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Ehret Co. v. Eaton

decided: September 11, 1975.

EHRET COMPANY, A CORPORATION, PLAINTIFF-APPELLANT,
v.
EATON, YALE & TOWNE, INC., AN OHIO CORPORATION, DEFENDANT-APPELLEE



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 70 C 1017 RICHARD W. McLAREN, Judge.

Fairchild, Chief Judge, Swygert, Circuit Judge, and William J. Campbell, Senior District Judge.*fn* Swygert, Circuit Judge, dissenting.

Author: Fairchild

FAIRCHILD, Chief Judge.

This appeal raises questions concerning the interpretation of an exclusive sales contract and the application of the parol evidence rule and promissory estoppel. It also raises the question whether the trial judge abused his discretion by offering a remittitur and granting a new trial. Jurisdiction is founded on diversity. All parties to this appeal have accepted Illinois law as controlling.

The plaintiff, Ehret Company, acted as a manufacturer's sales representative for the defendant, Eaton Company, in the Milwaukee and Chicago territories until the termination of their 1966 contract. This termination was effected by notice in compliance with the "Duration of Agency" clause and took effect on September 30, 1968.

There was evidence that the defendant's products, worm gears and lubricating systems, required the plaintiff to engage in "Development Work" of up to ten years prior to the consummation of a sale. It was necessary, during this pre-sale development, for the plaintiff to engineer, design and adapt the defendant's products into either the customers' finished product or into the customers' own manufacturing equipment. Before signing the 1965 contract, Mr. Ehret objected to the "Duration of Agency" clause which reads:

12. Duration of Agency

This Sales Agreement may be altered by our mutual consent and may be terminated by either of us upon thirty (30) days' notice in writing. In the event of cancellation of this Agreement or abridgment of the territory herein covered, no commission will be paid on any orders which have not been properly received, in writing, and accepted by us in writing before the termination of the Agreement or abridgment of the territory, or on orders which purchasers will not accept delivery of and pay for within three (3) months from the date of cancellation of the Agreement or abridgment of the territory.

His objections were raised in an April 28, 1965 letter to the General Sales Manager of Eaton Company, Mr. Witzenburg. Mr. Ehret showed concern for the possibility that Eaton Company could cancel the contract after Ehret Company had expended considerable time and money in procuring a sale, but before an order was placed, and also that orders placed prior to termination may not be shipped within 90 days.

On April 29, 1965, Eaton Company responded with a letter from Mr. Witzenburg declining to change the contract, stating:

It is true in the event of cancellation by either party, our company would not be obligated to pay a commission on orders that were received before the date of final cancellation but were not released for shipment three months after cancellation. However, in those few cases where the contract has been cancelled by us we have always been much more liberal than provided for in the contract.

The normal procedure is to allow full credit for all orders received within 30 days after final cancellation date, provided that they resulted from quotations made prior to the date of cancellation and if released for shipment within five months of the date of cancellation. In fact, in two cases, we have extended that protection to orders received under the same circumstances but shipped within a period of one year after cancellation.

Neither you nor we expect that the new contracts will be cancelled by either one of us, so that this discussion is probably academic only. However, we cannot alter the terms of the contract - the same contract must exist with you as with all of our other representatives and in the very unlikely event of cancellation, you will have to rely on receiving extremely fair treatment.

After receiving Mr. Witzenburg's letter, Ehret Company entered into the Commission Sales Agreement containing the "Duration of ...


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