Summary
In Crawford, the Supreme Court held that the fact that the wholesale dealer did not specifically agree to furnish the products would not render the contract void for lack of mutuality in an action against the retail dealer who did specifically agree to purchase such products.
Summary of this case from Seaside Petroleum Co. v. Steve E. Rawl, Inc.Opinion
17092.
JUNE 14, 1950.
Petition for injunction. Before Judge Hendrix. Fulton Superior Court. February 15, 1950.
McKenzie Kaler and David Eisenberg, for plaintiff.
T. J. Long, for defendants.
1. While the obligations of a contract must be mutually binding where mutual promises are relied on as furnishing and constituting the consideration for the contract, the mere fact that a contract may be unilateral and lacking in mutuality, in the sense that both contracting parties may not sue thereon and enforce it, does not render such a contract invalid if it be based on a valid or valuable consideration flowing to the promisor. If mutuality, in its broad sense, were held to be an essential element in every valid contract, to the extent that both contracting parties could sue on it, there could be no such thing as a valid unilateral or option contract, a contract evidenced by a subscription paper, a contract to enforce a reward offer, a guarantee, or many other contracts made in ordinary business affairs.
2. A contract, by the terms of which a wholesale dealer in petroleum products agrees to and does furnish at her expense to the operator of a described filling station certain equipment consisting of underground gasoline tanks, gasoline pumps, and rotary car lift, and paves the filling station with concrete, constructs a concrete island in front of the station, and paints the front of the building, in consideration of which the operator of the filling station agrees that for a period of seven and one-half years, expiring on a given date, he will sell only and purchase only for resale in the operation of said business, petroleum products handled by the wholesale dealer, is not void for lack of mutuality, although the wholesale dealer does not agree to sell and furnish such products.
3. The petition stated a cause of action, and the trial court erred in sustaining the general demurrer thereto.
No. 17092. JUNE 14, 1950.
Mrs. J. M. Crawford filed her equitable complaint in the Superior Court of Fulton County, against J. E. Baker, H. C. Posey and Fred J. Baker, doing business as Stratford Coal Company, and American Oil Company, in which she alleged that on June 23, 1945, she and J. E. Baker entered into and signed a written contract as follows:
"Georgia, Fulton County: This contract made and entered into this 23rd day of June, 1945, between Mrs. J. M. Crawford, hereinafter referred to as party of the first part, and Mr. J. E. Baker, hereinafter referred to as party of the second part; Witnesseth: That the party of the first part hereby agrees to furnish and install certain equipment for the operation of a gasoline filling station, located at 2879 Gordon Road, and operated by party of the second part, or any dealer to whom he may lease premises during the term of this contract, said equipment being a rotary lift, and furthermore, said station having been paved with concrete at the expense of party of the first part. Other equipment already in use at said location includes one electric computing pump, one 10 gal. visible pump, also two 550 underground tanks, which is owned by party of the first part.
"Title to the above named property is retained by party of the first part, and upon expiration of this contract party of the first part shall have the right to remove said equipment from the premises.
"Party of the second part agrees that for and in consideration of the furnishing of the above-named equipment by the party of the first part that for a period of 7 1/2 years, expiring December 31, 1952, he will sell only and purchases only for resale in the operation of said business, petroleum products handled by the party of the first part.
"That the parties hereto agree that this contract shall be binding and in effect upon the signing hereof, and that any successor or purchaser or assigns of the party of the second part in the operation of said service station shall be bound hereby.
"Signed in duplicate, this day and year first above written."
