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January 7, 1981

FRANCIS DEVLIN CO., INC. and Hoelzel S/A, Defendants

The opinion of the court was delivered by: DUFFY

In this diversity action to recover damages for breach of an exclusive agency agreement and for unjust enrichment, the defendants have moved for summary judgment. The plaintiff, Marcraft Recreation Corp. (hereinafter "Marcraft"), is a New Jersey corporation engaged in the manufacture of sporting goods equipment including paddle and racquet products. The defendant, Hoelzel S/A (hereinafter "Hoelzel"), is a Brazilian company which manufactures rubber products, including balls used in paddle and racquet sports. The other defendant, Francis Devlin Co., Inc. (hereinafter "Devlin"), was the sole representative for all of Hoelzel's sales in the United States until January, 1976.


The parties' business relationship began in February, 1975 when Marcraft agreed to be the sole United States distributor of all sporting goods manufactured by Hoelzel. The parties were introduced to each other by Devlin. There exists some confusion over whether this initial agreement was in writing. There is no dispute, however, that the agreement expired on January 20, 1976.

 Marcraft alleges that before this expiration date, the parties expended joint efforts to develop and refine a unique brand of paddle and racquet balls. Marcraft further alleges that between January 1976 and March 1977 they continued to jointly develop the balls with the understanding that once the development of the balls was completed, Marcraft would be the exclusive distributor of the balls in the United States for a period of five years with an option to renew for an additional five years. (Plaintiff's Memorandum p.14). After the February, 1975 agreement had expired in January, 1976, Marcraft expressed its concern that the oral agreement between the parties had not been reduced to writing. (Blair Affidavit, para 11, Exh.A). According to Marcraft, Devlin and Hoelzel on numerous occasions assured Marcraft that a written agreement would be forthcoming. (Plaintiff's Memorandum in Opposition to Defendants' Motion, p.5).

 Sometime in 1976, Marcraft offered to modify its relationship with Hoelzel by forming a distribution company in the United States which both parties would share in equally. Marcraft alleges that Hoelzel agreed to participate in this corporation and that both parties agreed to capitalize the corporation with five thousand dollars each. (Plaintiff's Memorandum, p.6). Thereafter, Hoelzel never provided five thousand dollars, and Marcraft dissolved the corporation.

 Despite these developments, Marcraft continued to distribute Hoelzel's balls and assist in their development. According to Marcraft, repeated efforts to finalize the exclusive distribution arrangement culminated in a letter dated March 21, 1977 from Marcraft's President, Nat Marks, to Hoelzel's President, Jorge Hoelzel, Jr. In that letter, Marcraft "once again offered and insisted that Hoelzel reduce its exclusive distribution arrangement with Marcraft into a written contractual arrangement." (Complaint para 12) The letter expresses Marcraft's disappointment over the dissolution of the joint company and states in pertinent part:

In view of the length of time and dedicated efforts we have put into the development of the NO. 1 and M-21 balls, plus the expenses of testing, (some of which you personally viewed when visiting us) the marketing, advertising and art which are all very costly, I would think that Marcraft by now should have an exclusive distributorship arrangement with you for at least five years with an option for another five years.
Please, Jorge, let's try to nail this down for I still feel that Marcraft and Hoelzel & Company can do very well together.
With regard to the exclusive distribution of both balls I am sure that you must agree with me that this arrangement is both just and deserving and that a written contractual arrangement should be forwarded to us quickly. I am sure that you are aware of the expenditures to date and the necessary expenses to further promote these balls and therefore you can readily understand why this contract is of the utmost importance.

 In a responsive letter ten days later, Mr. Hoelzel wrote:

You have had problems and so did I, Nat. We are together in this enterprise relating to the NO. 1 and M-21 balls and I think that any written arrangement between us is superfluous and unnecessary and as far as we have motivation with these articles. I have not offered the balls to any other client, even because my production cannot be large enough, once the balls need an extensive quality control and are almost handmade piece by piece.
But the quality control is fully within my sake. I have long made up my mind to supply only articles of first quality, so as to get always the next order from my clients.
But if you still feel a contract is necessary, Nat, please send me a sketch of one. I will make the necessary adjustments on my part and return it for your approval.

 Marcraft asserts that this reply letter constitutes a memorandum which evidences Hoelzel's agreement with the terms set forth in Marks' March 21 ...

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