Stern & Co. v. International Harvester Co.

• Court: Connecticut Supreme Court
• Writing for the Court: Before BALDWIN; KING
• Citation: Stern & Co. v. International Harvester Co., 172 A.2d 614, 148 Conn. 527 (Conn. 1961)
• Decision Date: 05 July 1961
• Parties: STERN AND COMPANY, Inc. v. INTERNATIONAL HARVESTER COMPANY. Supreme Court of Errors of Connecticut

Page 614

172 A.2d 614

148 Conn. 527

STERN AND COMPANY, Inc. v. INTERNATIONAL HARVESTER COMPANY.

Supreme Court of Errors of Connecticut.

July 5, 1961.

James W. Carpenter, Hartford, with whom was William E. Glynn, Hartford, for appellant (defendant).

Irving S. Ribicoff, Hartford, with whom was Louise H. Hunt, Hartford, for appellee (plaintiff).

Before BALDWIN, C. J., and KING, MURPHY, SHEA and RYAN ^*, JJ.

KING, Associate Justice.

Many of the material facts were outlined in the opinion on a previous appeal and need not be repeated here. See Stern & Co. v. International Harvester Co., 146 Conn. 42, 43, 147 A.2d 490. For some time the parties had done business under a contract granting the plaintiff the exclusive distributorship of the defendant's refrigeration products throughout a wide territory which embraced all of Connecticut, most of Vermont and some of Massachusetts. The defendant was empowered to change the territory 'by giving notice in writing * * * of such change.' On a number of previous occasions it had made changes, sometimes increasing and sometimes decreasing the plaintiff's territory, but always giving written notice as called for in the contract. On or about October 6, 1953, the defendant again changed the territory by giving to another concern the distributorship for the counties of New London and Windham, in Connecticut; and on this occasion the defendant failed to give the plaintiff prior written notice of the change. Indeed, the plaintiff was given no notice at all and first learned of the change from its own salesmen in New London and Windham counties; they telephoned that salesmen of another company were calling on the plaintiff's customers in those counties and were selling the defendant's refrigeration products.

The plaintiff brought this action to recover damages for injury to its business prestige, good will and sales, alleged to have been caused by the defendant's breach of contract. The contract contained a provision empowering either party to cancel the distributorship 'without cause * * * by giving written notice to the other party, specifying the effective time of cancellation.' On October 13, 1953, the plaintiff gave written notice to the defendant that, effective in thirty days, it canceled its distributorship for the entire remaining territory covered by the contract. The plaintiff asked the defendant to notify it as to what disposition the defendant wanted made of its products then on hand. The contract defined the rights and duties of the parties in settling accounts upon cancellation but contained no provision as to antecedent breaches of contract, though such breaches might motivate cancellation. The power in each party to cancel, upon giving written notice, did not, as the defendant seems to claim, result in the creation of an illusory contract, void for lack of any obligation on the part of either party. The contract remained operative until the power of cancellation was properly exercised. 1 Corbin, Contracts §§ 163, 167, 169. As to the portions of the contract which had been executed on the effective date of cancellation, the rights of the parties remained unaffected by the cancellation. Id. § 168; see Gurfein v. Werbelovsky, 97 Conn. 703, 706, 118 A. 32; R. F. Baker Co. v. P. Ballantine & Sons, 127 Conn. 680, 683, 20 A.2d 82, 137 A.L.R. 916. The defendant places great stress on the latter case. The facts in it differed markedly from those here. The right of cancellation of the oral contract was given only to the buyer (plaintiff) and was 'at will.' Here, the right of cancellation could be exercised by either party, but only by giving written notice of cancellation. Restatement, Contracts § 79, comment b, illust. 1. Furthermore, during the life of the present contract, that is, prior to the exercise by either party of the privilege of cancellation, there were mutual obligations which existed under the terms of the contract. There were also the provisions as to the rights and duties of the parties after cancellation. Necessarily, these survived cancellation. There was sufficient consideration moving from each party to make the contract enforceable. An interesting annotation on the effect of the reservation of an absolute right to cancel on the validity of a contract so far as it is executory may be found in 137 A.L.R. 919, appended to a report of R. F. Baker Co. v. P. Ballantine & Sons, supra. The decision in that case does not support the defendant's contention that here there was no valid contract, as far as executory dealings were concerned, and that therefore the defendant could break the contract with impunity and without liability for future losses.

The defendant claims that the exercise of the power to cancel constituted a rescission and thus necessarily brought about a forfeiture of the right to recover damages for any antecedent breach. Cases on the effect of the exercise of a power of cancellation which has been expressly provided for in a contract on liability accruing before the exercise of the power are collected in 166 A.L.R. 391. The effect of the exercise of a cancellation provision in a sales agency contract is the subject of an annotation in 32 A.L.R. 209, 215, supplemented in 52 A.L.R. 546, 547, and 89 A.L.R. 252, 254.

It is true that if the parties to a contract mutually agree to its rescission, in the technical sense of the term, they have agreed to annul or blot out the contract and consequently can claim no rights under it and no damages for any breach. Haaser v. A. C. Lehmann Co., 130 Conn. 219, 221, 33 A.2d 135. But even where the parties have employed the technical term 'rescind' or 'rescission,' the term will not necessarily be given its technical meaning. The meaning to be accorded it depends on the fair interpretation of the acts and conduct of the parties. 'From all the evidence before it the trier must determine what the intention [of the parties in the use of the word 'rescind' or 'rescission'] was. Intention is an inference of fact, and the conclusion [of the trier] is not reviewable unless it was one which the trier could not reasonably make.' Finlay v. Swirsky, 98 Conn. 666, 671, 120 A. 561, 563. Here, of course, the case is stronger for the plaintiff, since the term 'cancel,' rather than the term 'rescind,' was employed. Furthermore, this was not the termination of a contract by mutual agreement after partial performance. Such a termination might constitute a true rescission. Rather, this was the exercise by one party of the power to cancel which was expressly given to each party in the contract itself.

The cases referred to in the annotation in 166 A.L.R. 391 at page 392 support the statement of the writer of the annotation that 'when a contract * * * contains a provision or option giving the right or privilege of cancelation and the agreement is canceled in pursuance of the right [or] privilege thus given, such cancelation does not extinguish liabilities that have already accrued under the contract * * * regardless of whether the liability is that of the party who exercised the option to cancel the agreement or ...