Meier Dental Mfg. Co. v. Smith

ADAMS, Circuit Judge (after stating the facts as above). [1] Defendant contends, first, that the contract of May 7, 1913, is unilateral, and for that reason unenforceable in law or equity. This contention, in our opinion', is untenable. The covenants of the contract conferring rights and imposing obligations upon the respective parties afforded ample consideration for each other, and clearly validated the contract so far as this contention is concerned. It is next argued that plaintiffs had an adequate remedy at law, and for this reason the equitable remedy of injunction was not available to them. In the view we take of other questions, we do not cpnsider it necessary to decide this one. It is next contended that the twenty-sixth paragraph of the contract conferred absolute power upon defendant to cancel the contract ini the event plaintiffs failed to order and pay for, during tire second year of the duration of the contract, the minimum quantity of merchandise specified by the contract, namely, $10,500 worth, and that, the plaintiffs having failed to order that quantity of goods during that year, defendant, in the exercise of power conferred upon it, canceled the contract, as it had a- right to do. In the contract defendant appointed plaintiffs sole and exclusive agents for the sale of its goods in the very extensive territory of North and South America and Japan, and obligated itself to supply them with goods as and when ordered by them at prices definitely fixed in the contract. In consideration of this and other rights and privileges conferred upon them, plaintiffs agreed as follows: “Twenty-Sixtb. Tbe party of tbe second part [tbe plaintiffs in tbis case] covenants and agrees that if it does not, during tbe first year of tbis agreement purchase from tbe party of tbe first part [the defendant herein] and pay for as hereinbefore provided, at least ten thousand dollars ($10,000.00) worth of Usona and Helios brands of regulating appliances, ankrite, iridiumoid, and duplex [these being tbe dental supplies for tbe sale of which plaintiffs were given the exclusive agency], net, after all discounts have been taken off, and during each year of tbe life of this agreement purchase and pay for as hereinbefore provided, a net amount of” those articles “in an increasing ratio of five per cent. (5%) from the first year compounded, then it is agreed and understood that the party of the first part may cam-eel this agreement, hy gw [567] ing written notice, sent by registered mail, to the party of the second part, which notice shall be given mthin thirty days (SO) after the close of any year from the signing of this agreement.” This language is very plain and explicit, and without doubt in terms gave defendant the right to cancel the contract if plaintiffs should fail during the year ending May 7, 1915, to purchase and pay for at least $10,500 worth of defendant’s goods. But if) is claimed (1) that paragraph twenty-sixth did not make time of the essence of the contract, and that, if plaintiffs ordered the required amount of goods within approximately the time specified, or (2) ordered approximately the amount of goods required within the specified time, this would constitute substantial performance, enough at least to prevent cancellation of the contract. Plaintiffs’ counsel argue that, because plaintiffs had substantially performed tfie contract by ordering nearly all the merchandise required of them to be ordered for the second year, the right reserved in the defendant to cancel the contact for nonperformance should not have been exercised. They also argue that because they inadvertently failed to take notice that the year was about to expire and they had not ordered the required amount, and because defendant’s president when conversing with plaintiffs at about the expiration of the year failed to advised them of their pending peril, and because after the year had expired they offered to make good the deficiency either by then ordering the deficient amount of goods or by paying defendant the profits it would have made if the deficiency had not occurred, they are, on high equitable grounds, excused from failure to keep their covenant and released from the agreed consequences of it. If the only purpose of the contract on defendant’s part was to dispose of $10,500 worth of goods in the year in question, there might (which we hardly concede) be some merit in this argument. But it is manifest from a consideration of all the provisions of the contract that defendant’s main purpose was not to sell that specific quantity of goods in the time mentioned, but was to build up a substantial and enduring trade for the goods manufactured by it. In order to do so it sought to stimulate plaintiffs’ zeal and activity in its behalf by giving them the sole and exclusive right to sell its goods throughout a large territory for a long period of. time, and gave them attractive terms whereby their income was made dependent upon their success in disposing of its goods. The only covenant defendant required of plaintiffs to insure it of their diligence was that they should agree to dispose of at least $10,000 worth of goods in the first year, with an annual increase of 5 per cent, in each succeeding year, reserving to itself as its only effective means of self-protection against plaintiffs’ possible disloyalty or inefficiency, the right to cancel the contract if plaintiffs should fail to perform this covenant. [2] But plaintiffs, through their counsel, now say they did not mean what they said and agreed to in the twenty-sixth paragraph of the contract, but did mean that if they should not purchase approximately the amount specifically .agreed to be purchased within the year, in other words, if they should not substantially perform this one stipulation as required by defendant for its protection, in that event only, the [568] right of cancellation might be exercised by defendant. While the argument of counsel extended into some minor considerations, it was mainly confined to the one question: Whether the time within which the required amount of goods should be disposed of annually was of the essence of the contract, and this presents the main and controlling question for our present consideration. * It is true