Opinion
21964/08.
Decided March 24, 2010.
Norman Langer, Esq., Brooklyn, NY, Attorney for Plaintiff.
Joshua Ketover, Esq., Ketover Associates, LLC, Garden City, NY, Attorney for Defendant.
Upon the foregoing papers, in this action by plaintiff Kabbalah Jeans, Inc. (plaintiff) against defendant CN USA International Corp. (defendant) for breach of contract, defendant moves for summary judgment dismissing plaintiff's complaint, which consists of a first cause of action for return of a $26,606.40 deposit and a second cause of action for loss of profits in the amount of $100,000, as against it. Defendant, by its motion, also seeks summary judgment in its favor in the amount of $135,480 on its first counterclaim for breach of contract, its second counterclaim for repudiation, and its third counterclaim for price.
Plaintiff, a distributor of clothing, claims that it had a meeting in February 2008 with defendant, a manufacturer, wherein the parties agreed that plaintiff would purchase certain custom made clothing items from defendant to be manufactured by defendant for plaintiff at its overseas factory. The first purchase order generated by defendant was dated March 12, 2008, and reflected that defendant was to manufacture and deliver to plaintiff by April 2, 2008 and April 8, 2008 certain custom clothing items for $39,772.80. The purchase order explicitly stated, in language immediately to the left of the total price for the goods ordered, that defendant was "not responsible for delays in delivery." Although these goods arrived late, plaintiff paid defendant the full price for these goods.
On April 24, 2008, a second purchase order was generated by defendant, reflecting an agreement by defendant to manufacture at its overseas factory certain custom clothing items, which consisted of men's button-down fashion shirts, for an agreed upon total price of $60,480. The quantities, descriptions, and prices of the goods ordered were listed in this purchase order. However, there was no expected date of delivery listed in this purchase order. As with the earlier purchase order, this purchase order explicitly stated, in language immediately to the left of the total price for the goods ordered, that defendant was "not responsible for delays in delivery."
A third purchase order dated May 2, 2008, which was generated by defendant, reflected that plaintiff ordered additional custom clothing items to be manufactured by defendant at its overseas factory for the total price of $101,606.40. This purchase order listed the quantities, descriptions, and prices for these items, but did not list any delivery date. As with the two earlier purchase orders, this purchase order explicitly stated, in language immediately to the left of the total price for the goods ordered, that defendant was "not responsible for delays in delivery."
On May 2, 2008, plaintiff paid a deposit in the amount of $26,606.40 (consisting of a payment of $11,088 and a credit from a prior transaction in the sum of $15,518.40) toward the amounts due and owing under the April 24, 2008 and May 2, 2008 purchase orders. Despite the absence of a delivery date in the April 24, 2008 and May 2, 2008 purchase orders, plaintiff claims that there was a conversation between it and defendant, in which defendant represented that the merchandise would be available for pick up by plaintiff at defendant's warehouse facility on or before Father's Day of 2008 (i.e., June 15, 2008).
Defendant manufactured the custom clothing items listed on the two purchase orders for plaintiff and tendered delivery of these goods to plaintiff. Defendant asserts that this tender of delivery of the goods to plaintiff occurred on June 26, 2008. Plaintiff refused to accept the goods or to pay defendant the $135,480 balance due for the goods based upon the ground that the goods had not been delivered by Father's Day.
While plaintiff's complaint alleges that defendant did not make the goods available to plaintiff until July 2, 2008, and plaintiff, in its opposition papers, asserts that it received a call from defendant that the merchandise could be picked up at defendant's warehouse facility on July 2, 2008, Netanel Jacobov (Jacobov), who is plaintiff's vice president, testified, at his deposition, that defendant tendered the goods to plaintiff a week after Father's Day (Jacobov's Dep. Transcript at 77).
