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Caterer v. Hans Holterbosch Inc.

Decided: May 15, 1968.


Sullivan, Foley and Leonard. The opinion of the court was delivered by Foley, J.A.D.


[101 NJSuper Page 62] Plaintiff, caterers, take this appeal from a judgment for defendant rejecting plaintiff's suit sounding in contract. Entering this order, the trial court determined the relationship of the parties to be noncontractual, finding that a "letter of intent" signed by defendant and containing "open terms essential to a contract of this nature, did not

constitute a contract but was merely an expression of agreement to enter a contract embodying more specific terms * * *." Testing the propriety of this ruling requires a careful historical examination of the relationship of the parties.

Contact between the litigants sprung from the turmoil surrounding the preparations for the opening of the 1964 New York World's Fair. Holterbosch, an American importer and distributor of Lowenbrau beer, was granted the franchise to operate the Lowenbrau Pavilion at the Fair. Final approval of this award was given on or about January 15, 1964 and contemplated an April 15, 1964 opening. This was the last major pavilion awarded, making time essential in all of defendant's considerations.

In aid of this enterprise defendant engaged a metropolitan-based industrial design consultant, Becker & Becker Associates, to formulate a feasible production plan for serving the required beer and, as a desired adjunct, platters of German food. As stated by defendant, the goal of both Lowenbrau and Holterbosch was the "quality concept of merchandising."

The Raytheon Corporation, knowing the Becker firm's privy role and eager to market their microwave concept of cooking, suggested plaintiff's name to Becker as one able to discharge the culinary requirements of the Lowenbrau Pavilion. Thus approached by Becker, plaintiff on March 10, 1964 entered into preliminary negotiations with the consultant regarding the feasibility of the Raytheon microwave cooking concept as related to the superior quality of food desired by defendant. Briefly, microwave preparation depends upon platters of food prepared and frozen at a central commissary and stored at the place of distribution and/or consumption. Receiving an order for food, the vendor places the frozen, nearly "done" food platter into a Raytheon microwave oven, which "reconstitutes" the frozen food to the desired degree of "doneness." The unit then may be served to the customer. The direct microwave primarily heats, but also serves as a minimal cooking agent bringing the platter

to the desired temperature and "doneness" simultaneously. The entire process of reconstitution is completed in a matter of seconds or minutes, depending on the nature and state of the stored units.

At the March 10, 1964 meeting Becker and another employee of the planning firm reviewed with approval ten general food samples submitted by Graulich. Defendant Holterbosch did not personally attend this initial meeting. Informed of defendant's needs, plaintiff redesigned the samples and presented eight platters at a second meeting held on March 17, 1964. This was attended by two Becker employees, Holterbosch, a chef from a German-based steamship company, Graulich and an employee of plaintiff corporation.

Defendant was impressed by six of the samples, recalling at trial that "the food was good, the quality was obvious. It was well prepared." From this date defendant was committed to the microwave concept of satisfying his desire to complement the Lowenbrau beer with an appropriate German cuisine of high quality.

The samples presented and approved on March 17, 1964 were prepared in the Graulich commissary at Port Elizabeth, New Jersey, by plaintiff's employees and were presented to defendant at the Raytheon office in New York City. The operation was agreed upon, with the initial delivery set for April 15, 1964. Daily preparation was to be based on the orders transmitted by defendant to plaintiff's commissary, with daily delivery of the orders made between midnight and 8 A.M. Consumption, theoretically, was to be on the day of delivery. Although the number of units was to fluctuate in relation to the many variables of the operation, the figure of 1,000,000 units was used in estimating the tentative demand for the initial year. Service of the food was to be made on specially designed and colored plastic platters which were required by defendant.

Before confirming basic purchases of raw food products, plastic platters, storage trays and transportation dollies, plaintiff requested of defendant a deposit of $50,000 as a

contract security. Noting its already large investment, and finding the request unacceptable, defendant cited plaintiff's obligation to bear some of the business risk attendant to ventures of this type.

Plaintiff then submitted a letter of general intention, dated April 1, 1964, requesting defendant's signature as approval. This letter purported to be an interim agreement demonstrating the bona fides of the parties to be bound until a formal contract documenting the specifications could be executed at a later date. Defendant signed the letter in plaintiff's presence, but before the signing a "rider" was incorporated stating that the letter indicated "intent only." It also reiterated the desire for an early drafting of the menu specifications, and provided for a cancellation clause in the event the product fell below the established standards.

