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CISG CASE PRESENTATION

United States 22 September 1994 Federal District Court [New York] (Graves v. Chilewich)
[Cite as: http://cisgw3.law.pace.edu/cases/940922u1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19940922 (22 September 1994)

JURISDICTION: United States [federal court]

TRIBUNAL: U.S. District Court, Southern District of New York [federal court of 1st instance]

JUDGE(S): Keenan

CASE NUMBER/DOCKET NUMBER: 92 Civ. 3355 (JFK)

CASE NAME: Graves Import Co. Ltd. and Italian Trading Company v. Chilewich International Corp.

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy [plaintiffs were sales representatives of buyer]

BUYER'S COUNTRY: U.S.A. (defendant)

GOODS INVOLVED: Footware (boots)


Case abstract

UNITED STATES: Graves v. Chilewich 22 September 1994 U.S. District Court

Case law on UNCITRAL texts (CLOUT) abstract no. 86

Reproduced with permission from UNCITRAL

The plaintiffs were the agents of the defendant [buyer], a New York import-export company, in its dealings with an Italian manufacturer of footwear that were intended to be sold in Russia. The [buyer] refused to pay the plaintiffs' agency fees arguing that: the plaintiffs had breached their agency duties; and delivery of the shoes was a condition precedent to the payment of the agency fees. The [buyer] refused to accept delivery of a shipment of shoes send from the Italian [seller] arguing that the sales contract was orally modified to the effect that further deliveries would be subject to the Russian buyers paying for shoes previously delivered to them. The plaintiffs argued that their agency duties were limited to performing quality controls and that they had performed those duties. In addition, the plaintiffs rejected the existence of any condition precedent. Both the plaintiffs and the defendant applied for a summary judgement.

The court noted that in contract actions summary judgement was appropriate "when the contract terms are clear and not conducive to more than one reasonable interpretation" and rejected both applications for a summary judgement finding that the content of the agency agreement between the defendant and the plaintiffs was disputed. In the course of discussion, the court noted that the contract between the [buyer] and the Italian [seller] incorporated a provision making modifications invalid unless they were in the form of a writing signed by both parties. Citing Article 29(2) CISG, the court found that the [buyer] was precluded from asserting that there had been an oral modification of that contract making further deliveries of shoes by the Italian [seller] to the [buyer] subject to payment by the Russian end-buyers of the price of shoes previously delivered.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 29(2)

Classification of issues using UNCITRAL classification code numbers:

29B [Modification or termination of contract by agreement: written contract may require writing for modification or termination]

Descriptors: Modification of contract

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Editorial remarks

EDITOR: Albert H. Kritzer

CISG issues ruled upon:

Modification of contract. This is a ruling on motions for summary judgment that the court rejected because of disputed issues of fact, directing the parties to conclude their discovery and proceed toward trial. The facts relevant to the CISG are: A buyer from the U.S. contracted to purchase a quantity of boots from a seller in Italy. The contract was concluded at a time when the CISG was in effect in both countries. Graves, the plaintiff in this proceeding, was buyer's representative in the transaction. Not all of the boots were purchased from seller by buyer. Graves claims a commission on these boots, alleging that seller was ready and willing to supply the goods but buyer defaulted by not honoring his contractual commitment to open a letter of credit for seller on the delivery date specified. Buyer alleged that he was not in default because seller had orally agreed to modify the delivery date.

Citing a no-oral-modification (n.o.m.) clause applicable to the contract between buyer and seller, the court called attention to a provision of the CISG that precludes this defense by the buyer. The n.o.m. clause states: "No amendments and additions to the present Contract shall be valid unless the same are in writing and signed by duly authorized representatives of both parties." The court stated: "Article 29 of the United Nations Convention on Contracts for the International Sale of Goods respects the parties' express intent to require modifications in writings, though a 'party may be precluded from asserting such a provision to the extent that the other party has relied on that contract.'"