It was further alleged: that, at the time of the execution of the contract, the plaintiff was and had been, and since said date has continued to be, a tank truck dealer for Texas Company, engaged in the wholesale distribution of Texaco petroleum products, including gasoline, oil, and by-products of gasoline and oil, and receives from the company certain commissions as compensation for her services; that in pursuance of her contract she furnished and continues to furnish to the individual defendants certain of the equipment referred to in the contract and described in the petition, for the benefit of the defendants, J. E. Baker and his lessees, in the operation of the gasoline filling station mentioned in the contract; that in pursuance of the contract she spent $350 for concrete paving in and around the gasoline filling station for the purpose of improving the station operated by the defendant J. E. Baker, this paving and furnishing of equipment being done in conformity with provisions of the contract and in consideration of the defendant J. E. Baker's agreement that he would sell and purchase for resale in the operation of the filling station only the products handled by the plaintiff; that all of the equipment described has been in constant use in the operation of the filling station until the first week in January, 1950; that the underground gasoline tanks are still being used by the defendants, H. C. Posey and Fred J. Baker, son-in-law and son of J. E. Baker, respectively, in the operation of the station; that in January, 1947, Posey and Fred J. Baker, doing business as Stratford Coal Company, assumed the operation of the said J. E. Baker filling station, and held themselves out as lessees from the defendant, J. E. Baker; that they went into possession of the premises with knowledge of the said contract and acknowledged and recognized the plaintiff's rights therein, and since said time have been selling at retail the products of Texas Company as supplied by the plaintiff; that in February, 1947, Posey and Fred J. Baker demanded of the plaintiff that she have a concrete island built in front of the building occupied by them, and that the gasoline pumps be relocated thereon, which she did at an expense of $123.40; that in September, 1947, at their request, she spent $45 to paint the front of the building; that in December, 1949, upon demand of the said defendants, she spent $94.50 in relocating the car lift on the premises; that in the latter part of December, 1949, or the first part of January, 1950, the defendant, American Oil Company, advised the other defendants that their contract with the plaintiff was void and unenforceable; that this company made such statements for the purpose of maliciously inducing the other defendants to breach their contract with the plaintiff, and in order to induce them to breach their contract with the plaintiff, agreed to hold the other defendants harmless from any judgment which might be obtained against them as the result of their breach of said contract; that the acts of the defendants in discontinuing the purchase of petroleum products distributed by the plaintiff, and continuing to use her underground tanks, have damaged the plaintiff in such a way that the damages are incapable of computation and ascertainment, thereby causing the plaintiff, irreparable injury and damage; that the defendant American Oil Company is now furnishing the other defendants with gasoline and petroleum products, thereby becoming a competitor of the plaintiff and depriving her of the profits which would accrue to her from the sale of the products of Texas Company to the said defendants for the operation of the filling station, and she prays:
(a) For process; (b) that the defendants be temporarily restrained and permanently enjoined from using the plaintiff's underground gasoline tanks in violation of her rights and over her protest; (c) that the defendant American Oil Company be temporarily restrained from further inducing the other defendants to breach the contract referred to; (d) that the defendants be temporarily restrained and enjoined from removing any of the plaintiff's equipment located on said premises, and from taking the exclusive possession of said equipment and using the same to the defendants' individual use and to the exclusion of the plaintiff; (e) for a rule nisi; and (f) for general relief.
To this petition the defendants demurred generally upon the ground that the same is insufficient as a matter of law to constitute a cause of action.
To the judgment of the trial court sustaining this demurrer and dismissing the petition, the plaintiff excepts.
It is contended by the defendants in error that the trial court properly sustained the demurrer and dismissed the petition, upon the ground that "the contract was unenforceable because it is unilateral and without mutuality; . . that it purports to bind the defendant in error, J. E. Baker, and his assigns for a period of seven and one-half years to sell only and purchase only for resale in the operation of said business petroleum products handled by the party of the first part. There is no corresponding obligation on the part of the plaintiff in error to sell petroleum products to the defendant in error J. E. Baker. There is no mutuality of obligation to sell and purchase. Moreover, the purported contract is too indefinite as to what petroleum products are to be purchased, and in what quantity."
