Bay State Smelting Co., Inc. v. Ferric Industries, Inc., 292 F.2d 96, 1st Cir. (1961)

292 F.
2d 96
BAY STATE SMELTING CO., Inc., Defendant, Appellant,

v.
FERRIC INDUSTRIES, INC., Plaintiff, Appellee.
No. 5803.
United States Court of Appeals First Circuit.

June 30, 1961.
Arthur M. Gilman, Boston, Mass., with whom Walter H. McLaughlin,

Boston, Mass., was on the brief, for appellant.
Stuart Macmillan, Boston, Mass., with whom Warren G. Reed, Rhilip H.
Suter and Haussermann, Davision & Shattuck, Boston, Mass., were on the
brief, for appellee.
Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH,
Circuit Judges.
HARTIGAN, Circuit Judge.
This is an appeal from a judgment of the United States District Court for the
District of Massachusetts entered January 6, 1961.
The action was commenced by a complaint filed by Klockner & Company

(hereinafter referred to as Klockner),1 against the defendant-appellant, Bay
State Smelting Co., Inc. (hereinafter referred to as Bay State), alleging that
Klockner through its authorized agent, Ferric Industries, Inc. (hereinafter
referred to as Ferric), entered into five written contracts with Bay State
whereby Bay State agreed to provide Klockner with certain quantities of
copper, suitably packed in drums, for agreed prices, shipment date to be
Jan./Feb. 1955 on one lot (hereinafter referred to as lot #1) and Feb./first half
March '55 on the other lots. Klockner further alleged that Bay State attempted
to cancel the foregoing contracts without cause by a notice on February 28,
1955 as to lot #1 and notices on March 11, 1955 as to the other lots, and that
since that time Bay State has refused to make delivery of the copper in
accordance with the contracts.
Klockner alleged that the price of copper has risen since the contracts were
entered into and that it has been damaged by Bay State's breach of the
contracts. Klockner sought judgment of $10,725 together with interest and
costs.
Bay State in its substitute answer denied various material allegations and made
further answer that it orally agreed to sell certain quantities of copper for export
to Klockner on the condition that Klockner would secure the necessary federal
government export licenses during the period prescribed for delivery, and that
the copper was to be shipped as it was completed by Bay State at various
intervals during the period prescribed in the agreement. Bay State further
answered that it completed the material and notified Klockner and requested
shipping instructions and evidence of the necessary export licenses, that
Klockner did not provide shipping instructions or evidence of necessary export
licenses, and was not able to provide the export licenses during the period
prescribed for delivery because of a federal government embargo on the
material, that Bay State held the material at its plant and when the period
prescribed for delivery had elapsed it notified Klockner that it would not sell
the material because of Klockner's failure to comply with the terms and
conditions of the agreement and further by reason of the contingency provision
in the agreement excusing delivery by the seller.
As a second defense Bay State said that the embargo on the copper material
remained in effect during the entire period prescribed for delivery, thereby
rendering the sale by Bay State to Klockner illegal and excusing Bay State
from performance of the agreement.
Ferric made a motion for substitution as party plaintiff or as joint plaintiff on

the basis of a written assignment by Klockner of its claim and Ferric's
allegation that the contracts referred to in the complaint were executed between
Ferric and Bay State, that Ferric is not the agent of Klockner and that Ferric is
the real party in interest in this action. The motion was allowed.
A trial was held before a jury. At the completion of the trial Klockner was
discontinued as a party plaintiff and a motion for a directed verdict against
Klockner was granted. The district court reserved its ruling on Bay State's
motion for directed verdict against Ferric. The case was submitted to the jury
for a special verdict on five specific issues:
'1. Did the plaintiff, Ferric Industries, Inc., as principal make contracts with the
defendant, Bay State Smelting Co., Inc. to buy the property described in
plaintiff's exhibits one to five, inclusive?