Since defendant refused to return plaintiff's deposit and demanded that plaintiff pay the balance of the purchase price, plaintiff, on July 29, 2008, filed this action against defendant. Plaintiff's complaint alleges that defendant breached the agreement with it by failing to timely deliver the goods by Father's Day 2008. Plaintiff's first cause of action seeks the return of plaintiff's deposit in the sum of $26,606.40. Plaintiff's second cause of action seeks to recover lost profits in the amount of $100,000 based upon defendant's breach of the agreement. Defendant has interposed an answer, which asserts three counterclaims, seeking the $135,480 balance due and owing from plaintiff under the purchase orders for the goods. Defendant's first counterclaim alleges a breach of contract by plaintiff, defendant's second counterclaim alleges a repudiation by plaintiff, and defendant's third counterclaim seeks recovery of the price from plaintiff.
Defendant, in support of its motion, asserts that it manufactured and delivered the goods in accordance with the terms of the contract, as set forth in the purchase orders, and that plaintiff has breached the contract by failing to accept the goods and tender payment of the balance of the purchase price. In opposition to defendant's motion, plaintiff has submitted the affidavit of its vice president, Jacobov, who asserts that clothing is seasonal, and that plaintiff had ordered the merchandise from defendant for the summer season. Plaintiff claims that defendant orally represented that the goods would be delivered by Father's Day 2008, and that the delivery was late because it was delivered approximately two to three weeks into the summer season. Plaintiff asserts that due to this delay, most of its customers had cancelled their orders, and that since the merchandise was of a seasonal nature, it would not be saleable at a profit to it due to defendant's late delivery.
Since the parties are merchants as that term is defined in Uniform Commercial Code (UCC) 2-104 (1), and the transactions at issue are for the sale of goods as defined in UCC 2-105 (1), the transactions are covered by UCC article 2 which governs the sale of goods. UCC 2-201 (2) provides:
"Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of [the Statute of Frauds for the sale of goods for the price of $500 or more] against such party unless written notice of objection to its contents is given within ten days after it is received."
Thus, writings in confirmation of a contract between a seller and a buyer which contain sufficient terms satisfy the requirements of the Statute of Frauds unless written notice of objection to its contents is given within 10 days after they are received ( see Mulitex USA, Inc. v Marvin Knitting Mills, Inc. ,12 AD3d 169, 169; Considar, Inc. v Redi Corp. Establishment, 238 AD2d 111, 112; B R Textile Corp. v Domino Textiles, 77 AD2d 539, 539-540; Trafalgar Sq. v Reeves Bros., 35 AD2d 194, 197; Bayside Fuel Depot Corp. v Nu Way Fuel Oil Burners Inc., 25 Misc 3d 1237[A], 2009 NY Slip Op 52469[U], *6 [Sup Ct, Kings County 2009]; M. Slavin Sons Ltd. v Glatt Gourmet Cuisine, Inc., 23 Misc 3d 18, 20 [App Term, 2d Dept 2009]; Kahan Jewelry Corp. v Venus Casting, Inc. ,17 Misc 3d 684, 687 [Sup Ct, NY County 2007]; R.F. Cunningham Co. Inc. v Driscoll , 7 Misc 3d 234, 235 [Auburn City Ct 2005]). Such a contract, as memorialized in purchase orders, will be enforced if not objected to within such 10-day period ( see Mulitex USA, Inc., 17 AD3d at 169; Considar, Inc., 238 AD2d at 112; B R Textile Corp., 77 AD2d at 539-540; Trafalgar Sq., 35 AD2d at 197).
Here, the purchase orders, which both contained the names of the buyer and seller, the date, the price of the goods, a description of the goods, the quantity of the goods, the unit prices of the goods, and the total price of the goods constitute writings in confirmation of a contract for the sale of goods sufficient to satisfy the Statute of Frauds, provided that no written notice of objection was given as to the contents of the purchase orders within 10 days of receipt ( see Bazak Intl. Corp. v Mast Indus., 73 NY2d 113, 124). Plaintiff was, therefore, obliged "to make written objection [if] there [wa]s an intent to disavow it" ( id. at 122; see also Apex Oil Co. v Vanguard Oil Serv. Co. Inc., 760 F2d 417, 423 [2d Cir 1985]; B R Textile Corp., 77 AD2d at 540; Trafalgar Sq., 35 AD2d at 197).
It is undisputed that plaintiff received the purchase orders and that plaintiff did not object to their contents within 10 days of such receipt. In addition, plaintiff admits, in its complaint and deposition testimony, that a contract for sale was made ( see UCC 2-201 [b]). Plaintiff acknowledges that these purchase orders reflect the terms of the contract.