While it is true that the contract in this case imposes upon the plaintiff no obligation to sell petroleum products to the defendant, we cannot agree with the contention of the defendants that this renders the contract so wanting in mutuality as to invalidate it. The rule here invoked by the defendants that the obligations of a contract must be mutually binding before they can be enforced applies where mutual promises are relied on as furnishing or constituting the consideration for the contract. Miami Butterine Co. v. Frankel, 190 Ga. 88 ( 8 S.E.2d 398); Pepsi-Cola Co. v. Wright, 187 Ga. 723 ( 2 S.E.2d 73); Foster v. Mack, 180 Ga. 418 ( 179 S.E. 97); McCaw Manufacturing Co. v. Felder Rountree, 115 Ga. 408 ( 41 S.E. 664); National Surety Co. v. City of Atlanta, 24 Ga. App. 732 ( 102 S.E. 175). It is not true, as insisted by the defendants, that "a contract, to be enforceable, must impose an obligation upon both parties." The rule that agreements which are optional and not binding on one party are also optional and not binding on the other applies only to agreements which are wholly executory and consist of mutual promises, each the consideration for the other. Rich v. Doneghey, 71 Okla. 204 ( 177 P. 86, 3 A.L.R. 352); Northwestern Oil Gas Co. v. Branine, 71 Okla. 107 ( 175 P. 533, 3 A.L.R. 344). "Mutuality of obligation is not required where there is other consideration than a promise." 12 Am. Jur. 609, § 114. Where there is any other consideration for a contract so that each promise does not depend upon the other for consideration, mutuality of obligation is not essential. The mere fact that a contract may be unilateral or lacking in mutuality, in the sense that both contracting parties may not sue thereon or enforce it, does not render such a contract invalid if it be based upon a valid or valuable consideration flowing to the promisor, for if mutuality, in its broadest sense, were held to be an essential element in every valid contract, to the extent that both contracting parties could sue on it, there could be no such thing as a valid unilateral or option contract, a contract evidenced by a subscription paper, a contract to enforce a reward offer, a guarantee, or many other contracts made in ordinary business affairs. In 12 Am. Jur. 512, § 14, it is said: "The doctrine of mutuality is inapplicable to unilateral contracts. If the promisor has received a sufficient consideration, his promise is binding and may be aptly termed an obligation, even though the consideration is not a promise and the promisee is not obligated. Accordingly, where one makes a promise conditioned upon the doing of an act by another, and the latter does the act, the contract is not void for want of mutuality, and the promisor is liable though the promisee did not at the time of the promise engage to do the act; for upon the performance of the condition by the promisee, the contract becomes clothed with a valid consideration which renders the promise obligatory." See also 12 Am. Jur. 509, § 13. In Richardson v. Hardwick, 106 U.S. 252, 255 ( 1 Sup. Ct. 213, 27 L. ed. 145), it is said: "In suits upon unilateral contracts, it is only where the defendant has had the benefit of the consideration for which he bargained that he can be held bound." In Joy v. St. Louis, 138 U.S. 1, 50 ( 11 Sup. Ct. 243, 34 L.ed. 843), the principle is announced that, when a party has received payment for a privilege, it cannot resist the enforcement of that privilege on the mere ground that it cannot compel the other party to continue in its enjoyment. In Redmond v. Sinclair Refining Co., 204 Ga. 699 (7) ( 51 S.E.2d 409), it is held: "An option founded on a consideration is a unilateral agreement binding from the date of its execution on the party who executes it; and after notice by the optionee to exercise his option rights, it becomes a bilateral contract binding on both parties." See also Wilkinson v. Lee, 138 Ga. 360, 364 ( 75 S.E. 477); Lowery Lock Co. v. Wright, 154 Ga. 867 (1-e) ( 115 S.E. 801); Cooper v. Dixie Cotton Co., 144 Ga. 33 ( 86 S.E. 242); Hardin v. Case, 134 Ga. 813 ( 68 S.E. 648); Hollingsworth v. Peoples Bank of Carrollton, 179 Ga. 704 (3) ( 177 S.E. 743).
In the instant case, the petition alleges that the plaintiff furnished the equipment and made the improvements upon the filling-station property, which were accepted by the defendant operators of the filling station. The contract was, therefore, based upon a valid and valuable consideration moving from the plaintiff to and received by the defendants, and was not invalid as being unilateral and without mutuality. In Hendler Creamery Co. v. Lillich, 152 Md. 190 ( 136 A. 631, 60 A.L.R. 207), it is held that a contract by the terms of which a creamery company agrees to install free of cost a mechanical refrigerating plant in a drugstore, to remain for three years, in consideration of which the druggist agrees to buy and use the said company's ice cream and other frozen products during said term, exclusive of any other company's frozen products, and to refrain from and refuse permission for advertising any such commodities other than the said company's is not void for lack of mutuality, although the creamery company does not agree to sell and furnish such products.
Nor is the contract so indefinite as to what petroleum products and the quantity thereof as to be incapable of enforcement. The contract provides that the defendants are to "sell only and purchase only for resale in the operation of said business, petroleum products handled by the party of the first part." The contract thus covers all of the petroleum products of the kind handled by them "in the operation of said business," and sold by the plaintiff. McCaw Manufacturing Co. v. Felder Rountree, 115 Ga. 408 (2) ( 41 S.E. 664).
The petition stated a cause of action, and the trial court erred in sustaining the general demurrer thereto. See Bishop v. McGuire, 169 Ga. 349 ( 150 S.E. 92); National Linen Service Corp. v. Clower, 179 Ga. 136 ( 175 S.E. 460).
Judgment reversed. All the Justices concur. Duckworth, C.J., concurs in the judgment only.