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S.G. Young Inc. v. B. & C. Distributors Co.

Decided: November 5, 1952.


Eastwood, Goldmann and Francis. The opinion of the court was delivered by Goldmann, J.A.D.


The Law Division of this court granted defendant's motion for judgment in its favor made at the close of the entire case, and plaintiff appeals. A chronological statement of what took place between the parties is of more than usual significance in the determination of this appeal.

Plaintiff is a New York corporation and a wholesale distributor of television parts; defendant, a New Jersey corporation, is a supplier. On November 18, 1950 Samuel Young, president of the plaintiff company, together with Harry C.

King, its vice-president and sales manager, a Mr. Katz who was connected with a Brooklyn television company, and Frank P. Fleming who was a representative of the General Electric Company of New York, went to defendant's warehouse in Paterson and there saw Philip Bornstein, president of the defendant company. They were interested in purchasing a supply of resistors and, after visually examining a sampling taken from marked boxes and cartons, purchased 269,109 half-watt and single-watt units. Of these, 235,638 were "random color-coded resistors" sold at $45 per thousand, and 33,471 were "accurate color-coded resistors" sold at $55 per thousand. A resistor is a short piece of wire, three to five inches long, bare at each end and with a bakelite coating around the center, over which is painted a band of color. Various colors are used and they constitute a code indicating the electrical resistance value of the device.

Young paid for the resistors by company check and received from Bornstein an invoice at the bottom of which appeared these two statements: "Any resistors rejected will be replaced or refunded," and "Goods returned without permission will not be accepted for credit." The former was written in; the latter was part of the printed form. This invoice constituted the entire agreement between the parties for the sale and purchase of the resistors, except for the fact that plaintiff desired resistors possessing a 20% tolerance in order to meet the requirements of General Electric which had placed an order for ten million resistors with it. This tolerance meant that each resistor had to be within 20% under or over the ideal precision point of 100%. Bornstein orally agreed that all resistors would have such tolerance. Upon completion of the transaction, Young and King placed the bags and cartons of resistors in their automobile and took them back to their Schenectady plant.

It appears that the legend "Any resistors rejected will be replaced or refunded," was included in the original invoice at plaintiff's request and for its own protection, because the

inspection at defendant's warehouse of a limited number of resistors could not reveal the electrical qualities of the random color-coded units, or whether they would meet General Electric's specification.

At the end of November 1950 King phoned Bornstein on behalf of plaintiff and told him that some of the resistors had more than a 20% tolerance; some had a wattage other than a half- or single-watt, and still others had broken bodies, or overlapping color bands, or flashings remaining from the molding process. The entire quantity purchased was returned, but plaintiff made no demand for a refund. According to King, Bornstein suggested that Lee Electric Inc., of Leonia, N.J., which was handling much of defendant's recalibration work, could rework the resistors. The parties, together with General Electric's representative, Arthur E. Constantine, met at the Lee plant on December 6 or 7, 1950. It was agreed that Lee Electric would recalibrate the resistors to a 10% tolerance, as General Electric then required, and would replace resistors having a wrong wattage, broken bodies and those with flashings from defendant's large stock on hand at the plant. Defendant was to pay the $10 per thousand cost of this work.

At the time this oral arrangement was made, plaintiff had already shipped three cartons of resistors back to defendant. The itemized statements covering these cartons show that of the more than 55,000 resistors shipped only 660 were described by plaintiff as over the 20% tolerance. Nothing was said of any of the resistors being "imperfect" or "defective," words which become important in the light of the pleadings in this case. Defendant later sent the three cartons to Lee Electric; plaintiff shipped the balance of the November 18 order direct to that plant.

Lee began the work of recalibration and replacement soon after December 6. Constantine set up General Electric's own instruments at the Lee plant for the purpose of accurate calibration. Plaintiff had left with Lee a number of its blank invoices, with instructions that as the work was completed

they could deliver and ship resistors directly to the General Electric plant or its representatives. 18,240 resistors were finished on December 8 and delivered to Constantine; he receipted for them upon one of plaintiff's invoices and they were shipped to General Electric. Another 48,445 resistors were similarly completed, delivered and accepted on December 13. Between December 13 and 19, Mr. King called at the Lee plant and took with him 6,810 resistors that had been completed, and receipted for them on his own company's invoice. The entire job of recalibration was completed early in January.

In the meantime plaintiff decided that it wanted the resistors recolored and recoded, apparently because a great number of them still carried their original and improper color-code band. Negotiations with Lee Electric to do this work began on December 19, 1950. On December 21 King wrote that company authorizing a reworking of the resistors at a cost of $10 per thousand for color-coating. The resistors were to be sorted and any culls removed and replaced from defendant's stock at the Lee plant. There was an added direction that the resistors were to be checked for a 10% tolerance. Packages were to be clearly marked to avoid confusion.

On January 4 Lee replied, advising that the cost of sorting and color-coding would be $15 per thousand. This price was orally agreed upon and Lee proceeded with the work as requested by plaintiff. As resistors were completed, they were shipped C.O.D. On March 15, 1951 plaintiff telegraphed Lee Electric to discontinue work under the contract. The next day Lee wrote plaintiff stating that it had discontinued the color-coding of the resistors. Enclosed in the letter was an invoice covering both the units already colored at the time the telegram was received as well as an additional quantity from which the color bands had been removed.

There were two shipments of resistors en route to plaintiff at the time. Plaintiff received ...

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