Gruber v. S-M News Co.

126 F. Supp. 442 (S.D.N.Y. 1954)

 

RULE:

For breach of a contract of exclusive distribution and return, plaintiffs are entitled to damages measured by the difference between what they actually obtained for their merchandise and what they would have obtained had defendant exercised its promised reasonable diligence. On this, plaintiffs have the burden of proof to the extent of a reasonably certain and definite factual basis of computation. 

FACTS:

The sellers were approached by the buyer's agent, who later died, and an oral agreement was made for the sellers to manufacture for the buyer 90,000 sets of 12 Christmas greeting cards for 1945. The designs involved the newly formed United Nations. The buyer, who had 700 wholesalers, showed the cards to only four, who each chose not to buy. The sellers claimed damages of $ 101,800. The court awarded $ 17,854, after finding (1) the statute of frauds was not a defense where other written materials showed the contract terms, (2) the agreement was a contract for distribution and return of 90,000 sets of cards, and not one for their sale, (3) the buyer did not exercise the promised "reasonable diligence" in showing the cards to only four wholesalers, (4) the salability of the cards may have been affected by world events after 1945, (5) the sellers could not show how many cards might have been sold, thus failing to carry their burden of showing certain profits, and (6) the buyer could not show that the sellers would have sustained a loss.

ISSUE:

Should the sellers' expenditures for labor and material be reasonably made in reliance to the buyer's promise of $ 19,934?

ANSWER:

Yes.

CONCLUSION:

The court accepts the rule that  plaintiffs' recovery for their out-of-pocket  expenses must be diminished by any loss that would result from defendant's full performance. We are not persuaded that defendant has established the probability of such loss. True plaintiffs were able to obtain merely six cents per box on a sale of 40,000 boxes in 1949, rather than the promised eighty-four cents for sale in 1945 under their agreement with defendant. But the Christmas cards had a novelty appeal, designed as they were to exploit a dozen different nations at the time of the newly-formed United Nations in 1945. The glamour of the caricatures may well have been clouded by the worsening world situation that gathered in the succeeding years.

Thus, only the amount of plaintiffs' expenditures reasonably made in performance  of  the contract or in necessary preparation therefor, may be recovered. This does not include, as plaintiffs have requested, the cost of making the plates from which the cards were printed since these had already been fabricated prior to making the contract with defendant. The amount of plaintiffs' expenditures for labor and material reasonably made in essential reliance on defendant's promise was $ 19,934.44. From this sum must be deducted the net amount realized by plaintiffs from sale of 40,000 sets at six cents a set which was $ 2,080. Accordingly plaintiffs are entitled to $ 17,854.44 in damages.

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