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Around World Merchandisers Inc. v. Rayovac Corp.

Decided: November 5, 1990.

AROUND THE WORLD MERCHANDISERS, INC., A NEW JERSEY CORPORATION, PLAINTIFFS,
v.
RAYOVAC CORPORATION, A FOREIGN CORPORATION, H.J. (JERRY) GUTTMAN, CHARLES GILDEA AND STEVEN FANTUS, DEFENDANTS



Menza, J.s.c.

Menza

Defendant moves for summary judgment. The issue in this case is whether the statute of frauds bars the enforcement of an oral contract between a manufacturer and a middleman engaged by the manufacturer to solicit and service customers for the sale of the manufacturer's product. There are no New Jersey cases which have addressed this precise issue.

Defendant is a manufacturer of batteries. Plaintiff is a wholesaler of general merchandise. In order to promote the sale of its batteries, defendant instituted a marketing program known as the "checkout merchandising program." This plan provided that a retailer who agreed to participate in the program would receive, at no charge, battery display racks and a quantity of batteries for the initial stocking of the racks. In order for the retailer to receive the free racks and the free quantity of batteries, he would first have to agree to display the batteries in the display racks for a period of four years. In the event it failed to do so, the retailer agreed to pay a termination fee to defendant. The fee would be 100% of the value of the free batteries if the retailer cancelled within the first year, 75% if he cancelled in the second year, 50% in the third year and 25% in the fourth year.

The program also included wholesalers. The wholesalers were to obtain orders from retailers for the sale of defendant's batteries which would then be shipped to the retailer by the manufacturer. For each initial rack of batteries placed by the wholesaler in a retailer's store, the wholesaler would receive, at no charge, half as many batteries as were shipped to the participating retailers. The program contemplated that the

wholesaler would then use their "free batteries" to restock the batteries sold by the retailer. The wholesaler was then responsible for servicing the accounts by insuring that the racks were properly displayed and replenished over the life of the contract. If the retailer terminated the program at anytime within a four-year period, the wholesaler would be responsible for the appropriate percentage of the termination fee. On May 11, 1987, the parties entered into an oral wholesaler agreement. Plaintiff thereafter obtained numerous orders to place defendant's batteries in various retail stores. Defendant refused to fill the orders contending that plaintiff failed to abide by certain terms of the oral agreement. Plaintiff has brought suit for breach of contract in which he seeks the money equivalent of the free batteries to which he claims he was entitled under the agreement with defendant.

Defendant contends that the statute of frauds bars plaintiff's claim because the oral agreement made by the parties involves the sale of goods for the price of $500 or more. Plaintiff responds that the statute of frauds is inapplicable because the agreement was for services and not for the sale of goods.

The New Jersey statute of frauds, N.J.S.A. 12A:2-201, provides:

(1) . . . a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.

Was the agreement between defendant manufacturer and plaintiff middleman one for the sale of goods or was it solely an agreement in which plaintiff agreed to act on behalf of defendant in order to sell its goods to retailers and thus a contract of service?

Defendant makes two arguments that the agreement was for the sale of goods. Defendant argues that the agreement falls within the statute of frauds regardless of whether title vested

in plaintiff, because the thrust and purpose of the agreement was for the sale of goods. Defendant also argues that the contract contemplated a sale of goods by defendant directly to plaintiff ...


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