In reliance on this agreement plaintiff contracted with suppliers for platters, trays and dollies, which, coupled with labor expenses, totaled $29,937 after adjustments. This sum, plus a projected profit figure of $35,950, was claimed by plaintiff as the amount of damages in its suit.

Returning to the chronology of events, plaintiff, after purchasing its component materials, established a production line commissary at the Jamaica City, Long Island, plant of Met Provisions, where the operation was to be supervised by plaintiff's personnel. This change of commissary site was made in an effort to comply with the Fair requirements of union labor and federal food inspection. A Long Island commissary had the additional delivery advantage of neighboring the Fair. Met also directly supplied plaintiff's raw food product for this venture, as it had, indirectly, through a New Jersey distributor for enterprises in the past. Plaintiff's production of deliverable product awaited only defendant's order.

The delayed and muddled opening of the Fair brought the parties into daily, and at times even hourly, contact. Postponements followed premature orders until a firm order for April 23, 1964 was placed by Mr. Leigh, an employee of

Becker & Becker. Upon delivery the members of defendant's organization were stunned by the product and complained immediately that the tendered units did not, in any way, match the contract samples. Rejecting this 955-unit installment as unacceptable, defendant described the food as "bland," unpresentable, tasteless and "just wasn't the type of food that we could sell." Notwithstanding this low grade delivery, defendant, obligated to the Fair to serve food and committed in theory to the Raytheon ovens, conferred with the equally dissatisfied plaintiff in seeking to improve the quality standard of the product to the point where it would be acceptable. Plaintiff's effort to improve the quality of the units was aided by Becker and defendant's pavilion personnel manager, Mueller, as well as the special foods chef from the "VIP" section of defendant's exhibit.

The second delivery, made on April 25, 1964, was likewise unacceptable. Of the 2520 units delivered, between 500 to 700 were distributed among the employees and patrons of the exhibit for a fast reaction. The complaints in response to the food were many and varied. Defendant, describing the sources of unfavorable comment, stated that the sauerbraten was dry and the gravy, pasty and unpalatably "gooey," surrounded rather than enveloped the meat. The knockwurst platter suffered similarly, being dry and comparing unfavorably with the standards established by the samples. Generally, defendant complained that the food was simply not "German food" and as such was unacceptable for the Lowenbrau Pavilion.

Following the failure of the second delivery Holterbosch claimed that plaintiff took no further curative measures, while plaintiff protested that defendant was "not available" following the second and last delivery of April 25, 1964. Graulich stated that he was told through Becker that plaintiff's food would be unsuitable for the Lowenbrau Pavilion. Becker, affirming the nonconformity of the deliveries, denied terminating the relationship and insisted that such an act was beyond his authority as an agent.

Hellmuch Laufer, defendant's pavilion factotum, affirmed hearing Graulich verbally acknowledge Holterbosch's complaints. Laufer agreed that the second delivery was qualitatively no different than the first, stressing that plaintiff's efforts to cure the unpalatable food failed. This witness, joined by Mueller and the "VIP" chef, converted the microwave cooking area into a conventional kitchen using pot burners to successfully prepare the food served for the duration of the Fair.

The trial court on these facts determined the relationship of the parties to be noncontractual. Our review of the relevant legal principles indicates that this characterization was improper. The analysis of the pertinent issues is divided into four parts, the first of which relates to the choice of law.

Noting the presence of diverse jurisdictions (New York and New Jersey) the trial court properly made New Jersey's jurisprudence its choice of law since no pleading or notice of foreign law was made at trial by either party. Leary v. Gledhill, 8 N.J. 260 (1951); Donnelly v. United Fruit Co., 75 N.J. Super. 383, 397 (App. Div. 1962), affirmed 40 N.J. 61 (1963). Since the trial dates antecede the adoption of the New Jersey Rules of Evidence (September 11, 1967), these rules are negatively considered in determining them inapplicable. According to New Jersey law the status of the parties and the effectiveness of the April 1, 1964 instrument must be construed under the relevant sections of the Uniform Commercial Code adopted prospectively in this State from January 1, 1963, N.J.S. 12 A:10-106.

Plaintiff asserts that the April 1 letter of intention contractually bound defendant and defendant became liable to plaintiff for the damages resulting from a breach of that agreement. In response defendant, denying the allegations of the complaint, alleged that the "letter of intention" was not an enforceable agreement since it contemplated the subsequent execution of a formal contract. Alleging that plaintiff breached ...

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