the parties did not, in express terms or in so many words, say that time should be of the essence of the contract; but such an explicit statement as that was not necessary to make it so. If the provisions of the contract, taken in connection with the circumstances of the case and the purposes sought to be accomplished by its execution, disclose that the parties at the time of execution intended to make the time of performance essential, that intention should not be thwarted, and the time so fixed should be regarded as essential, without any express stipulation to that effect; and this, we think, is especially true in contracts of merchants and manufacturers, where special preparations to perform are often necessary, and time within which deliveries’ are needed are peculiarly insistent. In the case of Telegraphone Corporation v. Telegraphone Co., 103 Me. 444, 454, 69 Atl. 767, 771, the Supreme Court of Maine, in treating of this general subject, said: “ * * * If it satisfactorily appears from the terms of the stipulation, and all the circumstances that the parties actually intended to' make the time specified an essential element of the contract, and that the consequences, of a failure of performance must have been contemplated by the parties at the time of the execution of it, such an express stipulation as to time will be held decisive of the question in a court of equity as well as a court of law.” In the case of Norrington v. Wright, 115 U. S. 188, 6 Sup. Ct. 12, 29 L. Ed. 366, the Supreme Court of the United States, speaking by Mr. Justice Gray, said: “In the contracts of merchants, time is of the essence. * * * A statement descriptive of the subject-matter, or of some material incident, such as the time or place of shipment, is ordinarily to be regarded as a warranty; * * * that is to. say, a condition precedent, upon the failure or nonperformance of which the party aggrieved may repudiate the whole contract.” And in the case of Cleveland Rolling Mill Co. v. Rhodes, 121 U. S. 255, 7 Sup. Ct. 882, 30 L. Ed. 920, the Supreme Court adopted the language just quoted from the Norrington Case, and approved its doctrine. See, also, to the same effect, Jones v. United States, 96 U. S. 24, 24 L. Ed. 644. [3] We think it very clear that the parties to this case intended, when they executed the contract in question, to make the time within which it should be performed an essential element of the contract. They said in clear and unambiguous language that the plaintiffs should take $10,500 worth of defendant’s goods during the second running year of the contract. Persons are presumed, and ought to be held, to mean what they say. As indicating that they regarded this stipulation as creating a serious and binding obligation on the part of the plaintiffs, they not only expressly so agreed, but agreed in no less clear and unambiguous language that, if they failed to take that amount of goods within the second year, the defendant might cancel [569] the contract, and thus deprive them of all its valuable rights and privileges. This last stipulation discloses that plaintiffs understood well the consequences of their failure to perform as agreed. As all men are presumed to intend the necessary consequences of their act, we must conclude that plaintiffs, by consenting to the drastic remedy of cancellation of their contract for failure to keep its stipulation as to time of performance, were keenly alive to the importance attached to the time of delivery, and must have known that it was regarded as essential by the defendant, and they conceded it to be so at the time. Moreover, the purposes of the defendant company, as already°pointed out, and all the circumstances attending the execution of the contract, converge to the conclusion that time of performance was regarded by both parties as important and essential. We therefore cannot escape from the necessity of holding that time was of the essence of the contract between plaintiffs and defendant Plaintiffs’ counsel have also argued that defendant acted arbitrarily and oppressively in canceling it (1) without notifying plaintiffs of its purpose to do so; (2) without giving plaintiffs an opportunity to perform after the expiration of the time for performance; (3) without accepting plaintiffs’ offer to compensate defendant in money for the profits it would have made if there had been full performance; and they have also argued that because plaintiffs unintentionally overlooked the requirement of the contract in question, and failed to keep themselves advised as to the quantity of goods ordered, and were, therefore, as the end of the second year drew near, ignorant of the fact that they had not complied with the requirement of the contract for the second year, the defendant should be deprived of its only effective remedy of' cancellation. All such considerations as these are, in our opinion, foreclosed by the holding that time of performance, as fixed in the contract, was of the essence of the contract. But, if they were not foreclosed by that holding, we should not be inclined to regard them with much favor. They are considerations which plaintiffs might have presented to the defendant as excuses for nonperformance, with a hope that they might secure favorable concessions from it and,thus avoid cancellation. They might also have been of some importance, if defendant was seeking affirmative aid of a court of equity, in the determination of a question, which might possibly then have been raised, whether it approached its portals with clean hands;. but as plaintiffs are alone invoking equitable relief, and defendant’s legal right to do what plaintiffs complain of is established,- we refrain from any discussion of the evidence tending to justify defendant’s conduct in these respects, and also from any discussion of the merits of these considerations, which we regard, so far as their bearing on this case is concerned, as purely ethical and immaterial. On the whole, we are unanimously of the opinion that the court erred in setting aside tire cancellation and ordering the defendant to proceed with the contract as if no cancellation had been made. The judgment is reversed, and the cause remanded to the District Court, with instructions to enter a decree dismissing plaintiffs’ bill.