The opinion of the court was delivered by: TENNEY
Plaintiff L. Orlik Ltd. ("Orlik"), an English corporation engaged in the manufacture of briar pipes and tobacco accessories, brought this diversity action against defendants Helme Products, Inc. ("Helme") and Whitehall Products, Inc. ("Whitehall"), New York and New Jersey corporations respectively.
Orlik alleges that the defendants breached a contract under which the defendants had an obligation to purchase a minimum amount of briar pipes every year during the life of the contract, and moves for summary judgment. For the reasons stated below, the plaintiff's motion is granted insofar as the defendants' liability is concerned. With respect to damages, however, genuine issues of material fact exist, precluding an award of summary judgment. The case is referred to United States Magistrate Nina Gershon for an inquest on damages pursuant to the Court's findings on the applicable law, as stated below.
At issue in this case is a contract for the sale and distribution of the plaintiff's briar pipes in the United States. The contract was first entered into by the plaintiff and Mastercraft Briars, Inc. ("Mastercraft") and is memorialized in a letter signed by both parties and dated October 29, 1970 ("1970 Agreement"). Although the 1970 Agreement contained a number of terms, its essence is found in these two clauses:
"4. You [Mastercraft] shall be the sole and exclusive distributor for the United States of America of briar pipes manufactured by us [Orlik]. We shall not knowingly sell so as to affect, directly or indirectly, distribution in such purchases through any person other than you.
"5. So long as this agreement is in force you agree to purchase not less than [*] 40,000 per annum of our briar pipes from us (except for the first year 1971 when the minimum purchases shall be not less than [*] 12,000), the assortment of which should correspond to the various qualities available from best quality briar root."
Soon after the execution of this agreement, the plaintiff learned that Mastercraft was going out of business. In January of 1971, Mr. Harry J. Feaser, a Vice President of Whitehall, and Mr. G. Jackson Ratcliffe, a Vice President of Helme, went to England to negotiate with Orlik concerning an assignment of the agreement between Orlik and Mastercraft. This assignment was accomplished and memorialized in a letter from Orlik dated January 27, 1971 ("1971 Agreement"), which adopted all the terms of the earlier agreement and added one further paragraph:
"2. Any terms of paragraph 6 of the Agreement notwithstanding you shall be the sole and exclusive distributor within the United States of America of briar pipes manufactured by us so long as you shall purchase the requirements of pipes set forth in paragraphs 5 and 10 of the Agreement."
Thereafter the parties began to perform under the contract. It is undisputed that the defendants purchased briar pipes in the following amounts:
1971 $ 3,321.22
Tot al $89,052.14
In October of 1974 Orlik sent the defendants a letter dated "9th October, 1974" stating that the defendants had "not carried out [their] obligations under this Contract," and giving notice of termination to be effective on October 31, 1975.
The plaintiff contends that the failure of the defendants to purchase the minimum amounts required by the 1970 Agreement was a breach thereof leading to substantial damages consisting of profits lost by the plaintiff on those sales. The defendants contend that the 1970 Agreement is ambiguous as to time periods covered and that, pursuant to the paragraph added in the 1971 Agreement, should be regarded as having terminated upon the failure of defendants to order the required amount in the first year of the contract. The defendants further contend that the plaintiff waived its right to enforce the minimum purchase requirement. Finally, they argue that even if liability is found, the applicable law leads to the conclusion that the plaintiff did not incur any damages.
The applicable law in this case is that of England.
The contract contains an explicit choice-of-law clause specifying that the "contract shall be covered by English law." (1970 Agreement para. 9). This clause settles the question since the defendants' purchase in England of the plaintiff's briar pipes provides a "reasonable relation" between this transaction and England, thus validating the clause under New York law. N.Y.U.C.C. § 1-105(1); see Fleischmann Distilling Corp. v. Distillers Co. Ltd., 395 F. Supp. 221, 229 (S.D.N.Y.1975).
With respect to the construction of contracts, the law of England is essentially similar to the basic law of contracts in the United States. As Lord Hailsham states:
"The object of all interpretation of a written instrument is to discover the real intention of the author, the written declaration of whose ...