Oscar Schlegel Manufacturing Co. v. Peter Cooper's Glue Factory

Dowling, J.:

This action was brought to recover damages claimed to have been sustained by plaintiff pursuant to defendant’s breach of a contract in writing between the parties as follows:

“ Peter Cooper’s Glue Factory

. ‘ Gowanda, New York, December 9th, 1915.

“ Messrs. Oscar Schlegel Meg. Co.,

“Ill East 12th Street,

“ New York City, N. Y.:

“ Gentlemen.— We are instructed by our Mr. von Schuckmann to enter your contract for your requirements of ‘ Special BB ’ glue for the year 1916, price to be 9c. per lb., terms 2% 20th to 30th of month following purchase. Deliveries to be made to you as per your orders during the year and quality same as heretofore. Glue to be packed in 500 lb. or 350 lb. barrels and 100 lb. kegs, and your special Label to be carefully pasted on top, bottom and side of each barrel or keg.

“ This contract is contingent upon fires, strikes, accidents and other causes beyond control of the parties hereto.

“ We take great pleasure in entering this contract and assure you this continuation of your business is greatly appreciated.

“ Yours very truly,

“ PETER COOPER’S GLUE FACTORY,

“ W. D. Donaldson,

Sales Manager.”

“ WDD/SIJ-D.

This agreement was accepted in writing by the plaintiff and concededly constitutes the contract between them. The parties entered upon its performance and deliveries were made from time to time amounting in the aggregate to 169,800 pounds or 340 barrels. For the first nine months of 1916, from January to September inclusive, plaintiff received and paid for 87^ barrels or 43,700 pounds. The average for these months was a little less than 5,000 pounds. In October, November and December, however, the plaintiff ordered an aggregate of 126,100 pounds. Between October 30, 1916, and December 26, 1916, plaintiff ordered the delivery pursuant to the contract of 79,891 pounds of glue which plaintiff needed to meet its requirements and the defendant did not deliver the same. Plaintiff in anticipation of the performance of the contract had sold 42,000 pounds of this glue and as it could no longer be bought in the open market it lost its profits on such sales. The other damage sustained by plaintiff pursuant to defendant’s failure to deliver the balance of the amount ordered brought the plaintiff’s damages up to a total of $6,431.28 for which it has recovered judgment.

The plaintiff was a jobber exclusively, handling glues, shellacs, paints and chemicals. It bought only for retailing to the trade and did not manufacture or use any of these articles in its own business. It sent out salesmen to solicit orders and when “ BB Special Glue ” was ordered by a customer a requisition covering the same would be sent to defendant who would fill the order. The plaintiff dealt in none of the glue from its own stock but filled the orders of its customers as it received them by calling upon defendant to deliver the goods under the contract between the plaintiff and defendant. Therefore, the plaintiff’s requirements of Special BB Glue for the year 1916 were the amounts of orders received therefor from its customers to whom its salesmen had sold such goods. This method of doing business, and the meaning of the term “ requirements ” as used in the contract, were concededly well known to defendant, which had theretofore done business under the same system with the plaintiff, to which it had sold goods as far back as 1910. The contract in question is similar in general terms to the contract between the parties for the year 1915 which also was for plaintiff’s “ requirements ” of special bookbinders’ glue, for the balance of the year from March 3, 1915, at a fixed price quoted. No question arose between the parties as to the meaning of such a contract during the year 1915 and plaintiff’s requirements, evidenced by orders from its customers, were filled without question during that year. Nor did any question arise as to the meaning or validity of the contract for the year 1916, until the price for this special glue rose so high that the contract became very valuable to the plaintiff and entailed a corresponding loss of profit to the defendant which it could have made by selling the goods elsewhere. The contract price was nine cents per pound arid by December, 1916, prices were quoted as high as twenty-one to twenty-five cents, and plaintiff itself had sold at the price of fifteen cents and twenty-four cents goods which it was unable to buy in the open market in order to fill its sales. For such goods as plaintiff did obtain in the open market it paid seventeen cents a pound in December, 1916, and then the quality was lower than that which defendant was to supply. Furthermore, in the month of December, 1916, no quotations whatever were available for 1917 deliveries.

Under these conditions plaintiff not unnaturally sought to reap a legitimate advantage from its contract and by soliciting the trade received orders for the last three months of 1916 which, as has been said, aggregated 126,100 pounds. In the meantime the defendant was furnished by plaintiff with requisitions for orders for 79,891 pounds of glue which it has failed to deliver under the contract, and upon the trial these requisitions were produced by the defendant upon notice and received in evidence. At no time during the receipt of these orders did the defendant repudiate the contract or disavow the same, nor did it object to, or question, the good faith of the orders. Plaintiff repeatedly demanded performance of the contract and defendant’s representative with whom the original contract was made promised repeatedly as late as the month of December, 1916, to ship glue to cover the requisitions and said that the glue was on the way. Instead of repudiating the contract, the defendant undertook to place an arbitrary limitation upon the same, by saying it would give the plaintiff as a jobber ten per cent more than it had purchased during the year 1915 or about 40,000 pounds. But despite this the defendant never notified plaintiff to cease taking orders from its customers for delivery of this glue, nor did it ever notify plaintiff while the orders in question were being taken that it would not live up to its contract.

