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DORAL HOSIERY CORP. v. SAV-A-STOP

March 28, 1974

DORAL HOSIERY CORPORATION
v.
SAV-A-STOP, INC.


Hannum, District Judge.


The opinion of the court was delivered by: HANNUM

HANNUM, District Judge.

 Plaintiff, Doral Hosiery Corporation, (hereinafter referred to as Doral) brought this action against the defendant, Sav-A-Stop, Inc., (hereinafter referred to as Sav-A-Stop) for damages resulting from breach of contract.

 The plaintiff's Complaint contains two counts. The first count avers that Sav-A-Stop did not pay the full contract price for merchandise sold and delivered to it by Doral. The second count avers that Sav-A-Stop did not purchase a sufficient quantity of merchandise from Doral to satisfy the terms of the contract.

 Presently before the Court is the Motion of the defendant, Sav-A-Stop, for partial summary judgment pursuant to Rule 56(b) of the Federal Rules of Civil Procedure. This Motion is directed to Count II of the Complaint.

 An understanding of the chain of distribution in the women's hosiery industry and the relevant roles of the parties therein is necessary to an understanding of the legal issues raised by the defendant's Motion.

 INTRODUCTION

 The chain of distribution in the women's hosiery industry includes a manufacturer, a service merchandiser, and a retail outlet store. In the case at bar, Doral is a manufacturer and Sav-A-Stop is a service merchandiser. A service merchandiser buys its line (brand) of hosiery from a manufacturer and sells it to a retail store as needed or, as alleged here, on a programmed sale basis. The programmed sale basis enables a service merchandiser to buy its line of hosiery from one manufacturer and induce its retail store customers to carry that line of merchandise. When a service merchandiser acquires a new retail store account, the service merchandiser often repurchases the retail store's existing inventory and replaces it with the programmed merchandise. In order to dispose of this non-programmed inventory the merchandiser resells it to the manufacturer. To induce the manufacturer to purchase such non-programmed inventory it is customary for the service merchandiser to agree to purchase its requirements of that manufacturer's line of products for a period of time sufficient to enable the manufacturer to recoup these losses with profits on subsequent sales to the service merchandiser. It is this kind of arrangement between a manufacturer and a service merchandiser which is the subject matter of the action.

 CONTENTIONS

 Doral contends that it agreed to accept for credit, returns of non-programmed merchandise from Sav-A-Stop in exchange for Sav-A-Stop's promise to purchase a sufficient amount of hosiery from Doral to exhaust these credits.

 Sav-A-Stop contends that this action is barred by the Statute of Frauds provision of the Uniform Commercial Code (hereinafter referred to as the Code) Article II, 12A Pa.Stat.Ann. § 2-201.

 Doral counters by producing six letters, appended hereto as exhibits A through F, which it contends are sufficient confirmation of a prior oral contract to overcome Sav-A-Stop's defense.

 ISSUES

 When, as here, both parties to the alleged oral contract are merchants, the formal requirements of the Statute of Frauds are:

 (1) that within a reasonable time, there be a writing in confirmation of the oral contract;

 (2) that the writing be sufficient to bind ...


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