Court Opinion

ID: 3600203
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:46:49.588887+00
Date Added: 2024-06-11T09:20:10.543726
License: Public Domain

In May, 1937, the plaintiff, a corporation doing business in the Philippine Islands, agreed to sell to the defendant, a corporation doing business in the city of New York, 700 tons of cocoanut oil. The agreement was negotiated by Zimmerman, Alderson, Carr Co., oil brokers, who have an office in the city of New York. In their negotiations the parties communicated with each other by cable, telephone and mail. Under the terms of *Page 373 
the contract agreed upon in that manner, shipment was to be made during June, 1937, and payment of the stipulated price was to be made by means of a draft drawn under confirmed irrevocable banker's letter of credit to be established immediately by the buyer. After some dispute in regard to whether the draft should be a sight draft or a ninety-day draft, the buyer furnished a sight draft as demanded by the seller. The seller was unable to make shipments during June and the buyer refused to furnish an extension of the letter of credit to cover shipments made after the end of June.
After agreement had been reached in manner I have stated, the brokers submitted to both parties a written contract of purchase and sale. The contract contained a clause which permitted the seller to ship the oil after the end of June if unable to make such shipments during that month. No such clause had previously been discussed by the parties but both parties signed the written contract as submitted by the brokers. If the written contract signed by both parties were valid, the plaintiff would be entitled to recover damages caused to it by the defendant's failure to accept shipments made in accordance with the "forcemajeure" clause extending the stipulated time for shipment where shipment is prevented by causes beyond the control of the seller. Because the plaintiff signed that contract after the time when shipment during June could have been made in accordance with its terms, the trial court held that the written contract did not become effective, and dismissed, without objection by the plaintiff, the plaintiff's cause of action for damages caused by breach of that contract as alleged in the complaint in this action.
It is said, however, that the written contract was intended to be a memorial of the agreement previously made by cable, telephone and letter and that the plaintiff may recover damages under the earlier contract. The plaintiff recovered judgment upon that theory. Doubtless the evidence sufficiently establishes that the parties believed that they had arrived at a complete agreement for the purchase and sale of *Page 374 
the oil before the written contract was prepared. It was understood that the agreement so arrived at would thereafter be embodied in a formal written instrument which would integrate the negotiations and be the sole memorial of the agreement of the parties. The parties, doubtless, intended, however, that the agreement should be enforceable even before the written contract was signed. Only by consent of both parties could the written agreement add any terms to those agreed upon, but neither party was free to refuse to sign a contract which would embody those terms upon which there had been oral agreement. In this case the abortive signing of the written instrument does not change the legal rights of the parties under the previous agreement. If the parties had previously agreed expressly or impliedly that the contract for oil to be shipped in June should contain a proviso that shipment might be made later, the defendant has breached the contract and the plaintiff is entitled to damages The plaintiff, in the second cause of action of its complaint, alleged that the informal agreement contained such a proviso.
There is evidence that in the cocoanut oil trade, a custom exists that after a broker has negotiated an agreement of purchase and sale of oil to be shipped from abroad, a formal contract is executed by the parties setting forth the terms and conditions upon which the parties have reached express agreement and in addition "usual terms and conditions," including a forcemajeure clause. In this case the brokers' notice of confirmation stated that the formal written contract would contain "usual terms and conditions." There is also testimony that some forcemajeure clause was usually, if not invariably, incorporated in every written contract. To establish a cause of action the plaintiff must show not only that the parties understood thatsome form of force majeure clause was usual but also that the usual and customary form not only excused failure to perform by the seller within the stipulated time where performance was impossible, but extended the time during which performance might be made. *Page 375 
The jury found that the force majeure clause, incorporated in the written instrument which was signed by both parties, was the usual and customary clause to which both parties impliedly agreed. The Appellate Division reversed the judgment in plaintiff's favor and dismissed the complaint, holding that there was no evidence to sustain the finding. Experts who testified as witnesses for the plaintiff showed that it was customary to insert some force majeure clause in every contract, but it clearly appears, even from their testimony, that the nature of the force majeure provision varied in the different contracts. In some contracts the clause provided that performance by the seller of an agreement to ship at a stipulated time would be excused where performance is not possible. In other contracts impossibility of performance at the stipulated time would automatically extend the time for shipment, so that when performance thereafter became possible the seller would be required to ship and the buyer would be required to accept and pay for the oil at the agreed price. By fair implication we may read into the contract of purchase and sale of oil to be shipped in June, a clause which would permit performance in July only if such a clause is so usual that inference would be justified that the obligation for June shipment was made subject to such a condition. A majority of the court agree, I think, with the Appellate Division that the testimony of the witnesses who are connected with the oil trade is insufficient to prove that.
We are told, however, that though the written instrument has no force as a new convention of the parties, it is still in the case, with its force majeure provisions, "at least as a memorial, or written record, of what the parties meant by `usual terms and conditions.' It thus amounts to an admission by defendant that the force majeure clause in the writing was one of the `usual terms and conditions' of a shipment of cocoanut oil from the Philippine Islands to the United States, and thus part of the contract between the parties." The written contract embodies those terms which the parties were willing to accept, but under the circumstances of this *Page 376 
case acceptance by the defendant of the force majeure clause does not indicate that the clause was part of the original agreement. The evidence that before preparing the formal writing the broker cabled the plaintiff, "We are familiar with the Cristobal form of contract do you want us to execute and send forward * * *," and that plaintiff answered, "Leave you to arrange contract," shows conclusively that the broker and the parties understood that preparation of the formal writing involved more than formulation of terms previously agreed upon expressly or by necessary implication, but required choice of terms which would be acceptable to the parties in amplification of what had already been agreed to. The "Cristobal" form of contract contains a force majeure clause quite different from the force majeure clause eventually embodied in the written contract. The parties, not having agreed impliedly to accept the Cristobal form or any other particular form were still free to determine what force majeure clause would be acceptable. The fact that the defendant did accept a particular form which would have permitted an extension is evidence that it was willing to accept such a clause at that time. It is no evidence that the defendant had agreed to such a clause before. The evidence, in my opinion, shows beyond possibility of dispute that the parties had not so agreed earlier.
Judgment should be affirmed.
LOUGHRAN, FINCH, RIPPEY and LEWIS, JJ., concur with DESMOND, J.; LEHMAN, Ch. J., dissents in opinion in which CONWAY, J., concurs.
Judgment accordingly. (See 286 N.Y. 699.) *Page 377