Erving Paper Mills v. Hudson-Sharp Machine Co.

• Citation: 223 F. Supp. 913
• Decision Date: 09 December 1963
• Docket Number: No. 59-C-18.,59-C-18.
• Parties: ERVING PAPER MILLS, a Massachusetts corporation, Plaintiff, v. HUDSON-SHARP MACHINE CO., a Wisconsin corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

223 F. Supp. 913

ERVING PAPER MILLS, a Massachusetts corporation, Plaintiff, v. HUDSON-SHARP MACHINE CO., a Wisconsin corporation, Defendant.

No. 59-C-18.

United States District Court E. D. Wisconsin.

September 26, 1963.

On Motion for New Trial December 9, 1963.

COPYRIGHT MATERIAL OMITTED

E. L. Everson, James L. Everson and John C. Whitney, Green Bay, Wis., for plaintiff.

James C. Mallien, William K. McKibbage and Laurence C. Hammond, Jr., Milwaukee, Wis., for defendant.

GRUBB, District Judge.

This is an action for damages for breach of contract to manufacture and deliver two wrapping machines. The issue of damages has been severed from the issue of liability by stipulation of the parties.

Plaintiff, Erving Paper Mills (hereinafter referred to as "Erving"), is a Massachusetts corporation engaged, among other things, in the manufacture and sale of paper napkins. Defendant, Hudson-Sharp Machine Company (hereinafter referred to as "Hudson-Sharp"), is a Wisconsin corporation engaged in the manufacture and sale of various types of machinery. The court has jurisdiction because of diversity of citizenship.

Defendant raises the following defenses:

1. Defendant did not accept plaintiff's offer but only acknowledged it.

2. Plaintiff's offer was subject to a condition precedent, and therefore even if accepted, it placed no duty upon the defendant, since the condition never occurred.

3. The alleged contract is too indefinite to be enforced and fails to comply with the statute of frauds.

I. WAS PLAINTIFF'S OFFER ACCEPTED TO CREATE A CONTRACT?

The majority rule is that a mere acknowledgment of an offer does not constitute an acceptance of such an offer. 46 Am.Jur., Sales § 48 (1943). This is qualified to the extent that an "acknowledgment" of the receipt of an order, together with other circumstances, may be evidence from which acceptance may be properly inferred. 1 Williston, Contracts § 72 (3rd ed. 1957). In the present case Hudson-Sharp's purported acknowledgment reads as follows:

"We have for acknowledgment your P.O #11319 dated August 20, 1956, covering two No. 2W10 Campbell Wrappers especially constructed for wrapping 160 and 250 count luncheon napkins in polyethylene, per samples submitted.

"It is understood that these machines will be constructed on the basis as set out in your order, with one machine to be manufactured and installed first before building the second machine.

"Thank you very much for the order, and we have entered these in our production schedule accordingly." (Exhibit 12)

The language takes the letter beyond a mere acknowledgment of the order, thereby creating the other circumstances needed to constitute it an acceptance. After initially acknowledging the order, defendant promises to build the machines according to the terms of the offer when it says: "It is understood that these machines will be constructed on the basis as set out in your order, * * *." (Emphasis added.)

The defendant further reports: "* * we have entered these in our production schedule accordingly." (Emphasis added.) This goes beyond a mere promise of giving prompt attention to the matter which courts have generally held is not enough to constitute an acceptance. The past tense is used in stating what the defendant has done, rather than providing a vague promise to do something at some future indefinite date. The promise to build the machines is implicit from the entire tone of the letter. Particularly in point is the Wisconsin case of Felt & Tarrant Manufacturing Co. v. Northwestern Egg & Poultry Co., 178 Wis. 552, 190 N.W. 431 (1922).

Subsequent conduct of the parties indicating that each party recognized the existence of a contract may also be considered. United States v. Sylvanus, 192 F.2d 96 (7th Cir., 1951). The testimony of Cletus A. Wetli, vice-president and sales manager of Hudson-Sharp in 1956, states that a firm order and respective acceptance was intended. (Tr. p. 167) A subsequent letter of S. J. Campbell, president of Hudson-Sharp at the time of the offer and purported acceptance, evidences that it was his intention to accept the order and that it was binding. (Tr. pp. 222-226) The successor management also conceded this point as shown by A. J. Olsen, the general manager of Hudson-Sharp, when he stated in a letter to Erving: "We fully realize that the order was originally accepted, * *." (Exhibit 17)

The entire record clearly indicates that both parties considered the order to have been accepted. It was not until October 1956 that defendant first indicated that it had no intention to build the machines. Even then Hudson-Sharp sought to have Erving agree to cancel the order as opposed to asserting that no contract obligation existed in the first instance. (Exhibits 17, 19, 21) The language used in the purported acceptance letter plus the subsequent pronouncements and acts of the parties indicate that this letter of acknowledgment was in fact an acceptance of plaintiff's order and was intended as a memorandum of such acceptance.