9
Answer. Yes.
10
'2. If your answer to the foregoing interrogatory number one is 'no', did
Kloeckner & Co. as principal contract with Bay State Smelting Co., Inc. to buy
the property described in plaintiff's exhibits one to five, inclusive?
11
Answer. No answer required. Answer left blank by Jury.
12
'3. Did the buyer involved in said contracts fail without reasonable cause to take
delivery of the said property within a reasonable time after seller was able,
ready, and willing to deliver said material pursuant to the contract and buyer
was notified thereof?
13
Answer. No.
14
'4. Was the notice of cancellation of said contracts by the seller on or about
March 11, 1955, made before there was any breach of the contract by the
buyer?
15
Answer. Yes.
16
'5. What was the difference between the total contract price of the material
described in exhibits one to five inclusive and the market value of said material
on or about March 15, 1955?
17
Answer. $7,500.'
18
Bay State urged its motion for directed verdict against Ferric by a memorandum
of law filed within ten days of the verdict. The district court denied the motion
and ordered entry of judgment in favor of the plaintiff, Ferric, and against the
defendant, Bay State, in accordance with the verdict of the jury. Judgment was
entered January 6, 1961 and Bay State filed its notice of appeal on January 12,
1961 from the order denying its motion for directed verdict against Ferric and
from the judgment.
19
On appeal, Bay State contends (1) that the district court erred prejudicially in
admitting parol evidence to vary terms of the five written contracts and in
submitting to the jury special questions concerning such parol evidence; (2) that
the contracts provided for a sale for export and when Klockner failed to secure
the necessary export licenses, the performance of the contracts by Bay State
would have been unlawful; (3) that the contracts were subject to the condition
that the buyer was to secure the necessary export licenses and the failure of the
buyer to procure such licenses terminated the contracts; (4) that the cancellation
by Bay State on March 11, 1955 of the four contracts calling for March
delivery did not deprive Bay State of its right to consider the contracts
terminated: (5) that for the reasons in (2), (3) and (4) the district court was
required to grant Bay State's motion for a directed verdict as to Ferric.
20
We believe that under the standard rules for interpreting contracts, Bay State
was excused from performing under the contracts until the buyer, whether it be
Ferric or Klockner, secured export licenses and that since no export licenses
were obtained within the specific period prescribed for delivery of the
materials, nor even within a reasonable time thereafter, Bay State could regard
the contracts as terminated and the buyer could not recover for breach of such
contracts. We find it unnecessary, therefore, to consider Bay State's other
contentions.
21
One of the 'conditions incorporated in and made part of all quotations, contracts
and sales' which is printed on the reverse side of the order confirmation sent by
Ferric to Bay State is: 'The execution of any order is subject to the buyer's
ability to secure the necessary Export License.' Even if the order confirmation
for each lot is not an integration or partial integration of the agreement between
the buyer and seller, there is no doubt that the above condition is part of each
agreement. This conclusion is supported by the pleadings and the evidence.
22
Ferric contends that the export license provision is for the benefit of the buyer
only and could be and was waived unilaterally by Ferric.
23
We believe, however, that the plain meaning of the provision is that the seller is
not required to undertake the execution of any order until all necessary export
licenses are available. Under this interpretation of the provision, the condition
cannot be said to be included only for the buyer's benefit and thus able to be
waived unilaterally by him. We believe that words of the provision are given
their natural scope by this interpretation, Hamlen v. Rednalloh Co., 1935, 291
Mass. 119, 197 N.E. 149, 153, 99 A.L.R. 1230; Williston, Contracts 620
(Rev.Ed.1938); and that even if Ferric's interpretation were as likely, the phrase
should be construed against Ferric, the party drawing the order confirmation
containing the phrase. See Morse v. City of Boston, 1927, 260 Mass. 255, 262,
157 N.E. 523, 526; Williston, op. cit. 621.
24
Although this provision of the agreement would excuse Bay State from making
delivery of the scrap until export licenses had been obtained, the right to regard
the agreements as terminated would arise only if the buyer failed to obtain
export licenses during the time set by the agreements for delivery of the
materials. In other words, termination of the agreements would be justified
when the failure to obtain the export licenses had materially delayed delivery of
the scrap.
25
Bay State contends that March 15, 1955 was the last date contemplated by the
agreements for delivery of four lots of scrap and the failure of the buyer to
obtain the export licenses by the date permitted Bay State to regard the
contracts as terminated. This contention is based on the premise that in the
contracts time was of the essence. We do not believe that the practical
construction given by the parties to the contracts by their conduct entirely
supports this assumption. For example, Bay State wrote letters of availability as
to three lots stating the scrap material would be available for shipment 'on the
week of March 14.'
26
Nevertheless, even if the contracts be construed as not making time of delivery

'of the essence,' still the buyer must prove that within the reasonable time
implied by the contracts, it fulfilled all the conditions precedent to the seller's
duty to deliver. The record contains testimony that an export license for forth
tons of copper materials was granted to Ferric 'around March 23,' 1955. We do
not believe that this was within a reasonable time of the period specified in the
agreements, giving consideration to the fluctuating market involved. Therefore,
Ferric cannot recover since it has not satisfied its burden of proving compliance
with the terms of the contracts.
27
Finally, we agree with defendant that although it may have prematurely

cancelled certain of the contracts by its notices on March 11, 1955, such
cancellations made no difference since the buyer did not change its position in
reliance on them and they did not affect plaintiff's efforts to obtain export
licenses. Premature repudiation merely excuses subsequent acts which
otherwise could have, and presumably would have been performed. See
Restatement of Contracts 306, Comment a; Williston, op. cit. 698A.
28
Judgment will be entered vacating the judgment of the district court and
remanding the case to that court for entry of judgment for the defendant.
29
WOODBURY, Chief Judge, concurs in the result.
In various exhibits and protions of the briefs and record before us the name is
spelled 'Kloeckner.' We use the spelling given in the complaint

Bay State Smelting Co., Inc. v. Ferric Industries, Inc., 292 F.2d 96, 1st Cir. (1961)

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292 F.

BAY STATE SMELTING CO., Inc., Defendant, Appellant,

United States Court of Appeals First Circuit.

Arthur M. Gilman, Boston, Mass., with whom Walter H. McLaughlin,

The action was commenced by a complaint filed by Klockner & Company

Ferric made a motion for substitution as party plaintiff or as joint plaintiff on

plaintiff's exhibits one to five, inclusive?

Answer. No answer required. Answer left blank by Jury.

Nevertheless, even if the contracts be construed as not making time of delivery

Finally, we agree with defendant that although it may have prematurely

WOODBURY, Chief Judge, concurs in the result.

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