Source: http://mn.gov/law-library-stat/archive/ctapun/9910/269.htm
Timestamp: 2018-06-23 13:38:42
Document Index: 396077442

Matched Legal Cases: ['§ 336', '§ 336', '§ 336', '§ 336', '§ 336', '§ 336', '§ 336', '§ 336']

Webb Business Promotions, Inc., Respondent, vs. American Electronics & Entertainment Corp., Appellant. C2-99-269, Court of Appeals Unpublished, October 12, 1999.
C2-99-269
Webb Business Promotions, Inc.,
American Electronics & Entertainment Corp.,
Filed October 12, 1999
C8-96-7902
Kay N. Hunt, Paul L. Dinger, Lommen, Nelson, Cole & Stageberg, P.A., 1800 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondent)
Katherine L. MacKinnon, 3744 Huntington Avenue, St. Louis Park, MN 55416 (for appellant)
Appellant challenges the district court’s finding that it breached its contract with respondent. Appellant contends that the district court erred: (1) when it failed to impute an agent’s knowledge to respondent; (2) in its construction of the terms of the parties’ contract; (3) in finding that there was no accord and satisfaction; and (4) and in failing to find that respondent’s resale of goods was commercially unreasonable. We affirm.
This appeal arises out of a breach of contract claim brought by respondent Webb Business Promotions, Inc. (Webb) against appellant American Electronics and Entertainment Corp. (AEE). Following a bench trial, the district court found that AEE breached its contract with Webb and awarded damages.
At the time of the alleged breach, AEE was an official licensee of Metro Goldwyn Meyer (MGM) and was authorized to sell and distribute blank MGM videocassette tapes (MGM tapes). Webb was primarily engaged in the business of selling promotional products directly to corporations that used the products for their own advertising. William Akers (Akers) was AEE’s exclusive manufacturer’s representative in Minnesota. He also worked as a manufacturer’s representative for Webb; however, the parties dispute the extent of his representation.
In April 1995, Akers, on behalf of AEE, solicited Webb to become involved in a commercial transaction that Akers was negotiating with Target stores. Originally AEE attempted to sell its tapes to Target independently, but Target wanted to package the MGM tapes with a premium, such as a pen or calendar, as part of a back-to-school promotion. As a result of Target’s request, AEE sought Webb’s participation in the transaction.
Webb never entered into a contract with Target. Webb had no knowledge of the standard terms and conditions of Target’s contracts with its vendors. AEE received a purchase order from Target that contained language permitting Target to cancel its purchase order any time. While AEE did not advise Webb that the agreement contained such a provision, Akers was aware of the contingency provision contained in the Target purchase order.
To evidence their contract, the parties presented three documents exchanged between AEE and Webb. Webb sent its proposal (the Webb proposal) to AEE on May 23, 1995. The Webb proposal did not contain any terms making it contingent on the Target purchase order. The second document exchanged between the parties was the document drafted up by AEE (the AEE proposal), also sent on May 23, 1995. On May 24, 1995, AEE accepted the Webb proposal when its agent executed it and returned it by fax to Webb that day. AEE also sent Webb a purchase order (P.O. #604) on May 24, 1995. Both AEE’s proposal and P.O. #604 contained contingency language. AEE’s proposal stated, "AE&E’s purchase order to WEBB are all contingent upon any change of Target’s promotion order." AEE’s P.O. #604 stated "[t]his order will be contingent upon Target purchase order."
As part of its negotiations with AEE in May 1995, Target requested that the MGM tapes be tested for quality assurance purposes. AEE complied with this request. On May 31, 1995, the company that tested the tapes informed Target that it had discovered several problems with the MGM tapes and advised Target to "stay away" from MGM tapes. However, on June 9, 1995, pursuant to a request from Akers, Target agreed to retest the MGM tapes. The second set of tests resulted in a satisfactory rating. At no time did Akers or AEE inform Webb of the problems with the MGM tapes cited by the testing company. Target canceled the purchase order with AEE due to the results of the quality assurance tests.
