Opinion
Civ. A. No. 1076.
July 22, 1948.
Clement Wood (of Hering, Morris, James Hitchens), of Wilmington, Del., for plaintiff.
William Prickett, of Wilmington, Del., for defendant.
Action by Albert Blain against Sullivan-Waldron Products Company to recover on a contract whereby plaintiff granted defendant an exclusive license to manufacture and sell record changers covered by plaintiff's applications for patents.
Judgment for defendant.
On January 15, 1947 plaintiff granted defendant an exclusive license to manufacture and sell record changers covered by plaintiff's applications for patents. The agreement provided: "The minimum royalty due to the Inventor by Company hereunder is one thousand dollars ($1,000.00) with execution hereof, receipt of which is hereby acknowledged, and four thousand dollars ($4,000.00) within six (6) months from date hereof." It also provided that: "This license agreement may be terminated by the Company by giving to the Inventor three (3) months written notice of its intention to terminate the same." Acting under the latter provision the Company gave notice of termination on April 8, 1947.
On the execution of the agreement, defendant paid plaintiff $1,000.00. Plaintiff contends upon execution of the agreement he was entitled to a minimum royalty of $5,000.00 and by no cancellation could defendant work a divestiture.
There is no dispute that defendant's notice of cancellation was valid and the agreement terminated on July 9, 1947. On July 15, 1947, six months after the date of the agreement, and subsequent to the date of cancellation, plaintiff demanded the unpaid $4,000.00. Defendant claims on termination of the agreement, pursuant to one of its provisions, all obligations on both parties ended.
The question for decision is whether plaintiff can enforce a provision of the contract which was executory at the time the contract was validly terminated.
The contract was executed in Washington. In that State, a contract containing an option for cancellation is regarded as valid. Central Guarantee Company v. National Bank of Tacoma, 137 Wn. 24, 241 P. 285, 45 A.L.R. 721; Robbins v. Seattle Motor Co., 148 Wn. 197, 268 P. 594. Where a party cancels a contract according to its provisions, remaining executory obligations are terminated. Brooks v. Sinclair Refining Co., 10 Cir., 139 F.2d 746; Bendix Home Appliances v. Radio Accessories, 8 Cir., 129 F.2d 177. See Page, Contracts § 2639. If the right to terminate is valid, all undertakings then unperformed on both plaintiff and defendant are ended; e.g., plaintiff's important promise that defendant will be the exclusive licensee is withdrawn. Defendant is free from its future obligation to pay the $4,000.00. But aside from this view, the parties' interpretation of the contract is in accordance with defendant's interpretation. The construction put on a contract by the parties should be given weight. Radio Corp. of America v. Philadelphia Storage Battery Co., 23 Del. Ch. 289, 6 A.2d 329; Coca Cola Co. v. Nehi Corp., Del., 36 A.2d 156. It appears from the pleadings that on March 9, 1947, defendant by letter took the position that if it cancelled the agreement prior to the date the $4,000.00 was due, it would be discharged of that obligation. Plaintiff in his reply letter of April 14 did not dispute that position and apparently acquiesced in it until the present suit was started.
Moreover, the provisions which deal with cancellation on the part of plaintiff recognized that cancellation terminates future rights and liabilities with two exceptions. One is in reference to devices in the process of manufacture and the other preserves to plaintiff sublicenses granted prior to termination. The preservation of these rights by specific provision implies that all other rights, not so specifically preserved, are to terminate upon the cancellation of the agreement.
Judgment should be for defendant.