Defendant further contends that there were three variances in defendant's "acknowledgment" letter which preclude the possibility of a binding contract. It is elementary contract law that the acceptance of an offer upon terms varying from those of the offer is a rejection of the offer. See Leuchtenberg v. Hoeschler, 271 Wis. 151, 154, 72 N.W.2d 758 (1955); Hess v. Holt Lumber Company, 175 Wis. 451, 455, 185 N.W. 522 (1921).

The alleged "variances" contained in defendant's letter of August 27, 1956, are:

1. That the two machines were to be "especially constructed";

2. That the machines would wrap napkins in polyethylene "per samples submitted"; and

3. That "one machine to be manufactured and installed first before building the second machine." (Exhibit 12)

With regard to the first alleged variance, defendant does not indicate how this language in any way qualifies or varies the terms of the purchase order. The court finds that the words "especially constructed" merely confirm the undisputed fact that the machines were to be so constructed as to meet the particular specifications stated in the purchase order.

The second alleged variance — that the machines would wrap napkins in polyethylene "per samples submitted" — again is merely a reference to the terms of the purchase order which specified that each machine was to wrap napkins "as samples to be submitted by Hudson Sharp and to be approved by Erving Paper Mills." (Exhibit 10)

The third alleged variance — "one machine to be manufactured and installed first before building the second machine" — is equally without merit. This statement does not vary the requirement of the purchase order that "* * * the manufacture of the second machine is to be held up until the first machine is in satisfactory operation at Erving Paper Mills and a decision is reached as to what product is then to be wrapped on this second machine." (Exhibit 11)

II. WAS PLAINTIFF'S OFFER SUBJECT TO A CONDITION PRECEDENT, AND IF SO, WAS DEFENDANT RELIEVED BECAUSE THE CONDITION DID NOT OCCUR?

The order in question contains the following language:

"Each wrapper to efficiently polyethylene wrap ¼ fold, 13½", luncheon napkins, both 160 ct. & 250 ct. package sizes as samples to be submitted by Hudson Sharp and to be approved by Erving Paper Mills." (Exhibit 11)

Prior to the order being sent to Hudson-Sharp, both parties had exchanged certain samples. The record is not entirely clear as to whether Hudson-Sharp submitted any samples to Erving after August 20, 1956, the date of the purchase order. Defendant now contends that the words "as samples to be submitted by Hudson Sharp and to be approved by Erving Paper Mills" created a condition precedent to a contractual obligation.

Where it is doubtful whether words create a promise or an express condition, they are interpreted as creating a promise. Restatement, Contracts § 261 (1932). A condition in a promise limits the undertaking of the promisor to perform, either by confining the undertaking to the case where the condition happens or to the case where it does not happen. Here we have two events mentioned — the supplying of samples and their approval. Defendant would have the court find that both elements were conditions to contractual liability. This would be difficult to find. Whether a provision in a contract is a condition, the nonfulfillment of which excuses performance, depends upon the intent of the parties to be ascertained from a fair and reasonable construction of the language used in light of all the surrounding circumstances. Restatement, Contracts § 250 (1932); Lach v. Cahill, 138 Conn. 418, 85 A.2d 481 (1951). Here Erving went to elaborate pains to draft a written memorandum evidencing most of the agreement. Further, any condition which might have been inserted is assumed to be for the benefit of Erving, since it would have been more advantageous for Hudson-Sharp to have received an absolute promise. Considering the facts in this light, it is not reasonable to read the phrase "as samples to be submitted by Hudson Sharp" as creating a condition to contractual liability on the part of Hudson-Sharp. Hudson-Sharp has not alleged that it ever insisted on such a provision; yet, if it were construed as a condition, it would run entirely in Hudson-Sharp's favor and offer no benefit to Erving. Defendant alone would then have controlled whether the condition occurred in the first instance. Erving would have gained nothing from such an arrangement. A much more reasonable construction is that in accepting the offer, Hudson-Sharp implicitly promised to supply samples to Erving for its approval and incurred an immediate obligation to proceed to do so.

Was Erving's approval of samples a condition precedent of any sort? A reasonable reading of the language used in light of the background surrounding the negotiations indicates that a condition was intended. Erving was concerned with securing a...