Ken-Rad Corporation v. RC Bohannan, Inc.

• Decision Date: 03 December 1935
• Docket Number: No. 6790.,6790.
• Parties: KEN-RAD CORPORATION v. R. C. BOHANNAN, Inc.
• Court: U.S. Court of Appeals — Sixth Circuit

80 F.2d 251 (1935)

KEN-RAD CORPORATION v. R. C. BOHANNAN, Inc.

No. 6790.

Circuit Court of Appeals, Sixth Circuit.

December 3, 1935.

T. E. Sandidge, of Owensboro, Ky., and Lawrence D. Stanley, of Columbus, Ohio (Henderson, Burr, Randall & Porter, of Columbus, Ohio, and Sherman B. Randall, of Columbus, Ohio, on the brief), for appellant.

George E. Landis and Luther L. Boger, both of Columbus, Ohio, for appellee.

Before MOORMAN, SIMONS, and ALLEN, Circuit Judges.

SIMONS, Circuit Judge.

The controversy is as to the validity of an alleged contract between a manufacturer of radio tubes and a distributor thereof in definitely assigned territory, and as to the respective rights and obligations of the parties to the contract, if valid. The plaintiff below was Bohannan, Inc., the distributor, and the suit was against the Ken-Rad Corporation, the manufacturer, for compensation in procuring certain dealer contracts in the assigned territory, and upon contracts concluded by the manufacturer itself, in breach of the distributor's monopoly. Judgment below was for Bohannan, and Ken-Rad appeals on the ground of error in the denial of its motion for directed verdict and requested instructions on the question of damages.

On May 4, 1931, Ken-Rad sent Bohannan a one-year distributor's franchise in duplicate, both copies of which the latter signed and returned. In June of that year, Ken-Rad's representative delivered to Bohannan a second one-year franchise, differing in some respects from the first, which was also signed, and then delivered to the representative. On the ground that Ken-Rad never executed the first franchise or returned an executed copy thereof to Bohannan, and on the ground that there is no evidence that the second franchise was ever delivered to its home office, or to any officer having authority to execute the agreement, Ken-Rad contends that there is no writing binding the parties as to the matters in controversy. It is clear, however, that both litigants operated under the terms of the franchise, that Ken-Rad's representatives understood that it controlled relations with Bohannan, and that the Ken-Rad letter of October 23, 1931, canceling the contract, was "within the understanding of the contract with us," and so recognized the existence of the written agreement. We consider the issues here to be governed, therefore, by the written instrument executed in June, 1931, if otherwise it is valid and enforceable.

The instrument recites a purpose to define the relations of the manufacturer and distributor in the marketing of Ken-Rad radio tubes, to describe definite territory within which the distributor is to sell, and to provide terms that shall enter into all sales by the manufacturer to the distributor; the manufacturer, however, reserving the right to change the territory upon notice. The manufacturer agrees to sell, and the distributor agrees to buy, at list prices, to be established from time to time by the manufacturer, less a discount of 50-10-10 per cent., with the right reserved to the manufacturer to change the discounts when competitive market conditions warrant. In the event of reduction in prices, the manufacturer agrees to protect the distributor to the extent of tubes on hand or in transit, and for this purpose the distributor agrees to furnish a complete monthly inventory, and is likewise authorized to protect its dealers on price reductions. There follows a recital of the manufacturer's merchandising plan, with which we shall deal separately. Additional provisions reserve the right to the manufacturer to allot tubes to its distributors proportionately, and specify that acknowledged orders are not to constitute contracts to sell until apparatus or tubes are appropriated thereto. The distributor agrees to sell no tubes outside of his territory, and the manufacturer to refer to the distributor all inquiries and orders originating therein. The distributor is obligated to maintain a stock sufficient to promptly supply his territory, and to report his sales monthly on forms to be furnished by the manufacturer. The distributor is also required to maintain an adequate testing department for servicing tubes. The agreement may be canceled at any time by either party upon 30 days' notice; the cancellation to terminate as of its effective date all orders not shipped, and to impose no liability on either party with respect thereto.

Paragraph 7 of the agreement details the manufacturer's merchandising plan, and recites that in order to assist the distributor the manufacturer has acquired from the Acremeter Company an exclusive right to distribute its tube-testing device, and copyrighted sales promotion plan; that the manufacturer, in co-operation with the distributor, contemplates placing acremeters and merchandising plan with desirable dealers on a basis that would require each dealer to agree to purchase $5,000 worth of tubes from the distributor at the rate of not less than $300 during each 90-day period, in consideration of which, upon the dealer's taking and paying for the required amount of tubes, the acremeter and plan would become his property. The dealer is to make a deposit of $200 with the manufacturer to guarantee the purchase agreement; the deposit to be refunded upon performance, and, in order to assure proper performance and operation of the plan, the distributor agrees to establish and maintain...