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RILEY v. GENERAL MILLS

February 27, 1964

Helen RILEY, Executrix of the Estate of Bernard A. Riley, Deceased, and William E. Edgeworth, individually, and trading as Riley & Edgeworth, a partnership,
v.
GENERAL MILLS, INC.



The opinion of the court was delivered by: WOOD

The subject matter of this opinion concerns the determination of damages in a breach of contract action. The defendant was found liable to the plaintiffs after trial to a jury in November 1962. Thereafter, by agreement of the parties, the damage portion of the case was heard by the Court without a jury on December 9 and 10, 1963.

Essentially, this case involves a promotional campaign intended to increase the lagging sales of a food product manufactured by General Mills. The inducement to buy constituted an insurance application enclosed between two packages of Betty Crocker Gingerbread Mix. A purchaser of the mix could then obtain a $ 1000 school-child accident and health insurance policy by remitting one dollar and the executed application to the Peerless Casualty Company, Keene, New Hampshire. The promotion was begun in the summer of 1955 and discontinued within a few months of its inception by General Mills.

 The plaintiffs were the insurance agents for the Peerless Casualty Company. They negotiated with the defendant and its advertising agency to formulate the promotional campaign which was the subject matter of the contract.

 With this brief background of the case, we now make the following findings of fact and conclusions of law:

 FINDINGS OF FACT

 1. The number of insurance applications which were printed and intended for distribution in this venture totaled 3,305,000.

 2. Some 387,450 applications were actually distributed by the defendant before it discontinued the campaign in the autumn of 1955.

 3. The plaintiffs were to receive a guaranteed commission of five per cent on the first million dollars of annual net premium, four per cent on the second million, and three per cent on the third million.

 4. The plaintiffs were also to receive a contingent commission of 25 per cent of the net profit received on the first $ 3,000,000 of premium.

 5. This contingent commission would be calculated by subtracting from 100 per cent of the premium received, the anticipated 50 per cent loss ratio, an agreed expense loading of 28 per cent and an average guaranteed commission of four per cent, leaving a profit of 18 per cent of the first $ 3,000,000.

 6. Betty Crocker Gingerbread Mix was selected by the defendant as the product to be used in this promotion because its sales in units of merchandise represented only one tenth (1/10) of the annual sales of General Mills. (N.T.469)

 7. It was the intended purpose of this promotion to increase the sales of this product.

 8. To insure the success of the program, national advertising in newspapers, on radio and television was planned to introduce the promotion to the public. (N.T.479-480)

 9. None of this advertising was ever undertaken by the defendant. (N.T.501-502)

 10. General Mills purchased sufficient cellophane and containers to package three million deal units of the gingerbread mix. (N.T.491)

 11. This was a new and untried venture since school-child accident and health insurance in 1955 was a relatively new field. None of the parties had any experience in offering such insurance as an inducement to sell a food product.

 12. The plaintiffs spent a year and a half negotiating and formulating this insurance promotion.

 13. In the course of that time the plaintiffs made various plane trips to Albany, New York, to New York City on six occasions, Chicago, Illinois, Minneapolis, Minnesota, and they spent several weeks in Keene, New Hampshire to work out the details of this program. (N.T. 635, 636, 637)

 14. On these trips the plaintiffs incurred traveling expenses, hotel and meal costs in the estimated ...


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