"A written [purchase] order following an oral agreement is the usual and recognized contract between the parties" ( Loudon Mfg. v American Efird Mills, 46 AD2d 637, 638; Kahan Jewelry Corp., 17 Misc 3d at 688). The purchase orders were the final expression of the parties' agreement with respect to the terms that were included therein when the buyer failed to object in writing as required by UCC 2-201 ( see Mulitex USA, Inc., 12 AD3d at 169; Trafalgar Sq., 35 AD2d at 197).
Pursuant to UCC 2-601 (a), a buyer may reject goods if the goods or the tender of delivery fail in any respect to conform to the contract. Here, however, there was no term in the contract, as evidenced by the written purchase orders, requiring the delivery to take place by a certain date.
Pursuant to UCC 2-309 (1), where the time for delivery is not agreed upon, it shall be a reasonable time. As discussed above, however, plaintiff alleges that a date no later than Father's Day 2008 was orally agreed upon, and that defendant did not deliver the goods until June 26, 2008, approximately one week after Father's Day (or, as alleged in plaintiff's complaint, until July 2, 2008, approximately two weeks after Father's Day). Even assuming that this delivery term was orally agreed upon, the unambiguous terms of the purchase orders stated that defendant was not responsible for any delays in delivery. Shlomi Skaf (Skaf), plaintiff's principal owner, at his deposition, confirmed that this disclaimer language was present on the purchase orders (Skaf's Dep. Transcript at 25). Jacobov (who, as noted above, is plaintiff's vice president) testified, at his deposition, that he understood this phrase in the purchase orders to mean that defendant was "not responsible for delays" (Jacobov's Dep. Transcript at 61-62). Skaf further testified, at his deposition, that he "saw [this language] but . . . didn't pay attention to it "(Skaf's Dep. Transcript at 25). Thus, pursuant to the written contractual terms, as memorialized in the purchase orders, the mere one or two-week delay in defendant's delivery of the goods would not entitle plaintiff to reject the goods.
Plaintiff contends that this notation in the purchase orders regarding a delay in delivery should not be considered a contract term because the purchase orders were delivered after the oral agreement to buy the goods was made, and because the purchase orders were never signed by it. As set forth above, however, UCC 2-201 does not require that the written memorialization occur at the same time as the alleged oral agreement or that the buyer sign the purchase order where it otherwise complies with that section and where no objection to the purchase order is made within 10 days ( see Bazak Intl. Corp., 73 NY2d at 119-120, 124).
Plaintiff further argues that the delay disclaimer language in the purchase orders nevertheless should not be found to be a contract term based upon its allegation that the oral agreement mandated delivery on or before Father's Day 2008. This argument must be rejected. UCC 2-202 provides:
"Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may [only] be explained or supplemented . . . by course of dealing or usage of trade . . . or by course of performance . . .; and . . . by evidence of consistent additional terms."
While plaintiff claims that it is the custom and usage of the industry that if merchandise is not received by a deadline date, the sale is deemed to be cancelled, it has submitted no evidentiary proof of any such custom and usage. Indeed, the agreement as to the delivery date alleged by plaintiff cannot be established by course of dealing or performance or usage of trade since the prior March 12, 2008 purchase order was delivered late and accepted by plaintiff. Moreover, plaintiff's assertion that this delivery date was a time is of the essence date which, if not met, permitted it to reject the goods, would constitute an inconsistent additional term contradicting the purchase orders since (as discussed above) they explicitly permitted a delay in delivery by defendant. The parol evidence rule embodied in UCC 2-202 bars the introduction of any such proof of an alleged oral agreement between the parties that would vary the terms of the purchase orders, which were the final written expression of the parties' contract ( see Intershoe, Inc. v Bankers Trust Co., 77 NY2d 517, 522; Raj Jewelers v Dialuck Corp., 300 AD2d 124, 126; Sunkyong Am. v Beta Sound of Music Corp., 199 AD2d 100, 101; M. Slavin Sons Ltd., 23 Misc 3d at 21).