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=101&step=Abstract>

French: Revue de Droit des Affaires Internationales/International Business Law Journal (1995) 753-754

Italian: Diritto del Commercio Internazionale (1995) 460-461 No. 82

Polish: Hermanowski/Jastrzebski, Konwencja Narodow Zjednoczonych o umowach miedzynarodowej sprzedazy towarow (Konwencja wiedenska) - Komentarz (1997) 253-254

CITATIONS TO TEXT OF DECISION

Original language (English): Text presented below; see also 1994 U.S.Dist. Lexis 13393; 1994 Westlaw 519996; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=101&step=FullText>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Honnold, Uniform Law for International Sales (1999) 232 [Art. 29]; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.163-164

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Case text

Graves Import Company, Ltd. and Italian Trading Company, Plaintiffs,
v.
Chilewich International Corporation, Defendant

92 Civ. 3655 (JFK)

United States District Court for the Southern District of New York

Before: Judge Keenan Decided September 21, 1994
Filed September 22, 1994 Opinion by Judge Keenan

Attorney for Plaintiff: Becker, Glynn, Melamed & Muffly, New York, New York. Of Counsel: Richard N. Chassen, Esq. and Terese L. Arneth, Esq. Attorney for Defendant: Warshaw Burstein Cohen Schlesinger & Kuh, New York, New York. Of Counsel: Lawrence J. Profeta, Esq.

OPINION

Before the Court are plaintiffs' motion and defendant's cross-motion for summary judgment pursuant to Fed. R.Civ. P. 56. Plaintiffs allege that they are entitled to commissions from defendant pursuant to an oral agency agreement between the two sides. Defendant alleges that its duty to pay commissions under this agreement never matured b ecause plaintiffs failed to adequately perform their contractual responsibilities and a condition precedent to payment of the commissions--the delivery of the goods contracted for--never occurred. In addition, defendant alleges that it is entitled to summary judgment on its counterclaim because plaintiffs violated their obligations of loyalty and fidelity. For the reasons that follow, both motions are denied.

BACKGROUND

Plaintiffs, Graves Import Company, Ltd., and Italian Trading Company, S.R.L., were the agents of defendant, Chilewich International Corporation, which has since changed its name to Plainswhite International Corporation. Chilewich was engaged in the international sale of consumer goods, doing substantial business in the former Soviet Union. Knowing of Chilewich's expertise in the Soviet Union, David Graves, the President of Graves Import, approached Simon Chilewich, the President of Chilewich International, in 1988 to discuss the possibility of developing a market in the Soviet Union for imported footwear. As a result of these discussions, Chilewich purchased Taiwanese footwear from Graves for resale in the Soviet Union.

In early 1989, Chilewich and Graves decided to market non-Taiwanese bootwear in the Soviet Union. Graves, with the assistance of Sergio Squilloni, the principal of Italian Trading, located non-party Filanto S.p.A. as a potential source of supply of the bootwear, and thereafter introduced Filanto to Chilewich. On or about August 11, 1989, Chilewich and Filanto entered into three separate contracts. Pursuant to these contracts, Filanto agreed to deliver 200,000 pairs of footwear to Chilewich for subsequent sale in the Soviet Union under three separate contracts between Chilewich and Foreign Economic Association "Raznoexport," a state entity. Each of the August 11, 1989 agreements between Filanto and Chilewich provided: "2. Sellers to allow Buyer's representatives access to production facilities to inspect quality with or with out prior notice. Graves Import Company, Ltd., Nashville, Tennessee, U.S.A., along with Italian Trading Company, Florence, Italy, will act as agents in this transaction." See Chilewich Notice of Motion, Exhibit 2. There was no further specification of plaintiffs' agency duties. In a one-page memo to Chilewich dated August 2, 1989, Graves and Squilloni set forth their schedule for monitoring the quality control of Filanto's manufacturing. See Graves' Affidavit, Exhibit A. The transactions contem plated in the August 11, 1989 agreements were successfully concluded and plaintiffs received their commissions after each delivery of footwear by Chilewich.

