King v. Gerold

MOORE, P. J.

Respondent is the inventor and designer of a house trailer known as the “Sport King.” On September 27, 1946, by a writing he licensed appellant to manufacture and sell such trailer for a period of six months—expiring March 16, 1947. It was agreed that (1) respondent should receive a royalty of $50 for each trailer sold at wholesale and $100 for each sold at retail; (2) if the license be not renewed after the initial six months’ period appellant “shall cease to produce said trailer for any purpose whatsoever.” The contract was drawn by appellant’s attorney. It was their mutual intention by the writing of September 27th to replace the less formal but substantially similar contract executed by the parties approximately a week previously. It is a fact not without value that the earlier document contained no express requirement for appellant to cease production after six months in the event the parties should fail to effect a new agreement.

During the term of the contract respondent worked for appellant and supervised construction of the trailers. After the expiration of the contract he left appellant’s employ and commenced operations alone, building trailers in which he incorporated certain minor changes which he had previously suggested to appellant. Notwithstanding that the licensing agreement was not renewed appellant continued to manufacture and sell a trailer substantially similar to that designed by respondent. As a result of the competition so created, respondent was forced to make numerous reductions in his selling price. The rivalry had not long continued before respondent instituted the instant action seeking damages for breach of contract, an accounting for unpaid royalties and an injunction to restrain appellant’s continued manufacture of such trailers. Damages were awarded respondent but an injunction was denied for the reason that it was determined that appellant at the time of trial had discontinued manufacturing the trailers.

[318]

Numerous points are asserted as grounds for reversal of the judgment. The first contention is that the agreement of September 27th is void for lack of consideration and as being in restraint of trade. From the record however, it is apparent that the last mentioned contract was intended to replace the earlier document which was rescinded by mutual agreement. This is evident from the testimony of respondent that the former contract was intended to be operative only until a formal, more complete licensing agreement could be drawn under the guidance of appellant’s attorney. Accordingly, a sufficient consideration is to be found in the surrender of the former rights existing under the original agreement.