Pyrate Corporation v. Sorensen

• Decision Date: 27 October 1930
• Docket Number: No. 6138.,6138.
• Citation: 44 F.2d 323
• Parties: PYRATE CORPORATION v. SORENSEN et al.
• Court: U.S. Court of Appeals — Ninth Circuit

44 F.2d 323 (1930)

PYRATE CORPORATION v.SORENSEN et al.

No. 6138.

Circuit Court of Appeals, Ninth Circuit.

October 27, 1930.

Harold M. Sawyer, Alfred T. Cluff, and Daniel W. Evans, all of San Francisco, Cal., for appellant.

Paul Barksdale D'Orr, Thomas A. Reynolds, and A. L. Abrahams, all of Los Angeles, Cal., for appellees.

Before RUDKIN and WILBUR, Circuit Judges, and NORCROSS, District Judge.

WILBUR, Circuit Judge.

The appellant, who will hereinafter be referred to as the plaintiff, entered into a contract with the defendants Sorensen and Dee, who will hereinafter be referred to as the defendants, giving to the defendants the exclusive right to manufacture and sell Pyrate products within the state of California for a period of twelve months from the date of the contract, July 10, 1925, with certain renewal privileges.This proviso of the contract with reference to renewal is the only question involved on the appeal; plaintiff contending that the contract had been renewed and that the defendant broke the contract by refusal to continue thereunder.In order to understand the situation of the parties, it will be necessary to state some of the facts as to which there is no disagreement.

The agreement between the parties may be briefly summarized as follows: The defendants entered into a contract with the plaintiff stating that the plaintiff corporation is exclusive owner of all varieties of cleansing product known and sold under the registered trade-name of "Pyrate"; that the defendants desire to act as exclusive agents for the marketing of the product in the state of California, and in consideration of being granted that right agreed "that they will purchase every twelve months continuation of the within contract, a minimum quantity of 800,000 pounds of the above described product."The contract fixed the price per pound for the product, but provided for a change in cost in accordance with the fluctuations of the market.Plaintiffs were to furnish to the defendants formulas of the special mixtures supplied to them provided that such formulas should remain the property of the plaintiffs, and that "upon the cancellation of the within contract by either party the buyers (defendants) agree to deliver to the seller (plaintiffs) on demand all records of sales of bulk Pyrate and/or special mixtures."Defendants agreed not to engage in any similar or competing business or to use the formulas or information furnished them to further the interests of any similar or competing business.It is also provided: "It is further understood and agreed that buyers (defendants) will conduct and operate their business during the life of this contract under the name of `Pyrate Products of California.'"The agreement in regard to the term of the contract is as follows:

"It is agreed that this contract is to continue for a period of twelve months from date, with the privilege of renewal for a further period of four years, and at the expiration of said second period, for an additional five year period; provided the terms of the within contract have been faithfully performed by said buyers during such previous period."

The contract was modified in writing so as to reduce the minimum quantity agreed to be purchased from 800,000 to 200,000 pounds.The business of selling said product within the state of California was continued by the defendants acting under the name of the Pyrate Products Company of California as therein agreed until September, 1926.The defendants did not at any time give the plaintiff formal notice of intention to renew the contract at the expiration of the twelve months' period, and both parties by their conduct treated the contract as continuing in force until September, 1927, at which time defendants sought to terminate the contract, claiming that it had not been renewed.It is apparently conceded by the parties that the option to renew the contract was with the defendants, and the question is whether they exercised that option.It would seem clear that any conduct of defendants entirely inconsistent with the termination of the lease at the end of twelve months brought to the knowledge of the plaintiff would in effect operate as an election to renew the contract.In this connection it should be stated that the contract itself makes no provision, as is frequently done, for the method by which the parties shall manifest its intent to renew the contract.In June, 1926, the defendants entered into similar sales contracts with subagents for portions of California for a period of five years.These contracts were brought to the attention of the plaintiff and actually drawn by one of their employees, but these contracts were not executed by or on behalf of the plaintiff.Their validity depended entirely upon the right of the defendant to give the exclusive agency for five years in the territory in California covered by their blanket agreement for the entire state.It would seem difficult to express more definitely to the plaintiff the intention of the defendants to continue the conduct of the business for at least five years than was thus done by the defendants in executing a contract which could only be valid in the event that such option was exercised.It may be that a mere purchase of supplies by the defendants would not alone constitute a renewal of the contract, even though the prices quoted were those specified in the contract; but here we have in addition to the conduct of the business acts of the defendants entirely inconsistent with any other theory than that the contract...