The August 11, 1989 contracts were followed by two additional contracts, one of which is the subject of this action. In January of 1990, Simon Chilewich, Sergio Squilloni, Antonio Filograna, Filanto's principal, and the Russian buyers met in Moscow to negotiate the terms of these two new contracts. On Chilewich's behalf, Italian Trading assisted in negotiating the contract price for Filanto's manufacturing and delivering of the footwear to Chilewich. On March 13, 1990, Chilewich executed the two contracts and sent them to Italian Trading with a cover letter directing Filanto to execute and return the contracts to Chilewich's associate in London.[1] The first contract, No. 9003001, which is not at issue in this case, provided that Filanto ship 100,000 pairs of shoes by June 15, 1990. The other contract, No. 9003002, the source of this dispute, required Filanto to ship 250,000 pairs of footwear to the Yugoslavian border in two installments: 100,000 by September 15, 1990, and 150,000 by November 1, 1990. The contract in dispute contained the same agency provision as found in the August 11, 1989 agreements. See Plaintiffs' Notice of Motion, Exhibit 1. Indeed, the parties agree that plaintiffs were required to act in the same agency capacity under these new contracts as they had done pursuant to the first agreements. Nevertheless, the parties dispute the exact nature of the agency relationship: plaintiffs claim that this role was limited to the supervising of production and quality control of the shoes manufactured by Filanto, while Chilewich asserts that, as Chilewich's intermediaries with Filanto, plaintiffs possessed agency powers extending far beyond mere supervision of manufacturing, such as negotiating prices and supervising and monitoring of all phases of production and delivery.

Unlike the August 11, 1989 contracts and Contract No. 9003001, performance on Contract No 9003002 did not go smoothly. The first shipment contemplated by No. 9003002, consisting of 100,000 pairs of footwear, was received and paid for by Chilewich on time. At the September of 1990 meeting in Paris between Filograna and Chilewich, see supra note 1, however, Simon Chilewich advised Filanto that Raznoexport was seriously delinquent in paying for prior shipments. Chilewich further alleges that Filanto agreed with him that prudence required the second shipment, due to be delivered by November 1, 1990, be deferred until some payments were received from Raznoexport. See Chilewich Affidavit P 20; Chilewich Deposition at 82, 84, 87-88. Chilewich claims that he reassured Filanto that his company would stand behind its contractual obligations and would open a letter of credit for the second installment under Contract No. 9003002 as soon as payments were received from Raznoexport on earlier shipments, which Chilewich expected within a few weeks.

Subsequent correspondence reveals that soon after the Paris meeting, Filanto became concerned that Chilewich would not accept the 150,000 pairs of footwear that Filanto was manufacturing for delivery by November 1, 1990. On September 27, 1990, in response to a fax sent by Filograna, Chilewich wrote Filograna, stating that the circumstances in the Soviet Union required that they "reduce the rate of shipments" and that "there be a delay in [their] establishing a letter of credit for the balance of [their] current contract which created extraordinary financial burdens." See Chilewich Notice of Motion, Exhibit 7. Chilewich stated that he did not want to abrogate the contract and that the matter would be handled "most responsibly," and that he expected payment soon because the shoes were "most urgently needed." See id. On October 8, 1990, Chilewich again wrote Filograna in response to Filograna's concerned inquiries, asserting that the delay in establishing the letter of credit was "by no means an abrogation of our contractual responsibilities, but because we are dealing with a country that is undergoing very substantial reforms, patience is essential." See Chilewich Notice of Motion, Exhibit 8. He again claimed that he believed that Raznoexport would soon make partial payment. See id. On November 13, 1990, Chilewich re-affirmed his desire to go forward with the transaction and his belief that the situation would be resolved the "next few weeks." See Chilewich Notice of Motion, Exhibit 9. On November 21, 1990, Chilewich informed Filograna that he would be in Moscow during the week beginning November 26, 1990, and would contact Filograna immediately upon his return. See Chilewich Notice of Motion, Exhibit 10. The next day, November 22, 1990, Filograna advised Chilewich that Filanto had received an offer for the second shipment of shoes and that he was seriously considering it because the footwear was for the winter season, which was soon closing. See Chilewich Notice of Motion, Exhibit 11.

