Data

Date:: 22-09-1994
Country:: USA
Number:: 92 Civ. 3655 (JFK)
Court:: U.S. District Court, S.D., New York
Parties:: Graves Import Company Ltd. & Italian Trading Company v. Chilewich International Corp.

Keywords

MODIFICATION OF CONTRACT (ART. 29 CISG) - NO-ORAL MODIFICATION CLAUSE

Abstract

The plaintiffs, a US company and an Italian company, were agents of the defendant, a US import-export company (the 'buyer'), in connection with a sales contract for the purchase of shoes from an Italian seller (the 'seller'). The shoes had to be resold by the buyer in Russia, according to a master agreement the buyer had previously entered into with a Russian state entity. The seller was to deliver the shoes in two installments. Due to a delay on the part of the buyer in opening a letter of credit for the second installment, the seller decided to sell part of the undelivered shoes to a third party. The remaining shoes were delivered after the opening of the letter of credit by the buyer. The buyer paid to the agents only the commission corresponding to the part of shoes actually delivered by the seller. The agents started an action against the buyer to recover the full commission, alleging that the buyer had breached the sales contract, since it had opened the letter of credit later than agreed. The buyer contended, inter alia, that the payment of the commission was conditional upon delivery of the goods, which had been only partial. Moreover, the sales contract had been orally modified so as to defer the second delivery and the opening of the letter of credit until the Russian end-buyer paid the price still due under previous contracts with the buyer.

The Court noted that the sales contract between buyer and seller incorporated the Russian master agreement, which contained a clause according to which amendments and additions to the contract were not valid unless made in writing. The Court stated that Art. 29 CISG gives effect to the parties' express intention to require modifications in writing, though a party may be precluded by its conduct from asserting such a provision to the extent that the other party has relied on that conduct. The buyer was thus precluded by the terms of the Russian master agreement from asserting that the sales contract had been orally modified. Failure to pay the full commission was not therefore justifiable on this ground.

Fulltext

OPINION AND ORDER

JOHN F. KEENAN, United States District Judge:

Before the Court are plaintiffs' motion and defendant's cross- motion for summary judgment pursuant to Fed.R.Civ.P. 56. Plaintiffs allege that they are entitled to commissions from defendant pursuant to an oral agency agreement between the two sides. Defendant alleges that its duty to pay commissions under this agreement never matured because plaintiffs failed to adequately perform their contractual responsibilities and a condition precedent to payment of the commissions -- the delivery of the goods contracted for -- never occurred. In addition, defendant alleges that it is entitled to summary judgment on its counterclaim because plaintiffs violated their obligations of loyalty and fidelity. For the reasons that follow, both motions are denied.

BACKGROUND

Plaintiffs, Graves Import Company, Ltd., and Italian Trading Company, S.R.L., were the agents of defendant, Chilewich International Corporation, which has since changed its name to Plainswhite International Corporation. Chilewich was engaged in the international sale of consumer goods, doing substantial business in the former Soviet Union. Knowing of Chilewich's expertise in the Soviet Union, David Graves, the President of Graves Import, approached Simon Chilewich, the President of Chilewich International, in 1988 to discuss the possibility of developing a market in the Soviet Union for imported footwear. As a result of these discussions, Chilewich purchased Taiwanese footwear from Graves for resale in the Soviet Union.

In early 1989, Chilewich and Graves decided to market non- Taiwanese bootwear in the Soviet Union. Graves, with the assistance of Sergio Squilloni, the principal of Italian Trading, located non-party Filanto S.p.A. as a potential source of supply of the bootwear, and thereafter introduced Filanto to Chilewich. On or about August 11, 1989, Chilewich and Filanto entered into three separate contracts. Pursuant to these contracts, Filanto agreed to deliver 200,000 pairs of footwear to Chilewich for subsequent sale in the Soviet Union under three separate contracts between Chilewich and Foreign Economic Association 'Raznoexport,' a state entity. Each of the August 11, 1989 agreements between Filanto and Chilewich provided: '2. Sellers to allow Buyer's representatives access to production facilities to inspect quality with or without prior notice. Graves Import Company, Ltd., Nashville, Tennessee, U.S.A., along with Italian Trading Company, Florence, Italy, will act as agents in this transaction.' [...]. There was no further specification of plaintiffs' agency duties. In a one-page memo to Chilewich dated August 2, 1989, Graves and Squilloni set forth their schedule for monitoring the quality control of Filanto's manufacturing. [...]. The transactions contemplated in the August 11, 1989 agreements were successfully concluded and plaintiffs received their commissions after each delivery of footwear by Chilewich.

