Case identification
DATE OF DECISION: 19940922 (22 September 1994)
JURISDICTION: United States [federal court]
TRIBUNAL: U.S. District Court, Southern District of New York
[federal court of 1st instance]
JUDGE(S): Keenan
CASE NUMBER/DOCKET NUMBER: 92 Civ. 3355 (JFK)
CASE NAME: Graves Import Co. Ltd. and Italian Trading Company v.
Chilewich International Corp.
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Italy [plaintiffs were sales representatives of buyer]
BUYER'S COUNTRY: U.S.A. (defendant)
GOODS INVOLVED: Footware (boots)
Case abstract
UNITED STATES: Graves v.
Chilewich 22 September 1994 U.S. District Court
Case law on UNCITRAL texts (CLOUT) abstract no. 86
Reproduced with permission from UNCITRAL
The plaintiffs were the agents of the defendant [buyer], a New York import-export
company, in its
dealings with an Italian manufacturer of footwear that were intended to be
sold
in Russia. The
[buyer] refused to pay the plaintiffs' agency fees arguing that: the
plaintiffs had breached their
agency duties; and delivery of the shoes was a condition precedent to the
payment of the agency
fees. The [buyer] refused to accept delivery of a shipment of shoes send
from
the Italian [seller]
arguing that the sales contract was orally modified to the
effect
that further
deliveries would be subject to the Russian buyers paying for shoes
previously delivered to them.
The plaintiffs argued that their agency duties were limited to performing
quality controls and that
they had performed those duties. In addition, the plaintiffs rejected the
existence of any condition
precedent. Both the plaintiffs and the defendant applied for a summary
judgement.
The court noted that in contract actions summary judgement was appropriate
"when
the contract
terms are clear and not conducive to more than one reasonable
interpretation" and rejected both
applications for a summary judgement finding that the content of the agency
agreement between
the defendant and the plaintiffs was disputed. In the course of discussion,
the
court noted that the
contract between the [buyer] and the Italian [seller] incorporated a
provision making
modifications invalid unless they were in the form of a writing signed by
both parties. Citing
Article 29(2) CISG, the court found that the [buyer] was precluded from
asserting that there
had been an oral modification of that contract making further deliveries of
shoes by the Italian
[seller] to the [buyer] subject to payment by the Russian end-buyers of
the
price of shoes
previously delivered.
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Classification of issues present
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue: Article
29(2)
Classification of issues using UNCITRAL classification code
numbers:
29B [Modification or termination of contract by agreement: written contract
may require writing for
modification or termination]
Descriptors: Modification of contract
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Editorial remarks
EDITOR: Albert H. Kritzer
CISG issues ruled upon:
Modification of contract. This is a ruling on motions for summary judgment
that the court rejected because of
disputed issues of fact, directing the parties to conclude their
discovery
and proceed toward trial.
The facts relevant to the CISG are:
A buyer from the U.S. contracted to purchase a quantity of boots
from
a seller in Italy. The contract
was concluded at a time when the CISG was in effect in both
countries.
Graves, the plaintiff in this proceeding, was buyer's representative
in the transaction. Not all of the
boots were purchased from seller by buyer. Graves claims a
commission
on these boots, alleging that
seller was ready and willing to supply the goods but buyer
defaulted by not honoring his contractual
commitment to open a letter of credit for seller on the delivery
date
specified. Buyer alleged that he
was not in default because seller had orally agreed to modify the
delivery date.
Citing a no-oral-modification (n.o.m.) clause applicable to the
contract between buyer and seller, the court
called attention to a provision of the CISG that precludes this defense
by
the buyer.
The n.o.m. clause states:
"No 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."
The court stated:
"Article 29 of the United Nations Convention on Contracts for the
International Sale of Goods respects the
parties' express intent to require modifications in writings, though a
'party may be precluded from asserting
such a provision to the extent that the other party has relied on that
contract.'"
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Citations to other abstracts, case texts and commentaries
CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=101&step=Abstract>
French: Revue de Droit des Affaires Internationales/International
Business Law Journal (1995) 753-754
Italian: Diritto del Commercio Internazionale (1995) 460-461 No. 82
Polish: Hermanowski/Jastrzebski, Konwencja Narodow Zjednoczonych o umowach
miedzynarodowej sprzedazy towarow (Konwencja wiedenska) - Komentarz (1997) 253-254
CITATIONS TO TEXT OF DECISION
Original language (English): Text presented below; see also 1994 U.S.Dist. Lexis 13393;
1994 Westlaw 519996; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=101&step=FullText>
Translation: Unavailable
CITATIONS TO COMMENTS ON DECISION
English: Honnold, Uniform Law for International Sales (1999) 232 [Art. 29]; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.163-164
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Case text
Graves Import Company, Ltd. and Italian Trading Company, Plaintiffs,
v.
Chilewich International Corporation, Defendant
92 Civ. 3655 (JFK)
United States District Court for the Southern District of New York
Before: Judge Keenan
Decided September 21, 1994
Filed September 22, 1994
Opinion by Judge Keenan
Attorney for Plaintiff: Becker, Glynn, Melamed & Muffly, New York, New
York.
Of Counsel: Richard N. Chassen, Esq. and Terese L. Arneth, Esq.
Attorney for Defendant: Warshaw Burstein Cohen Schlesinger & Kuh, New
York,
New York.
Of Counsel: Lawrence J. Profeta, Esq.
OPINION
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 b
ecause 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 with
out 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." See Chilewich Notice of Motion, Exhibit 2. 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. See Graves' Affidavit, Exhibit A. The
transactions contem
plated 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.[1] 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.
See
Plaintiffs' Notice of Motion, Exhibit 1. 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.
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.
See Chilewich Affidavit P 20; Chilewich Deposition at 82, 84, 87-88. 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." See
Chilewich Notice of Motion, Exhibit 7. 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." See id. 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." See Chilewich Notice of Motion, Exhibit 8. He
again claimed that he believed that Raznoexport would soon make partial payment.
See id.
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."
See Chilewich Notice of Motion, Exhibit 9. 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. See
Chilewich Notice of Motion, Exhibit 10. 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. See Chilewich Notice of Motion, Exhibit 11.
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." See Chilewich Notice of Motion, Exhibit 12. 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. See Chilewich Notice of
Motion, Exhibit 13. Graves further stated that plaintiffs would be entitled to their
commissions even if Chilewich failed to cure its breach. See id. 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. See Chilewich Notice of Motion, Exhibit 15. The next day,
Filanto wrote
Chilewich using the language that Graves had set forth in his note to
Squilloni. See Chilewich Notice of Motion, Exhibit 16. Filanto gave Chilewich until
December 10, 1990 to cure the breach. See id.
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." See Chilewich Notice of Motion,
Exhibit 16.
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, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (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, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (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, 488 U.S. 955, 109 S. Ct. 391, 102 L. Ed. 2d 380
(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 (1982). 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. 15
3, 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.[2]
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. See Chilewich Affidavit PP 12-14. 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.
Dated: New York, New York
September 21, 1994
John F. Keenan
United States District Court
FOOTNOTES
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.
2. Paragraph 13 of the USSR contract No. 32-03/93085
provides that "no 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.
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