Gorco Const. Co. v. Stein

• Decision Date: 30 October 1959
• Docket Number: No. 37744,37744
• Citation: 256 Minn. 476,99 N.W.2d 69
• Parties: GORCO CONSTRUCTION COMPANY, Respondent, v. Ed STEIN, Appellant.
• Court: Minnesota Supreme Court

Page 69

99 N.W.2d 69

256 Minn. 476

GORCO CONSTRUCTION COMPANY, Respondent, v. Ed STEIN, Appellant.

No. 37744.

Supreme Court of Minnesota.

Oct. 30, 1959.

Syllabus by the Court

1. When a prospective customer, upon the solicitation of a sales representative, signs a written order for goods or services upon terms which expressly provide that the order is taken subject to the acceptance or approval of the salesman's home office or of his principal, the order is nothing more than an offer by the customer and does not become a contract until acceptance of the order has been communicated to the customer.

2. The marital relation does not, standing alone, constitute the wife the agent for her husband.

3. The two circumstances in which a wife, as a matter of law or as an agent in fact, may act for her husband are: First, where the law creates a quasi-agency as the result of the marriage relation, by virtue of which the wife is authorized to pledge the husband's credit for the purpose of obtaining those necessaries which the husband himself has neglected or refused to furnish; and second, where an agency in fact arises from the authority of the husband, expressly or impliedly conferred, as in other cases.

4. Although there is here no basis for classifying the garages as necessaries, it is not to be overlooked that it is the general rule that whether an article is ordinarily a necessary, for which the wife may pledge the credit of the husband, is a question of fact unless the case is so clear that the court would be justified in directing the jury that the article cannot be a necessary.

5. Punishment of a promisor for breach, without regard to the extent of the harm that he has caused, is an unjust and unnecessary remedy and a provision for liquidated damages having an impact that is punitive rather than compensatory will not be enforced.

6. Where the actual damages resulting from a breach of the contract cannot be ascertained or measured by the ordinary rules, a provision for liquidated damages not manifestly disproportionate to the actual damages will be sustained.

7. Where, however, the measure of damages resulting from a breach of contract is susceptible of definite measurement, an amount greatly disproportionate will be held to be a penalty.

Joe A. Walters, Minneapolis, for appellant.

Theodor Herman, Minneapolis, for respondent.

MATSON, Justice.

Appeal from an order denying defendant's motion for judgment notwithstanding the verdict or for a new trial.

In this action for damages for a breach of a construction contract, issues arise as to whether the trial court erred in instructing the jury (1) that as a matter of law the wife was the agent of the husband and (2) that if a contract was found to exist damages must be awarded to the full amount of the 15 percent of the contract price as stipulated for liquidated damages.

Defendant placed an order with plaintiff's sales representative for the construction of two garages at a total cost of $1,800. The order form signed by the defendant contained the express provision that it was Subject to the approval and acceptance of the plaintiff's office manager. Shortly after the construction order had been taken, plaintiff's sales representative contacted defendant's wife by telephone and informed her that her husband's order for the construction of the garages had been approved and accepted by the plaintiff. Either during the time intervening between defendant's placing of the order with plaintiff's sales representative and the latter's telephone conversation with defendant's wife informing her of the approval of the contract, or shortly thereafter, the defendant entered into a contract with another construction company for the building of the two garages.

Upon learning that defendant did not intend to permit the plaintiff to build the two garages, plaintiff's president contacted the defendant by telephone to verify that defendant had cancelled his order.

The jury found that defendant had made a contract with the plaintiff for the building of the garages and that by refusing to permit the plaintiff to build the garages he had breached the contract. Pursuant to the trial court's instructions, the jury awarded plaintiff $270 in damages or the full 15 percent of the contract price stipulated as liquidated damages.

