Fageol & Tate v. Baird-Bailhache Co.

DOOLING, J.,

pro

tem.

On January 15, 1919, plaintiffs and respondents, Fageol and Tate entered into a written agreement with C. S. Baird and John M. Bailhache whereby Fageol and Tate granted a license to Baird and Bailhache to manufacture and sell heating devices under patents belonging to the licensors. Subsequently the licensees organized a corporation, Baird-Bailhache Company, which succeeded to their rights and obligations under the license agreement and is the defendant and appellant here. The agreement provided for the payment of royalties upon the articles manufactured and sold according to a certain schedule and for the payment of certain minimum annual royalties in any event. The amount of these minimum royalties and the manner of their payment were subsequently modified from time to time by the agreement of the parties, the final modification providing, in so far as is material here:

[3]

“1st:—That for the balance of the life of the main contract there shall be paid on the 15th of each month promptly the sum of $200 at all events” and in the event that the royalties due for heaters sold during the preceding month exceed the sum of $200, the excess shall be remitted and paid in addition to the $200.

"2nd:—That the yearly mínimums named in the principal agreement and supplement thereto shall remain in full force and effect and that on the 15th of January ... a full accounting shall be made . . . and the difference between the amounts paid in cash . . . during said fiscal year and the yearly minimum royalties due under said accounting shall be paid on January 15th of each year as aforesaid.”

The original contract contained the following provision which was never subsequently modified: “In case of a breach of any of the terms and conditions of this agreement by the parties of the second part (licensees), and the failure of said parties of the second part to comply therewith within thirty (30) days after receipt of written notice from said parties of the first part (licensors) of said breach, then, and in that event, this contract shall immediately terminate.”

On August 15, 1925, the appellant Baird-Bailhache Company failed to make the $200 payment due under the agreement as modified and on August 25, 1925, respondents Fageol and Tate sent a letter to appellant calling its attention to its default in payment and concluding: “Unless you do pay all royalties due and owing as of the 15th day of August, 1925, . . . the undersigned will consider the said contract as being, and having been, violated and terminated by you.”