The August 11, 1989 contracts were followed by two additional contracts, one of which is the subject of this action. In January of 1990, Simon Chilewich, Sergio Squilloni, Antonio Filograna, Filanto's principal, and the Russian buyers met in Moscow to negotiate the terms of these two new contracts. On Chilewich's behalf, Italian Trading assisted in negotiating the contract price for Filanto's manufacturing and delivering of the footwear to Chilewich. On March 13, 1990, Chilewich executed the two contracts and sent them to Italian Trading with a cover letter directing Filanto to execute and return the contracts to Chilewich's associate in London. [NOTE1] The first contract, No. 9003001, which is not at issue in this case, provided that Filanto ship 100,000 pairs of shoes by June 15, 1990. The other contract, No. 9003002, the source of this dispute, required Filanto to ship 250,000 pairs of footwear to the Yugoslavian border in two installments: 100,000 by September 15, 1990, and 150,000 by November 1, 1990. The contract in dispute contained the same agency provision as found in the August 11, 1989 agreements. [...]. Indeed, the parties agree that plaintiffs were required to act in the same agency capacity under these new contracts as they had done pursuant to the first agreements. Nevertheless, the parties dispute the exact nature of the agency relationship: plaintiffs claim that this role was limited to the supervising of production and quality control of the shoes manufactured by Filanto, while Chilewich asserts that, as Chilewich's intermediaries with Filanto, plaintiffs possessed agency powers extending far beyond mere supervision of manufacturing, such as negotiating prices and supervising and monitoring of all phases of production and delivery.

NOTE 1. Filanto did not return the executed contracts until August of 1990, advising Chilewich that it was deleting parts of both contracts. By this time, Chilewich had already paid for and accepted delivery of all of the footwear subject to Contract No. 9003001, and had paid for and received shipments under the first installment of Contract No. 9003002. In September of 1990, Chilewich and Filanto met in Paris and agreed to abide by the terms of the contract originally executed by Chilewich on March 13, 1990.

Unlike the August 11, 1989 contracts and Contract No. 9003001, performance on Contract No 9003002 did not go smoothly. The first shipment contemplated by No. 9003002, consisting of 100,000 pairs of footwear, was received and paid for by Chilewich on time. At the September of 1990 meeting in Paris between Filograna and Chilewich, see supra note 1, however, Simon Chilewich advised Filanto that Raznoexport was seriously delinquent in paying for prior shipments. Chilewich further alleges that Filanto agreed with him that prudence required the second shipment, due to be delivered by November 1, 1990, be deferred until some payments were received from Raznoexport. [...]. Chilewich claims that he reassured Filanto that his company would stand behind its contractual obligations and would open a letter of credit for the second installment under Contract No. 9003002 as soon as payments were received from Raznoexport on earlier shipments, which Chilewich expected within a few weeks.

Subsequent correspondence reveals that soon after the Paris meeting, Filanto became concerned that Chilewich would not accept the 150,000 pairs of footwear that Filanto was manufacturing for delivery by November 1, 1990. On September 27, 1990, in response to a fax sent by Filograna, Chilewich wrote Filograna, stating that the circumstances in the Soviet Union required that they 'reduce the rate of shipments' and that 'there be a delay in [their] establishing a letter of credit for the balance of [their] current contract which created extraordinary financial burdens.' [...]. Chilewich stated that he did not want to abrogate the contract and that the matter would be handled 'most responsibly,' and that he expected payment soon because the shoes were 'most urgently needed.' [...]. On October 8, 1990, Chilewich again wrote Filograna in response to Filograna's concerned inquiries, asserting that the delay in establishing the letter of credit was 'by no means an abrogation of our contractual responsibilities, but because we are dealing with a country that is undergoing very substantial reforms, patience is essential.' [...]. He again claimed that he believed that Raznoexport would soon make partial payment. [...]. On November 13, 1990, Chilewich re-affirmed his desire to go forward with the transaction and his belief that the situation would be resolved the 'next few weeks.' [...]. On November 21, 1990, Chilewich informed Filograna that he would be in Moscow during the week beginning November 26, 1990, and would contact Filograna immediately upon his return. [...]. The next day, November 22, 1990, Filograna advised Chilewich that Filanto had received an offer for the second shipment of shoes and that he was seriously considering it because the footwear was for the winter season, which was soon closing. [...].