1. It was prejudicial error to instruct the jury that under the circumstances the wife as a matter of law was the agent of her husband and that if the acceptance of the contract was communicated to the wife it would be the same as communicating it to him. It is, of course, well established that when a prospective customer, upon the solicitation of a sales representative, signs a written order for goods or services upon terms Which expressly provide that the order is taken subject to the acceptance or approval of the salesman's home office or of his principal, the order is nothing more than an offer by the customer and does not become a contract until acceptance of the order has been Communicated to the customer. ¹

2--3. It is likewise well settled that the marital relation does not, standing alone, constitute the wife the agent for her husband. ² In Bergh v. Warner, 47 Minn. 250, 251, 50 N.W. 77, Mr. Justice Mitchell summarized the two circumstances in which a wife, as a matter of law or as an agent in fact, may act for her husband as follows:

'* * * This agency is frequently spoken of as being of two kinds--First, that which the law creates as the result of the marriage relation, by virtue of which the wife is authorized to pledge the husband's credit for the purpose of obtaining those necessaries which the husband himself has neglected or refused to furnish; ³ Second, that which arises from the authority of the husband, expressly or impliedly conferred, as in other cases.' ⁴ (Italics supplied.)

There is no evidence whatsoever in this case that the defendant either expressly or impliedly authorized his wife to act as his agent in negotiating for the building of the garage or for the specific purpose of receiving notification of plaintiff's acceptance of his order to build the two garages. ⁵ If there was any understanding between the plaintiff's sales representative and the defendant that the latter's wife was authorized to act as his agent for any purpose, such understanding is not revealed by the record. ⁶

It follows, therefore, that if it was proper for the trial court to charge the jury that, as a matter of law, the defendant's wife was the agent of the defendant for the purpose of receiving notification of plaintiff's acceptance it must be justified upon the quasi-contractual theory ⁷ that the defendant's wife was authorized to serve as defendant's agent for the purpose of obtaining necessaries, and under the facts it must appear that the two garages constituted necessaries. Such a theory is unsound.

In the first place, as plaintiff in its brief candidly admits, a search of the authorities has failed to disclose a case involving a consideration of whether a garage may be classified as a necessary. Indeed, it is somewhat unusual to conceive of two garages as being necessaries in the absence of clear evidence indicating such. The record in this case discloses no such evidence. Secondly, the facts of this case all indicate that the plaintiff's acceptance of defendant's order to construct the two garages was in no way an attempt to furnish the defendant's wife with necessaries. The plaintiff's sales representative negotiated for the construction of the two garages with the defendant, not with his wife. The first contact that plaintiff's sales representative had with defendant's wife was when he called her to inform the defendant that the Gorco Construction Company had accepted the defendant's order. Whether a garage ever falls into the classification of necessaries we need not here determine. ⁸

4. Although there is here no basis for classifying the garages as necessaries, it is also not to be overlooked that the issue of classification is usually a question of fact for the jury. It is the general rule that whether an article is ordinarily a necessary, for which the wife may pledge the credit of the husband, is a question of fact unless the case is so clear that the court would be justified in directing the jury that the article cannot be a necessary. ⁹ By charging the jury that the defendant's wife was the agent of the defendant as a matter of law, the question of whether the two garages were necessaries was removed from the jury's consideration. It follows that, even if the theory advanced by the plaintiff were sound, the present case would require a new trial because of the further error arising from a failure to submit to the jury the question of whether the two garages were necessaries.

5. The construction order signed by the defendant contained a provision that, if he cancelled it after its acceptance, he agreed to pay plaintiff as liquidated damages a sum equal to 15 percent of the contract price to cover expenses incurred by plaintiff for the following items: Salesman's commissions, advertising, and the Committing of labor and equipment to perform the work. Pursuant to this provision, the trial court instructed the jury to award plaintiff $270 in damages if they found a contract existed. The court erred. The modern trend is to look with candor, if not with favor, upon a contract provision for liquidated damages when entered into deliberately between parties who have equality of opportunity for understanding and insisting upon their rights, since an amicable adjustment in advance of difficult issues saves the time of courts, juries, parties, and witnesses and reduces the delay, uncertainty, and expense of litigation. ¹⁰ Accordingly this court has long regarded provisions for liquidated damages as prima facie valid ¹¹ on the assumption that the parties in naming a liquidated sum intended it to be a fair compensation for an injury...