Mass Cash Register v. Comtrex Systems

Citation: Mass Cash Register, Inc. v. Comtrex Sys. