancels and replaces agreement dated January 1, 1927.

"Please signify your acceptance and approval of these conditions by signing and returning the enclosed duplicate of this letter within five days.

"Yours very truly "E. I. Du Pont de Nemours &amp Company, Chemical Products Division "H. E. Lackey, Director of Sales. "ME "Accepted and Approved: Claiborne-Reno Company "By M. M. Reno Sec. & Tr "Date Oct. 1st 27."

On October 27, 1930, the Du Pont Company gave notice to the Reno Company of the termination of the contract effective the December 1st following, and it was this termination by the Du Pont Company which the Reno Company asserts constituted a breach of the contract.

The Reno Company's cause of action, briefly stated, is this: That it had since 1924 acted as the sole distributor for Duco in the state of Iowa under the agreement in question and similar agreements; that it had developed the territory and created a demand for the Du Pont Company's products, had abandoned the sale of competitive products, had maintained facilities for instruction and demonstration in the use of and application of Duco, had expended large sums of money in furtherance of the Du Pont Company's interests, and had in all things carried out its obligations under the contract; that, under the terms of the contract, the Du Pont Company could not terminate it so long as the services of the Reno Company were, in the judgment of the Du Pont Company, satisfactory; that the termination of the contract was at a time when, in the judgment of the Du Pont Company, the services of the Reno Company were not unsatisfactory; that the Du Pont Company did not exercise good faith in terminating the agreement; and that the result of the refusal of the Du Pont Company to continue was the destruction of the Reno Company's business.

The question whether the termination of the contract by the Du Pont Company was in good faith, as claimed by it, or in bad faith, as claimed by the Reno Company, was submitted to the jury, and determined adversely to the former. There had been a motion by the Du Pont Company for a directed verdict at the close of the evidence, and the failure of the court to direct a verdict in its favor is assigned as error.

The important question in this case is whether the termination of this contract by the Du Pont Company gave to the Reno Company a cause of action for damages. Reduced to its lowest terms, the claim of the Reno Company is that what it bargained for and received from the Du Pont Company was an agreement that it should be the sole distributor of Duco in the state of Iowa so long as the Du Pont Company was satisfied with its services and so long as it (the Reno Company) chose to perform the services; that the consideration for the promise on the part of the Du Pont Company was the promise of the Reno Company to act as sole distributor and to do the things which it was required to do under the agreement, and the performance of that promise. The Du Pont Company, on the other hand, claims that the contract was unenforceable because the Du Pont Company did not promise to continue until dissatisfied, and because of uncertainty of consideration and lack of mutuality of obligation; that it is a bilateral contract, depending for its consideration upon the mutual promises of the parties, and that, being terminable at will by the Reno Company, it was also terminable at will by the Du Pont Company; and that the question whether, in its judgment, the services of the Reno Company were satisfactory, is not a justiciable question.

There is much to be said in favor of requiring men to adhere strictly to their undertakings, whatever they may be, but there are certain established rules with reference to contracts which are not to be disregarded, no matter how great the hardship may be which...