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Transcon, Inc. v. Motion Inc.

JULY 20, 1973.




APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND E. TRAFELET, Judge, presiding.


Rehearing denied September 11, 1973.

Transcon, Incorporated, (Transcon) filed an action against Motion Incorporated (Motion) to recover sums allegedly due it from sales to Motion. Motion filed a counterclaim against Transcon asking for damages for Transcon's alleged breach of an exclusive territorial sales representative contract with Motion. After a bench trial Transcon was awarded $5239 on its claim, and the court found against Motion on the counterclaim. Motion appeals only from that portion of the judgment denying it relief on the counterclaim.

On appeal Motion contends that as a matter of law Transcon breached its contract with Motion. Also, Motion asks this court to enter judgment in its favor for $28,147.38, the damages suffered by Motion assuming the existence of a breach.

Transcon is a manufacturer of industrial conveyors. It was formed in 1959 by former employees of Mayfran Corporation (Mayfran). Both companies manufacture industrial conveyors. Motion is a sales representative for various metal handling equipment manufacturers. The other corporate entity involved is Industrial Specialties Corporation (Industrial). It was formed in 1966 by Gilbert Haggerty, an ex-Mayfran salesman who operated in Illinois during his last three years with Mayfran. Industrial is located in Barrington, Illinois. It does some manufacturing on its own premises and some by "fabshops" off the premises. It purchases conveyors from manufacturers and combines them into a complete industrial system.

On January 20, 1966, Transcon and Motion entered into a contract (drafted by Transcon) whereby Motion was to serve as Transcon's exclusive sales representative in northern Illinois and western Iowa. This area was increased on February 9, 1966, to include three counties in northern Indiana. The contract provided that Motion would solicit orders for Transcon equipment in the aforementioned areas; that any orders were not to be deemed accepted until approval thereof was given by Transcon at its home office in Mentor, Ohio; and that the agreement would run from year to year, but that either party could terminate upon 30 days written notice. The commission schedule under which Motion was to operate was also set forth.

Paragraph 7 of the contract which is the subject of the dispute provides in relevant part:

"(7) You [Motion] shall not receive commission on the following transactions except as special permission for handling the account and special commission has been arranged.

(a) O.E.M. sales to original equipment manufacturers unless special permission has been granted to handle the account. * * *."

The term "O.E.M." or original equipment manufacturers was not defined in the contract.

When Gilbert Haggerty formed Industrial in June, 1966, he offered Industrial's service to Transcon. He was informed that Motion was Transcon's sales representative in the relevant area. Haggerty told Transcon that Industrial was going to purchase conveyors and not work as a sales representative. Transcon sold its first conveyor to Industrial in June, 1966. The conveyor was shipped directly to the ultimate user, i.e., Industrial's customer. Thereafter, until August 20, 1969, Industrial made 77 other sales of Transcon conveyors. All the sales were made to customers within Motion's selling territory; all conveyors were shipped directly from Transcon to Industrial's customer; and they all bore the name Transcon.

In selling its equipment systems, Industrial would inspect a customer's plant, take appropriate measurements and decide what equipment was needed. If Transcon equipment was required, Industrial would call Transcon and inform it of the dimensions and type of conveyor needed. Transcon would quote Industrial a price which Industrial then passed on to its customer. If the customer agreed to make the purchase, Industrial would forward a draft copy of the conveyor to Transcon and ask it to build it for the given sum. Transcon would then send Industrial a drawing of the conveyor and if approved by Industrial, a conveyor would be sent directly to the customer. Transcon would bill Industrial, and Industrial would bill its customer. Industrial assumed responsibility for the conveyor's performance after installation.

Motion would solicit orders for Transcon conveyors. If such a conveyor was needed, a Motion salesman would take the necessary measurements and other information. A blueprint and data sheet were prepared by Motion and sent to Transcon for a price quotation. The quoted price would be related to the customer and if he accepted it, a purchase order was sent to Transcon. Delivery was made to the customer's plant. Motion would then inspect it to see that it complied with the specifications and assisted in the installation. Transcon would then pay it a commission. Motion was responsible for servicing the equipment it sold.

From June, 1966, to August 20, 1969, (when Transcon cancelled the contract) Motion sold 14 Transcon conveyors. During this period Motion had attempted, unsuccessfully, to sell Transcon conveyors to many companies ...

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