Apparently recognizing that his commissions for the second shipment were now in jeopardy, Squilloni of Italian Trading informed Graves on November 27, 1990 that he believed that the men's shoes, which comprised 90,000 of the 150,000 pairs of footwear, were already sold, and that he would contact Chilewich to let him know that there was 'no more time to play.' [...]. That same day, November 27, 1990, Graves wrote Chilewich, declaring that plaintiffs had 'from the very beginning attempted to act on behalf of your and Chilewich Corporation's best interests' and that they believed that Chilewich should honor the contract he signed on March 13, 1990. [...]. Graves further stated that plaintiffs would be entitled to their commissions even if Chilewich failed to cure its breach. [...]. In a hand-written note dated November 29, 1990, Graves advised Squilloni that his lawyer had advised him that Filanto needed to write a letter to Chilewich setting a deadline for Chilewich to cure its breach. [...]. The next day, Filanto wrote Chilewich using the language that Graves had set forth in his note to Squilloni. [...]. Filanto gave Chilewich until December 10, 1990 to cure the breach. [...].

On December 6, 1990, Chilewich informed Filograna that he had a scheduled meeting in Moscow with the 'Ministry' on December 9, 1990, which he had hoped would result in 'good news.' [...]

Chilewich advised Graves in early January of 1991 that it would open a letter of credit for the second shipment of shoes. He claims that only at this time did Graves inform him that Filanto had sold the men's-shoes portion (90,000 pairs) of the 150,000-pair shipment. Chilewich subsequently opened a letter of credit for the remaining 60,000 pairs and paid plaintiffs a commission thereon. Although Filanto offered to manufacture an additional 90,000 pairs by late March, the Russian buyers refused to accept footwear so late in the season.

Filanto thereafter commenced an action in the Southern District of New York to recover the difference between the amount for which it allegedly sold the 90,000 pairs of footwear and the contract price. See Filanto S.p.A. v. Chilewich Int'l Corp., 91 Civ. 3253 (CLB). United States District Judge Brieant, then Chief Judge, dismissed the complaint, ruling that Filanto was compelled to arbitrate the matter. See Filanto S.p.A. v. Chilewich Int'l Corp., 789 F.Supp. 1229, 1237 (S.D.N.Y.1992).

DISCUSSION

A. Applicable Legal Standard

Fed.R.Civ.P. 56 'mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.' Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). A motion for summary judgment may be granted under Fed.R.Civ.P. 56 if the entire record demonstrates that 'there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.' Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). When viewing the evidence, the Court must 'assess the record in the light most favorable to the non-movant and ... draw all reasonable inferences in its favor.' Delaware & Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d 174, 177 (2d Cir.1990); see Francis v. Coughlin, 891 F.2d 43, 46 (2d Cir.1989). In making this determination, the district court may not resolve issues of fact; it may only ascertain whether such issues are present. See Donahue v. Windsor Locks Bd. of Fire Comm'rs., 834 F.2d 54, 58 (2d Cir.1987). The non-movant, in response to a properly supported motion for summary judgment, may not rest on the allegations in its pleadings, but must adduce 'significant probative supporting evidence' demonstrating that a factual dispute exists. Anderson, 477 U.S. at 249.

In contract actions, summary judgment is an appropriate method of disposition when the contract's terms are clear and not conducive to more than one reasonable interpretation. American Home Prods. Corp. v. Liberty Mutual Ins. Co., 748 F.2d 760, 765 (2d Cir.1984); see also United States v. All Right, Title & Interest in Real Property, etc., 901 F.2d 288, 290 (2d Cir.1990) (quoting Murray v. National Broadcasting Co., Inc., 844 F.2d 988, 992 (2d Cir.), cert. denied, 109 S.Ct. 391 (1988)) ('Summary judgment is appropriate if ... `no reasonable trier of fact could find in favor of the non-moving party.' '). Whether a writing is ambiguous presents a threshold question of law for the Court that is resolved within the four corners of the document. Weiss v. Weiss, 52 N.Y.2d 170, 174, 436 N.Y.S.2d 862, 864, 418 N.E.2d 377, 380 (1981). A writing is unambiguous when, construing as a whole and giving each section its plain meaning, the writing is readily susceptible to only one interpretation. See id.; American Home Prods. Corp., supra, 748 F.2d at 765; Hong Kong Export Credit Ins. Corp. v. Dun & Bradstreet, 414 F.Supp. 153, 158 (S.D.N.Y.1975). If and when a contract is deemed unambiguous as a matter of law, then the court must reject extrinsic evidence regarding the parties' intention as to the contract. See Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 528 (2d Cir.1990).