On July 14, 1995, Target and AEE negotiated a new agreement. Target agreed buy approximately 70% less product than stated in its original purchase order. On July 20, 1995, AEE informed Webb that it would be purchasing much less from Webb, due to the replacement agreement with Target. The district court found that this constituted a breach by AEE because AEE anticipatorily repudiated its contract with Webb when it stated that it would not be performing its obligations under the parties’ original agreement.
Upon learning of AEE’s breach, Webb attempted to mitigate damages by reselling some of the merchandise that was to have been packaged with the tapes. Webb’s resale attempts included soliciting the help of Akers; requesting assistance from Target (which was denied); and advertising the merchandise in the Webb catalog with close-out sheets. Webb sold some of the merchandise, returned some of it to its manufacturer, but was unable to resell much of the merchandise.
In a letter dated September 20, 1995, AEE stated that it would deliver a check to Webb via Federal Express on September 21, 1995. The letter also stated that "[b]y accepting and cashing the check, Webb is assumed to agree that this is the final settlement and AE&E will owe nothing to Webb." AEE then sent a check on September 21, 1995, along with another letter stating the following:
Per our phone conversation yesterday I have explained to you that AE&E is not supposed to send you a check until we receive a full payment from Target. However, considering your request, I am sending you the check as your favor even [sic] AE&E did not receive all payment from Target. Please be awared [sic] of that this is a final check, AE&E will have no obligation to Webb as long as the check is cashed by Webb.
Webb subsequently sued AEE for breach of contract, and the district court found in Webb’s favor. This appeal by AEE followed.
A district court's findings of fact will not be set aside unless clearly erroneous. Minn. R. Civ. P. 52.01; Schuett Inv. Co. v. Anderson, 386 N.W.2d 249, 252 (Minn. App. 1986). Findings are clearly erroneous if not reasonably supported by the record as a whole. Hubbard v. United Press Int’l, Inc., 330 N.W.2d 428, 441 (Minn. 1983). Whether the evidence also supports a reasonable finding to the contrary is immaterial if the evidence supports the district court’s finding. Total Equip. Leasing Corp. v. LaRue Inv. Corp., 357 N.W.2d 347, 350 (Minn. App. 1984), review denied (Minn. Feb. 19, 1985).
AEE contends that the district court erred in failing to find that Akers was Webb’s agent for all purposes associated with the Target transaction. AEE contends that because Akers was Webb’s agent for the transactions at issue, Akers' knowledge can and should be imputed to Webb. Thus, AEE argues because Akers’ knowledge may be imputed to Webb the district court’s numerous findings of wrongful concealment by AEE were erroneous.[1]
In support of its contention that Akers had an agency relationship with Webb, AEE attempted to introduce an exhibit purporting to show that two weeks after AEE gave notice that it would require less product from Webb, Webb requested that Akers sign an addendum to their agency contract. The district court excluded this document as irrelevant. AEE argues that the district court erred in excluding this document and that such error requires reversal or remand.
This court reviews a district court’s evidentiary rulings for abuse of discretion. Uselman v. Uselman, 464 N.W.2d 130, 138 (Minn. 1990). Because Exhibit 47 was a document dated August 1, 1995, and AEE informed Webb on July 20, 1995, that it was canceling its original order, the district court did not abuse its discretion by excluding this document. It was within the court’s discretion to conclude that because the document was dated almost two weeks after the alleged breach, the document was irrelevant.
Whether an agency relationship existed between Akers and Webb is a question of fact. Jurek v. Thompson, 308 Minn. 191, 197, 241 N.W.2d 788, 791 (1976). Agency is defined as
Akers’ had been contractually obligated to sell Webb’s merchandise and service Webb’s accounts since 1994. Webb testified that Akers was his "manufacturer’s rep[resentative]." Both Akers and Webb testified that Akers was Webb’s agent for purposes of developing and sustaining the Target transaction.
Webb argues that the evidence elicited at trial demonstrates that Akers was not Webb’s agent for purposes of the Target deal because Target was not aware that Akers was also serving as an agent for AEE. In support of its contention, Webb offers testimony by Akers that he was not involved in the AEE-Webb transaction.
Akers may not have been involved in the transaction involving AEE and Webb. He was, however, involved in negotiating the contract between AEE and Target. Furthermore, nothing requires that Target have knowledge of anything of the relationship between Akers and Webb for agency to be established. The law requires only that the parties mutually assent to the agency relationship. Id. Here, mutual assent was evidenced by the contract between Webb and Akers. Therefore, we find that Akers was acting as an agent for Webb.
