Frenchman & Sweet, Inc. v. Philco Discount Corp.

• Decision Date: 14 May 1964
• Citation: 21 A.D.2d 180,249 N.Y.S.2d 611
• Parties: FRENCHMAN & SWEET, INC., Respondent-Appellant, v. PHILCO DISCOUNT CORPORATION, Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 611

249 N.Y.S.2d 611

21 A.D.2d 180

FRENCHMAN & SWEET, INC., Respondent-Appellant, v. PHILCO DISCOUNT CORPORATION, Appellant-Respondent.

Supreme Court, Appellate Division, Fourth Department.

May 14, 1964.

Harris, Beach, Wilcox, Dale & Linowitz, Rochester, for appellant-respondent, Edward R. Macomber, Rochester, of counsel.

Falk, Schoenwald, Klafter & Ange, Rochester, for respondent-appellant, Sidney K. Schoenwald, Rochester, of counsel.

Before WILLIAMS, P. J., and BASTOW, GOLDMAN, HENRY and NOONAN, JJ.

PER CURIAM.

This breach of contract action arises out of termination of a supermarket merchandising plan because of the withdrawal from its operation of a third party, whose participation was essential to the continuance of the plan. The respondent, an appliance dealer, agreed to participate with appellant, a financing subsidiary of Philco Corporation, in the sale of Philco products in supermarkets. The issues are: (1) whether appellant had any obligation to make available the place of performance for a minimum of seven months provided for in the contract and (2) if there was such a duty, whether respondent has adequately proved loss of future profits emanating from its breach.

The introductory or whereas clauses indicate that both parties desired to engage in a merchandising plan and that appellant 'has entered into an agreement with Star Markets' in two designated stores to participate in merchandising the plan. The parties agreed that respondent would display Philco products for supermarket customers in an area made available by the supermarket, that appellant would finance the sales and that the agreement might be terminated by either party six months from date of execution upon 30 days written notice. The plan operated for about eight weeks and then Star terminated its arrangement with appellant and so informed respondent. Respondent sues for profits it would have realized had the plan operated for the specified six months and 30 days.

Appellant asserts no obligation to provide respondent with a sales area and contends that any statement in the whereas clause cannot be construed as such promise. Although a recital as to an intention in respect of the future may only indicate a motive and not a promise (Burr et al. v. Amer. Spiral Spring Butt Co., 81 N.Y. 175), on occasion recitals assist in determining the proper construction of a contract (17A C.J.S. Contracts § 314, Recitals, p. 177 et seq.). When a contract has no significance without participation of a third party and one party has indicated it has entered into an agreement with that third party to participate and is silent as to any contrariwise understanding with the third party, that party has impliedly promised there will be performance by the third party for the duration of the contract (Restatement of the Law of Contracts, Vol. 1, sec. 262, p. 376; also see sec. 331, p. 515).

The trial court correctly determined that the plan was inoperable without Star's participation and that respondent, as a reasonable business entity, was entitled to construe the entire agreement, including the whereas clause, as meaning that Philco had an arrangement with Star by which Star was bound for the duration of the stated period in the contract. The agreement having been drafted by appellant any ambiguity should be construed against it. Knowledge of the fact that Star could disassociate itself as one of the three...