Apparently recognizing that his commissions for the second shipment were now in jeopardy, Squilloni of Italian Trading informed Graves on November 27, 1990 that he believed that the men's shoes, which comprised 90,000 of the 150,000 pairs of footwear, were already sold, and that he would contact Chilewich to let him know that there was "no more time to play." See Chilewich Notice of Motion, Exhibit 12. That same day, November 27, 1990, Graves wrote Chilewich, declaring that plaintiffs had "from the very beginning attempted to act on behalf of your and Chilewich Corporation's best interests" and that they believed that Chilewich should honor the contract he signed on March 13, 1990. See Chilewich Notice of Motion, Exhibit 13. Graves further stated that plaintiffs would be entitled to their commissions even if Chilewich failed to cure its breach. See id. In a hand-written note dated November 29, 1990, Graves advised Squilloni that his lawyer had advised him that Filanto needed to write a letter to Chilewich setting a deadline for Chilewich to cure its breach. See Chilewich Notice of Motion, Exhibit 15. The next day, Filanto wrote Chilewich using the language that Graves had set forth in his note to Squilloni. See Chilewich Notice of Motion, Exhibit 16. Filanto gave Chilewich until December 10, 1990 to cure the breach. See id.

On December 6, 1990, Chilewich informed Filograna that he had a scheduled meeting in Moscow with the "Ministry" on December 9, 1990, which he had hoped would result in "good news." See Chilewich Notice of Motion, Exhibit 16.

Chilewich advised Graves in early January of 1991 that it would open a letter of credit for the second shipment of shoes. He claims that only at this time did Graves inform him that Filanto had sold the men's-shoes portion (90,000 pairs) of the 150,000-pair shipment. Chilewich subsequently opened a letter of credit for the remaining 60,000 pairs and paid plaintiffs a commission thereon. Although Filanto offered to manufacture an additional 90,000 pairs by late March, the Russian buyers refused to accept footwear so late in the season.

Filanto thereafter commenced an action in the Southern District of New York to recover the difference between the amount for which it allegedly sold the 90,000 pairs of footwear and the contract price. See Filanto S.p.A. v. Chilewich Int'l Corp., 91 Civ. 3253 (CLB). United States District Judge Brieant, then Chief Judge, dismissed the complaint, ruling that Filanto was compelled to arbitrate the matter. See Filanto S.p.A. v. Chilewich Int'l Corp., 789 F. Supp. 1229, 1237 (S.D.N.Y. 1992).

DISCUSSION

A. Applicable Legal Standard

Fed R. Civ. P. 56 "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corporation v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). A motion for summary judgment may be granted under Fed. R. Civ. P. 56 if the entire record demonstrates that "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). When viewing the evidence, the Court must "assess the record in the light most favorable to the non-movant and . . . draw all reasonable inferences in its favor." Delaware & Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990); see Francis v. Coughlin, 891 F.2d 43, 46 (2d Cir. 1989). In making this determination, the district court may not resolve issues of fact; it may only ascertain whether such issues are present. See Donahue v. Windsor Locks Bd. of Fire Comm'rs., 834 F.2d 54, 58 (2d Cir. 1987). The non-movant, in response to a properly supported motion for summary judgment, may not rest on the allegations in its pleadings, but must adduce "significant probative supporting evidence" demonstrating that a factual dispute exists. Anderson, 477 U.S. at 249.

In contract actions, summary judgment is an appropriate method of disposition when the contract's terms are clear and not conducive to more than one reasonable interpretation. American Home Prods. Corp. v. Liberty Mutual Ins. Co., 748 F.2d 760, 765 (2d Cir. 1984); see also United States v. All Right, Title & Interest in Real Property, etc., 901 F.2d 288, 290 (2d Cir. 1990) (quoting Murray v. National Broadcasting Co., Inc., 844 F.2d 988, 992 (2d Cir.), cert. denied, 488 U.S. 955, 109 S. Ct. 391, 102 L. Ed. 2d 380 (1988)) ("Summary judgment is appropriate if . . . 'no reasonable trier of fact could find in favor of the non-moving party.'"). Whether a writing is ambiguous presents a threshold question of law for the Court that is resolved within the four corners of the document. Weiss v. Weiss, 52 N.Y.2d 170, 174, 436 N.Y.S.2d 862, 864, 418 N. E.2d 377, 380 (1982). A writing is unambiguous when, construing as a whole and giving each section its plain meaning, the writing is readily susceptible to only one interpretation. See id.; American Home Prods. Corp., supra, 748 F.2d at 765; Hong Kong Export Credit Ins. Corp. v. Dun & Bradstreet, 414 F. Supp. 15 3, 158 (S.D.N.Y. 1975). If and when a contract is deemed unambiguous as a matter of law, then the court must reject extrinsic evidence regarding the parties' intention as to the contract. See Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 528 (2d Cir. 1990).