Because Akers was acting as an agent for Webb, Akers’ knowledge may be imputed to Webb. See Centennial Ins. Co. v. Zylberberg, 422 N.W.2d 18, 21 (Minn. App. 1988) (holding when an agent had actual notice of facts constructive notice may be imputed to the principal). However, in this case the fact that Akers gained his knowledge about the Target transaction while representing interests adverse to Webbs, prevented his knowledge from being imputed to Webb. See V. Woerner, Annotation, Imputation of Knowledge of Agent Acting for Both Parties to Transaction, 4 A.L.R.3d 224, 233 (1965) (stating "the principal is not chargeable with notice of facts within the knowledge of his agent when such knowledge was acquired while the agent was representing interests adverse to those of his principal."). We therefore conclude that the district court did not err in finding that Webb did not have either actual or constructive knowledge of the material facts concerning its transaction with AEE.
AEE contends that the district court improperly construed the terms of the contract between AEE and Webb. Specifically, AEE alleges that the district court improperly found the contract did not contain a term making AEE’s purchase of goods from Webb contingent upon the Target order not being cancelled. Accordingly, we must consider whether the contingency term is part of the parties’ contract. If the contingency term is part of the contract we must determine the proper construction of this term.
AEE contends that its execution of the AEE Proposal and P.O. #604 amount to written acceptance that contained modifications to the offer that Webb agreed to. Thus, AEE contends the contingency term contained in its acceptance is part of the parties’ contract.
"[T]he existence and terms of a contract are questions for the fact finder." Morrisette v. Harrison Int’l Corp., 486 N.W.2d 424, 427 (Minn. 1992). A finding of fact may be overturned only if it is manifestly contrary to the evidence. Id. Here, the court found that "[t]o the extent AEE attempted to add terms of "contingency" to the agreement, * * * the attempt constituted a material alteration of the agreement." We disagree.
In transactions involving the sale of goods:
[a] definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the addition or different terms.
They materially alter it: or * * * [n]otification of objection has already been given or is given within a reasonable time after notice of them is received.
Minn. Stat. § 336.2-207(1), 2(b), 2(c) (1998). Here, acceptance was not made conditional on assent to the additional contingency term, and Webb does not contend that it objected to the contingency term within a reasonable time after receiving AEE’s acceptance.
Finally, the record does not support the district court’s finding that the additional terms materially altered the offer. Typical clauses which normally "materially alter" the offer are clauses reserving to the seller the power to cancel upon the buyer’s failure to meet any invoice when due and clauses that disclaim all warranties. Minn. Stat. § 336.2-207(2)(b), cmt. 4.
Several factors impact whether a buyer would be unreasonably surprised if additional terms included in seller’s acceptance were incorporated into the parties’ agreement. Those include: " the parties’ prior course of dealing and the number of written confirmations that they exchanged, industry custom, and the conspicuousness of additional terms." In re Chateaugay Corp., 162 B.R. 949, 956 (S.D.N.Y. 1994). Here, the additional term was conspicuous in both documents. Furthermore, Webb signed AEE’s proposal.
Additionally, the district court heard testimony from Target employees that it was well understood in the industry that Target could cancel any order prior to shipment. Thus, the additional contingency term could not have been a surprise to Webb and as such did not constitute a material alteration of the offer. We therefore conclude the district court erred in finding that the contingency term constituted a material alteration. Nevertheless, the contingency term, while a part of the parties’ contract, may not require reversal of the district court’s order if its meaning can be resolved in Webb’s favor.
The district court found that even if the contingency term was part of the contract, its reasonable construction was that AEE’s purchase order would be contingent only on a change between the Target handwritten orders and the Target hard copy purchase orders.
We conclude the district court’s construction of the contingency term was not clearly erroneous. Evidence was presented at trial that AEE was not provided with hard copies of the Target purchase order until sometime after May 16, 1995. Furthermore, evidence showed that Webb was not made aware until after May 24, 1995, that Target had placed its first (original) order. Thus, while the contingency term was part of the contract, the term made the contract between AEE and Webb contingent only on AEE securing an original order with Target, not on any changes to the original order.
