of any others, for manufacturing containers for its products during the term of the agreement. The provision of the agreement relied upon by plaintiff to support its contention is to be found in paragraph 1 thereof, which recites that plaintiff leases its machines to defendant and licenses defendant "to use the same, exclusively, however, (except as hereinafter provided) for the use in the Lessee's business of packaging, selling and distributing milk * * *."
This provision does not require defendant to use the plaintiff's machines and no others. It licenses defendant to use such machines, but requires the defendant "to use the same, exclusively, however, * * * for the use in the Lessee's (defendant's) business, * * *" i.e., defendant could not supply a third party with "Sealcones" made on plaintiff's machines. This is the only construction consistent with the setting off of the word "exclusively" by commas, and with the use of the word "however".
Moreover, that this language was not inadvertent is shown by a clause in the second agreement made on the same day as the agreement in suit, in which the defendant clearly agreed to use the plaintiff's machines, and no others, for the manufacture of its containers (except for a stipulated 5% leeway). Under the terms of this second agreement, however, defendant's failure to use plaintiff's machines exclusively (and to meet certain other terms) resulted only in the loss of the exclusive license granted by this second agreement to use plaintiff's machines in a designated territory, and in no way affected the provisions of the original agreement under which defendant had only a non-exclusive license.
Plaintiff offered testimony as to the oral negotiations leading up to the execution of the agreement upon which suit is based for the purpose of "explaining" the meaning of the word "exclusively" as used therein. Such testimony is unavailing because it is inconsistent with, and would contradict rather than explain, the expressed intention of the parties in their written agreement. Gianni v. R. Russell & Co., Inc., 281 Pa. 320, 126 A. 791; Colonial Mfg. Co. v. Carideo, 142 Pa.Super. 485, 16 A.2d 731.
Since, therefore, defendant did not promise or agree to use plaintiff's machines exclusively, it committed no breach when it discontinued their use and began using other packaging machines. Plaintiff urges, however, that there should be read into the agreement an implied promise by the defendant to use the plaintiff's machines so as to earn the stipulated royalties and relies on the principle that the assumption of an exclusive agency is an assumption of its duties. Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214. In the case at bar, however, defendant was not granted an exclusive agency to use the plaintiff's machines. Moreover, there is no reason to imply a promise such as plaintiff contends for in this case. Plaintiff did not rely on the royalties as its sole compensation, but took the precaution of demanding and receiving an initial license fee of $72,500 for the use of its machines. Nor did it stipulate for minimum royalties. The obligations of the defendant to the plaintiff were clearly expressed in the agreement and there is no basis for implying what would have been expressed if intended.
Accordingly, plaintiff's claim for royalties on the packages manufactured by defendant since March 30, 1939, on machines other than those of the plaintiff, is denied.
Plaintiff's second claim is for an accounting for royalties on all "Sealcones" produced by the defendant since January 1, 1934. It is admitted that by the agreement of January 28, 1932, defendant was required to pay royalties on all "Sealcones" produced by it, and defendant further admits that since January 1, 1934, it has accounted for and paid royalties on only its net sales. It asserts, however, that this was in full accordance with an oral modification of the written agreement. Defendant's testimony as to the oral modification is corroborated, inter alia, by the following facts: Shortly after the execution of the original agreement, its terms were modified to the extent that defendant was given credit for the number of "Sealcones" returned over the week-end. Accordingly, its statements showed the credits claimed for these week-end returns. From and after January 1, 1934, however, no credit was taken for these returns, thereby indicating that some change had taken place. Plaintiff has no explanation of this fact other than that the defendant failed to claim credits after that date. On May 1, 1935, defendant sent a letter to plaintiff in which, upon request of the plaintiff, defendant reconciled its production figure with the figure for its net sales, on which it had reported royalties were due. This letter unequivocally shows that the defendant was at that time making payments on only its net sales, yet for almost five years thereafter plaintiff accepted without objection or complaint such returns from the defendant. I find that there was an oral modification of the agreement by which after January 1, 1934, defendant was obliged to pay royalties on only its net sales and that these royalties were paid to the plaintiff.
The remaining question is whether defendant has breached its covenant to keep the leased machines in good and efficient working order. The testimony shows that the machines were in good and efficient working order on March 30, 1939, the date when defendant ceased to operate them. Thereafter, without plaintiff's consent or authority, the machines were partially dismantled and were stored by the defendant. On September 21, 1939, defendant for the first time made an unconditional offer to return the machines to plaintiff. This offer was never accepted by the plaintiff, which on the same day wrote a letter giving defendant thirty days within which to remedy its alleged breach of the agreement. Although defendant did not comply, plaintiff appears never to have declared the agreement terminated. Defendant has breached the agreement in that it has not maintained the machines in good and efficient working order. I find that the cost of restoring the machines to such condition is $800.
There is, therefore, presented a peculiar situation. Defendant has failed to maintain the machines in good and efficient working order. It is not, however, obliged to continue to use them and obviously does not intend to do so. Plaintiff, on the other hand, contends that there is a market for the sale or rental of these machines even though considerable expense might be required to render them marketable. If this be true, to permit the machines to remain idle for a period of fourteen years would appear to be sheer economic waste and would serve no equitable purpose. But I cannot compel the plaintiff to accept their return. Until the return of these machines, however, plaintiff has suffered no asscertainable damage. Accordingly, if the plaintiff elects at the present time to terminate the agreement and accept the tendered return of the machines by the defendant, I will assess damages against the defendant in the sum of $800; otherwise, plaintiff is entitled to no damages in the present action.
Conclusions of Law.
1. Defendant is not required under the terms of the agreement in suit to use plaintiff's machines, to the exlusion of any other machines, for the manufacture of the containers for its products.
2. There is no implied agreement by defendant to continue to use plaintiff's machines during the entire term of the lease so as to earn royalties for plaintiff and "make productive the subject matter of the lease."
3. Plaintiff is not entitled to an accounting for royalties on the packages made by defendant on machines other than plaintiff's.
4. By oral modification of the original agreement between the parties defendant was required to pay royalties on only its net sales of "Sealcones" subsequent to January 1, 1934.
5. Defendant has failed to keep the leased machines in good and efficient working order as required by its agreement with plaintiff.
6. Plaintiff is entitled to damages in the amount of $800 if it elects to accept the tendered return of the leased machines by defendant; otherwise, plaintiff is entitled to no damages in the present action.
7. Each party shall pay its own costs.
A decree may be submitted in conformity herewith.
© 1992-2004 VersusLaw Inc.