B. Analysis

At first glance, this case would appear to be ripe for summary judgment: Chilewich undisputedly failed to open a letter of credit in Filanto's favor by November 1, 1990, as their written contract had required, and Filanto was ready and able to deliver the 150,000 pairs of footwear. In addition, the incorporation of USSR Contract 32-03/93085 in Contract No. 9003002 precludes Chilewich's argument that Chilewich and Filanto orally agreed to modify the November 1, 1990 delivery date.[2]

Nevertheless, summary judgment for either side is inappropriate because a material issue of fact exists as to the extent of the agency relationship between defendant and plaintiffs. Plaintiffs claim that their contractual duties to defendant were listed, in their entirety, in a one-page memo to Chilewich dated August 2, 1989. In that letter, Graves and Squilloni set forth their schedule for monitoring the quality control of Filanto's manufacturing. Plaintiffs allege that they satisfied all of these duties in supervising the production of the footwear. Defendant does not dispute that plaintiffs satisfied their duties concerning the monitoring of the shoes' quality; it does, however, assert that plaintiffs' agency duties were broader than performing mere quality control. According to Chilewich, plaintiffs participated in all material aspects of the transaction, including in ensuring the delivery of the goods. See Chilewich Affidavit PP 12-14. Thus, Chilewich argues, the contract between plaintiffs and defendant was not fully set forth in the August 2, 1989 letter. Chilewich argues that the parties' conduct in previous transactions exhibits the full extent of the plaintiffs' agency duties.

Plaintiffs' argument that defendant's failure to accept delivery of the shoes from Filanto on November 1, 1990 is the determinative act neglects the fact that Filanto gave defendant until December 10, 1990 to cure the breach. If plaintiffs' agency duties were broader than those listed in August 2, 1989 letter, then arguably they extended up until the deadline for defendant to cure the breach. Plaintiffs' alleged failure to advise defendant of Filanto's sale of the shoes, which may or may not have occurred prior to December 10, 1990, as well as plaintiffs' assisting Filanto in asserting Filanto's rights under Contract No. 9003002, could conceivably be deemed a breach of their agency agreement with Chilewich and thus a bar to their receiving the commissions sought in this action.

In addition, defendant claims that Filanto's delivery of the footwear to Chilewich was a condition for Chilewich's payment of plaintiffs' commissions. Plaintiffs dispute the existence of such a condition, and claim that, to the extent that any such condition existed, Chilewich's breach of its agreement with Filanto prevented the occurrence of the alleged condition. The Court has already determined that disputed issues of fact exist as to the terms of the parties' agency agreement. Given that plaintiffs' alleged actions in late November and early December of 1990 may have contributed to the non-occurrence of this alleged condition, material issues of fact exist as to the existence of the delivery condition and the parties' role in preventing the occurrence of such a condition.

CONCLUSION

For the reasons set forth above, this Court denies both motions. The parties are directed to conclude all discovery by November 7, 1994. The parties' ready-for-trial date is December 13, 1994. The Court's pre-trial materials are enclosed.

SO ORDERED.

Dated: New York, New York

September 21, 1994

John F. Keenan
United States District Court


FOOTNOTES

1. Filanto did not return the executed contracts until August of 1990, advising Chilewich that it was deleting parts of both contracts. By this time, Chilewich had already paid for and accepted delivery of all of the footwear subject to Contract No. 9003001, and had paid for and received shipments under the first installment of Contract No. 9003002. In September of 1990, Chilewich and Filanto met in Paris and agreed to abide by the terms of the contract originally executed by Chilewich on March 13, 1990.

2. Paragraph 13 of the USSR contract No. 32-03/93085 provides that "no amendments and additions to the present Contract shall be valid unless the same are in writing and signed by duly authorized representatives of both parties." Article 29 of the United Nations Convention on Contracts for the International Sale of Goods respects the parties' express intent to require modifications in writing, though a "party may be precluded from asserting such a provision to the extent that the other party has relied on that conduct." See 15 U.S.C. App. at 48, et seq.

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