The defendant now claims that this contract lacked mutuality and, therefore, was unenforcible. I do not think this contention can be sustained. Both parties were dealing with full knowledge that the plaintiff required no glue for use in any manufacturing business of its own, but desired and agreed only to purchase such glue as it might be able to sell through its salesmen to customers. The course of dealing between plaintiff and defendant kept defendant constantly advised of this fact and it knew that the plaintiff kept no stock of goods, but as soon as it received an order for glue it notified the defendant thereof and had the order filled by defendant. In other words, plaintiff’s requirements which, under the contract, defendant was to supply for the year 1916, were its requirements for the amount of glue which during that time it might be able to sell to customers. The recovery herein is based upon the loss which plaintiff sustained by reason of defendant’s failure to fill orders which plaintiff had so obtained from customers and of which the defendant had been promptly notified. The defendant had not protected itself against any abnormal variation in price during the year nor had it fixed any limitation upon the amount of glue which it would furnish the plaintiff, if it received orders from its customers therefor. The only proviso in the contract which the defendant cared to insert was that the contract was contingent upon fires, strikes, accidents and other causes beyond the control of the parties. A rising market could have been guarded against by the defendant by inserting in the contract a clause fixing the maximum amount which the plaintiff might be entitled to receive thereunder; but instead the defendant made an absolute contract at a fixed price for the entire year to deliver as much glue as plaintiff might be able to sell to customers during that period. If the plaintiff had taken orders for this quality of glue and had failed to buy the amount to fill such orders from the defendant, the defendant could have held the plaintiff under the contract and recovered the damages which it sustained by reason of plaintiff’s failure to order such glue from the defendant. And this it could have done no matter how low the market price might .have fallen during the year. Both parties acted with full knowledge of their respective methods of doing business and of the uncertain and fluctuating demand for glue which might come from plaintiff’s customers and which must naturally to some extent be dependent upon the market price. They entered upon this contract with their eyes open to all the conditions then existing, or which might possibly arise, and with the intention of being mutually bound thereby. I believe that under the contract the plaintiff was bound to order from the defendant every pound of this quality of glue which it sold to its customers and that in like manner defendant was bound to supply every pound of this quality of glue which • plaintiff sold to customers and called upon the defendant to furnish. The mere uncertainty as to the amount which might be required to be furnished under the contract is no reason why it was not a mutual one nor does it make the contract unenforcible.

The court has found that the orders in question were received by plaintiff and transmitted to defendant under the contract. The plaintiff’s good faith in soliciting these orders and their validity have not been successfully attacked. Having a valid and enforcible contract with the defendant, obtained without any unfair "dealing on its' part, but as the result of the deliberate judgment of both parties thereto, the plaintiff had a right in the absence of any notification from the defendant that it could not or would not fill all its orders to proceed legitimately in good faith to solicit orders from the trade for this quality of glue and to expect the filling of these orders by the defendant. The defendant had no right to arbitrarily limit the amount which plaintiff should receive under the contract, and it was, therefore, properly held liable for the damages which the plaintiff sustained.

The situation presented by this case is similar to that which was before the Court of Appeals in New York Central Iron Works Co. v. U. S. Radiator Co. (174 N. Y. 331). There also the parties had left the contract open and indefinite as to the quantity of the goods that plaintiff might order from time to time. Defendant had there sought to have the contract reformed so as to call for only the usual amount of goods sold in the preceding year, as an answer to the vendee’s action for damages sustained by reason of the vendor’s refusal to furnish the goods called for under its orders for the second year. Judge O’Brien said (p. 334): “ It is quite probable that this controversy originated in a circumstance which the defendant, at least, had not anticipated or provided for. After the execution of the contract there was a large advance in the market price of iron and the manufactured products of iron, and, consequently, the value and selling price of the goods covered by this contract advanced in the same or possibly in a greater proportion. The needs of the plaintiff could be indefinitely enlarged when the market was in such a condition as to enable it to undersell its competitors in the same business in consequence of a favorable contract with the manufacturer of the goods. If a party contracts for goods upon a rising market he is ordinarily entitled to such profits as may accrue to him by reason of a prudent or favorable contract. We cannot perceive that there is any error of law in this judgment, although the plaintiff has recovered a considerable sum in damages for the breach. The case in its general features is the same as another case which was recently before this court, where there was a similar recovery that was sustained. (Fuller & Co. v. Schrenk, 58 App. Div. 222; affd., 171 N. Y. 671.) ”

The judgment appealed from should be affirmed, with costs.

Merrell and Philbin, JJ., concurred; Clarke, P. J., and Page, J., dissented.