Automatic Vending Co. v. Wisdom

California Court of Appeal Jun 30, 1960 No. Civ. 9913Published

Before: Warne

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Holding. A contract granting a party discretionary power to vary commission rates is not illusory or void for lack of mutuality because the law imposes a duty to exercise that discretion in good faith; furthermore, an award of gross profits is appropriate when a plaintiff's fixed operating costs would not have decreased due to the breach.

Issues

Whether a contract allowing one party to vary commission rates is void for lack of mutuality or illusory.
Whether the trial court erred in calculating damages based on gross profits without deducting fixed operating costs.

Disposition. Affirmed

Quotations verified verbatim against the opinion

“the power given to the Automatic Vending Company to change the commission rates upon written notice would impose a duty upon it to exercise that discretion in good faith and in accordance with fair dealings”

“plaintiff’s expenses of operating his business are fixed and would have continued in an equal amount even if the contract had not been breached by the defendant, an award of gross profits may be allowed”

WARNE, J. pro tem.

Defendant appeals from a judgment for plaintiff in an action for damages for breach of contract.

Respondent is engaged in the business of selling and dispensing cigarettes by means of automatic vending machines. Defendant leases and operates a cafe. On February 27, 1958, respondent and appellant entered into a written contract whereby appellant granted to respondent a three-year concession for the sale of cigarettes on her premises by means of cigarette vending machines. The provisions of the contract insofar as they are pertinent to the issues presented on this appeal are as follows:

“1) In consideration of the payment of any advance com

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mission hereunder, or the payment of the commissions hereinafter set forth, I/we hereby grant to you, Automatic Vending Company, a corporation, for a period of three (3) years from the date shown hereon, an exclusive concession for the sale of cigarettes in and about my/our place of business located at 2816 W. Capitol Av. West Sacramento, California, known as Bessie Jane Wisdom, DBA Last Chance Cape.

“6) You are to pay me/us the following rates of commission for the said exclusive concessions:

“On Monthly sales 1000 packages or over... 8 % on all sales “On Monthly sales 700 to 1000 packages.. .7%

“On Monthly sales 400 to 700 packages.. .5%

“On Monthly sales 100 to 400 packages.. .4%

“7) I/we agree that you may change the above cigarette commission rates upon written notice to me/us and I/we further agree to accept your count as to the amount of cigarettes sold on my/our premises.

“8) No commissions shall be paid hereunder by you to me/us until all of the advance commissions, if any, heretofore paid by you have been repaid to you in full, and thereafter said commission shall be paid to me/us monthly. I/we shall not assign this contract or any part thereof, without your written consent, during the term hereof.”

Concurrently with the execution of this agreement respondent paid appellant $200 as an advance commission. In January of 1959, appellant demanded that respondent pay to her larger commissions than those provided for in the contract, which respondent refused to do. On January 28, 1959, appellant repudiated the contract and demanded that respondent remove its cigarette vending machine from her premises. Respondent did so and on March 8, 1959, filed this suit to recover damages for loss of profits which it would have earned during the remaining 25 months’ life of the contract.

Automatic Vending Co. v. Wisdom

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