AEE claims that the district court erred in finding that Webb made reasonable efforts to mitigate his damages by reselling the merchandise ordered pursuant to their agreement. Specifically, AEE argues Webb’s efforts to resell were unreasonable because it waited until September 1995 to begin reselling the goods and did not complete its efforts until April 14, 1998. Minn. Stat. § 336.2-706 (1998), which governs a seller’s resale of the goods as a remedy for breach of contract, provides:
(1) Under the conditions stated in section 336.2-703 on seller’s remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this article (section 336.2-710), but less expenses saved in consequence of the buyer’s breach.
Whether Webb’s efforts to resell the merchandise that remained after AEE purchased some of the goods were commercially reasonable is a question of fact dependent upon the particular circumstances of each case. Compare Firwood Mfg. Co. v. General Tire, Inc., 96 F.3d 163, 169 (6th Cir. 1996) (finding that a three year delay between breach and resale did not mandate that the jury find that the resale was commercially unreasonable), with Deaton, Inc. v. Aeroglide Corp., 657 P.2d 109, 115 (N.M. 1982).
Comment 5 to Minn. Stat. § 336.2-706 notes that "[w]hat is such a reasonable time depends on the nature of the goods, the condition of the market and the other circumstances of the case; its length cannot be measured by a legal yardstick or divided into degrees."
In this case, Webb did in fact resell many of the remaining products. Webb explained that it waited until July 14, 1995 to sell many of the goods, because it wanted to give AEE an opportunity to purchase some of the merchandise. It waited only a month and a half to begin selling the remaining goods. It also explained to the court why certain products were difficult to sell. Additionally, evidence was introduced demonstrating that Webb contacted the manufacturer of the pencils and was able to return them at no cost to AEE.
In contrast, AEE presented no evidence demonstrating that there was any thing about the condition of the goods or of the market that would make the time in which Webb resold the goods or the manner in which they were resold unreasonable. Thus, we conclude the district court’s finding that Webb acted in a commercially reasonable manner when he resold the goods was not clearly erroneous.
IV. Accord and Satisfaction
AEE challenges the district court’s finding that Webb’s acceptance of AEE’s September 1995 check in the amount of $150,677.27 and its November 1995 check for $3,023 did not constitute an accord and satisfaction.[2] The district court concluded that there was no accord and satisfaction because the parties failed to agree that Webb’s acceptance of the payment constituted full satisfaction and because AEE wrongfully concealed material facts from Webb.
When considering whether an instrument that purports to represent payment in full satisfies one parties’ obligation to the other we must examine Minn. Stat. § 336.3-311. It provides in relevant part:
[T]he claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
Minn. Stat. § 336.3-311 (1998).
Here, it appears the claim was subject to a bona fide dispute; whether AEE was obligated to pay Webb for the amount of goods it originally ordered or for the amount of goods it actually purchased after renegotiating its agreement with Target.
At common law, accord and satisfaction may not be found where mutual agreement is lacking. Action Instruments Co. v. Hi-G, Inc., 359 N.W.2d 664, 666 (Minn. App. 1984) (citation omitted). However, Minn. Stat. § 336.3-311, the statute that governs here, does not contain such a requirement. Instead, Minn. Stat. § 336.3-31 requires that the "payment in full" check be tendered in good faith. Because AEE tendered its "payment in full" check with the knowledge that there were outstanding obligations in dispute, we conclude it was not tendered in good faith. Therefore, it was not clear error for the district court to find no accord and satisfaction.
[1] The district court found that AEE 1) concealed the fact that Target requested the opportunity to test the MGM tape in early May 1995; 2) failed to reveal to Webb that the terms of sale and conditions of contract contained in the Target Purchase Order allowed Target to cancel the order for its "sole convenience" any time before shipment or in the event that the products ordered contained defects in quality; 3) failed to disclose test results to Webb; and 4) failed to disclose the true reason why Target cancelled the original purchase order.
[2] The second check issued in November 1995 was simply a return of funds to Webb for monies that had been held in escrow to pay for the costs for repacking. Therefore, they were not submitted as payment of any dispute between the parties and are not part of the accord and satisfaction analysis.