B. Analysis

At first glance, this case would appear to be ripe for summary judgment: Chilewich undisputedly failed to open a letter of credit in Filanto's favor by November 1, 1990, as their written contract had required, and Filanto was ready and able to deliver the 150,000 pairs of footwear. In addition, the incorporation of USSR Contract 32-03/93085 in Contract No. 9003002 precludes Chilewich's argument that Chilewich and Filanto orally agreed to modify the November 1, 1990 delivery date. [NOTE 2]

NOTE 2. Paragraph 13 of the USSR contract No 32-03/ 93085 provides that ' [n]o amendments and additions to the present Contract shall be valid unless the same are in writing and signed by duly authorized representatives of both parties.' Article 29 of the United Nations Convention on Contracts for the International Sale of Goods respects the parties express intent to require modifications in writing, though a 'party may be precluded from asserting such a provision to the extent that the other party has relied on that conduct.' See 15 U.S.C.App. at 48, et seq.

Nevertheless, summary judgment for either side is inappropriate because a material issue of fact exists as to the extent of the agency relationship between defendant and plaintiffs. Plaintiffs claim that their contractual duties to defendant were listed, in their entirety, in a one-page memo to Chilewich dated August 2, 1989. In that letter, Graves and Squilloni set forth their schedule for monitoring the quality control of Filanto's manufacturing. Plaintiffs allege that they satisfied all of these duties in supervising the production of the footwear. Defendant does not dispute that plaintiffs satisfied their duties concerning the monitoring of the shoes' quality; it does, however, assert that plaintiffs' agency duties were broader than performing mere quality control. According to Chilewich, plaintiffs participated in all material aspects of the transaction, including in ensuring the delivery of the goods. [...]. Thus, Chilewich argues, the contract between plaintiffs and defendant was not fully set forth in the August 2, 1989 letter. Chilewich argues that the parties' conduct in previous transactions exhibits the full extent of the plaintiffs' agency duties.

Plaintiffs argument that defendant's failure to accept delivery of the shoes from Filanto on November 1, 1990 is the determinative act neglects the fact that Filanto gave defendant until December 10, 1990 to cure the breach. If plaintiffs' agency duties were broader than those listed in August 2, 1989 letter, then arguably they extended up until the deadline for defendant to cure the breach. Plaintiffs' alleged failure to advise defendant of Filanto's sale of the shoes, which may or may not have occurred prior to December 10, 1990, as well as plaintiffs' assisting Filanto in asserting Filanto's rights under Contract No. 9003002, could conceivably be deemed a breach of their agency agreement with Chilewich and thus a bar to their receiving the commissions sought in this action.

In addition, defendant claims that Filanto's delivery of the footwear to Chilewich was a condition for Chilewich's payment of plaintiffs' commissions. Plaintiffs dispute the existence of such a condition, and claim that, to the extent that any such condition existed, Chilewich's breach of its agreement with Filanto prevented the occurrence of the alleged condition. The Court has already determined that disputed issues of fact exist as to the terms of the parties' agency agreement. Given that plaintiffs' alleged actions in late November and early December of 1990 may have contributed to the non-occurrence of this alleged condition, material issues of fact exist as to the existence of the delivery condition and the parties' role in preventing the occurrence of such a condition.

CONCLUSION

For the reasons set forth above, this Court denies both motions. The parties are directed to conclude all discovery by November 7, 1994. The parties' ready-for-trial date is December 13, 1994. The Court's pre-trial materials are enclosed.

SO ORDERED.}}

Source

Published in English:
- 1994 U.S. Dist. LEXIS 13393
- 1994 WESTLAW 519996}}