Plaintiff also argues that the delay disclaimer is vague because it does not state whether the delay may be occasioned by the fault and neglect on the part of defendant or must be occasioned by a catastrophe that is not within the control of defendant. This argument is unavailing. The plain meaning of this language encompasses all delays and is not limited to any particular source. Moreover, as noted above, Jacobov testified, at his deposition, that he understood that the meaning of this phrase was that defendant was not responsible for delays, and did not claim that he understood it to be limited to particular instances or causes of delay.
By establishing that the parties had a contract and that plaintiff owed money on the contract, defendant has made out a prima facie case that it was not liable for breach of contract, but, rather, that plaintiff had breached its contract with it by refusing to accept the goods ( see UCC 2-703 ; M. Slavin Sons Ltd., 23 Misc 3d at 20). It was, therefore, incumbent upon plaintiff to proffer evidentiary proof, in admissible form, sufficient to raise a triable issue of fact, which it has failed to do ( see Zuckerman v City of New York, 49 NY2d 557, 562). Consequently, inasmuch as defendant has demonstrated that it did not breach the terms of the contract, as memorialized by the purchase orders, and that plaintiff has breached the contract by wrongfully refusing to accept the goods tendered by it, plaintiff is not entitled to a return of its $26,606.40 deposit nor lost profits. Thus, summary judgment dismissing plaintiff's first and second causes of action must be granted ( see CPLR 3212 [b]).
Defendant, in support of its counterclaims, asserts that plaintiff wrongfully rejected the goods and breached the contract between them. Pursuant to UCC 2-703 , where the buyer wrongfully rejects goods, and if the breach is of the whole contract, then with respect to the whole undelivered balance, the aggrieved seller is entitled to resell and recover damages under UCC 2-706 , recover damages for non-acceptance under UCC 2-708 , or, in a proper case, recover the price pursuant to UCC 2-709 .
Here, defendant has not resold the goods under UCC 2-706 nor does it seek the difference between the market price at the time and place for tender and the unpaid contract price under UCC 2-708 . Rather, defendant seeks to recover the balance of the contract price of $135,480. Pursuant to UCC 2-709 (1) (b), when the buyer fails to pay the price, the seller may recover the price "of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing" ( see Sack v Lawton, 2003 WL 22682043, *4 [SD NY 2003]; Safety Cover Specialist, Inc. v Marmurek, 2003 NY Slip Op 50846[U], *2 [App Term, 9th 10th Jud Dists 2003]; Creations by Roselynn v Costanza, 189 Misc 2d 600, 601 [App Term, 2d Dept 2001]).
UCC 2-709 (2) provides:
"Where the seller sues for the price [it] must hold for the buyer any goods which have been identified to the contract and are still in [its] control except that if resale becomes possible [it] may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles [it] to any goods not resold."
In support of its third counterclaim to recover the price, defendant has submitted its answer, verified by its president, in which it asserts that the clothing items, which it was induced to manufacture for plaintiff, were special, custom, and/or unique, that it is unable to resell these goods, and that circumstances reasonably indicate that an effort by it to resell the goods would be unavailing ( see CPLR 105 [u]). Plaintiff, in its opposition papers, does not deny or refute these assertions. Indeed, plaintiff does not dispute that the dress shirts were manufactured for it at its request and, in fact, asserts that due to the seasonal nature of the shirts, they would not be readily saleable at a profit.
Thus, defendant is entitled to recover the contract balance of $135,480 from plaintiff in accordance with UCC 2-709 . Although defendant's third counterclaim alleges storage costs, defendant has not provided any evidence of specific incidental damages incurred by it nor does it request incidental damages in its motion ( see UCC 2-709 ; 2-710). Since the court finds that defendant is entitled to summary judgment in its favor in the amount of $135,480 on its third counterclaim for price, defendant's motion, insofar as it also seeks summary judgment in its favor in the amount of $135,480 based upon its first counterclaim for breach of contract and its second counterclaim for repudiation, is duplicative and rendered moot.
Accordingly, defendant's motion for summary judgment dismissing plaintiff's first and second causes of action, and for summary judgment in its favor on its third counterclaim for price in the amount of $135,480, is granted.
This constitutes the decision, order, and judgment of the court.