Case ID: ad_44/html/0415-01.html
Source: Caselaw Access Project
Author: {"author": "Barrett, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Albert Fries and Harold H. Fries, Respondents, v. George Merck and Theodore Weicker, Appellants.
    
      Contract to pay royalties while in exclusive control of the market — sales made, while not in such exclusive control, although the goods were delivered after exclusive control was regained, pay no royalty.
    
    The patentees of a process for making saccharine entered into a contract to pay to competitors, who. agreed.to become their sales agents, fifty cents .upon each pound “sold and delivered” by the patentees, either to the sales agents or to any other person “until said letters patent shall legally expire, or as long as this contract remains in force, as hereinafter provided,” the contract further stating: “Should said letters patent, however, in the meantime, be infringed upon by any person or firm, or should the market of the United States for any ■other reason be no longer under the exclusive control and in the absolute possession of the parties of the first part (the patentees) without their fault, connivance, act of commission or omission, then the parties of the first part shall have the right to terminate this agreement on five days’ written notice, but the same, in all respects, shall be again enforced upon the parties of the first part being reinstated in their rights and restored to such exclusive control during the legally unexpired term of said letters patent.”
    
      Held, that the patentees were not liable to pay the stipulated royalty upon saccharine, sold by them under contracts made while- the royalty "contract was suspended because of an infringement upon the patent, notwithstanding the fact that the goods thus sold were not delivered until after the contract was restored.
    Appeal by the defendants, George Merck and another, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of. the clerk of the county of New York on the 15th day of June, 1899, upon the report of a referee.
    
      Alfred Jaretzki, for the 'appellants.
    
      I. Albert Englehart, for the respondents.
   Barrett, J.:

The plaintiffs and the defendants, competitors in the business of selling saccharine, entered into a contract on the 1st day of May, 1898, whereby the plaintiffs became sales agents for the defendants’ article, upon which the latter held letters patent; and the defendants agreed to pay them "fifty cents upon each pound of saccharine which might be “ sold and delivered ” by the defendants, either to the plaintiffs or to any other person, until said letters patent shall legally expire, or as long as this contract remains in force, as hereinafter provided.” The contract contained this provision: “ Should said letters patent, however, in the meantime, be infringed upon by any person or firm, or should the market of the- United States for any other reason be no longer Under the exclusive control and in the absolute possession of the parties of the' first part (the defendants) without their fault, connivance, act of commission or omission, then the parties of the first part shall have the right to terminate this agreement on five days’ written notice, but the same in all respects shall be again enforced upon the parties of the first part being reinstated in their rights and restored to. such exclusive control during the legally unexpired term -of said letters patent.” Because of an infringement and consequent cessation of the defendants’ absolute control of the- market the contract was suspended from August 1 to September 26, 1891. During this period the defendants sold over 3,500 pounds of saccharine, the greater part of which, however, was not delivered to. the purchasers until after September twenty-sixth. The judgment awards to the plaintiffs fifty cents upon each pound of saccharine delivered subsequent to September twenty-sixth, although the contract of sale was made between that date and August first, and the sole question is'whether this was correct.

The defendants bound themselves to pay the plaintiffs fifty cents-upon each pound of saccharine “ sold and delivered ” while the contract was in force. The plaintiffs contend that a “sale” is not complete until title passes by delivery, and, hence,- that, in the eye of the law, the sale ” in the present case, as well as the delivery, took place after the contract was resumed. But this argument completely ignores the original transaction which- resulted in the subsequent delivery of the goods. It assumes that the word “ sold,” as used in the contract, referred exclusively to an executed, and not to an executory, sale. This construction is neither within the letter nor the spirit of the contract. The instrument, read in the light of the surroundings, shows that there was no intention to compel the defendants to make the specified payments upon goods, the agreement to sell which was made while the contract was in suspense. The substance of the arrangement was that the defendants agreed to make the payments only while they remained in exclusive control of the market. Such control would naturally enhance prices, and its continuous existence was the postulate upon which the bargain and liability thereunder rested. The price which would justify the bonus paid to the plaintiffs depended, of course, upon this exclusive control of the market. The moment that exclusive control ceased or was suspended the price would naturally drop, and there would, no longer be a suitable basis for the bonus. As matter of fact, the defendants, as ivas to be expected, were forced to lower their prices between August first and September twenty-sixth, and the goods in question, though delivered after September twenty-sixth, were contracted for at the lower rates during the period of suspension. Clearly no payment of the bonus in such case was contemplated. With what grace could the defendants have refused to pay the plaintiffs upon goods contracted to be sold prior to August first (when they had complete control of the market, and higher prices were consequently attainable), merely because such goods were not delivered under the contract until the period of suspension ? The defendants, under such circumstances, would -not have been heard to say that the sale was only executed upon delivery, nor would they have been heard to say that because of the use of the words “ sold and delivered ” the contract and delivery must both be within the period when the bargain was in force. The essential bargain was that, when the defendants made an agreement to sell during the running life of the contract, they were upon delivery and payment (at any period) to give the plaintiffs the agreed bonus. But they were not bound to do so when the agreement of sale was made during the suspension of the contract, although delivery and payment might, be made after the resumption of the arrangement.

The judgment should be reversed, with costs, and as the facts are conceded and cannot possibly be varied upon a new trial, the complaint should be dismissed,•with costs.

Van Brunt, P. J., Rumsey, Patterson and O’Brien, JJ., concurred. ■ - .

Judgment reversed, with costs, and complaint dismissed, with costs.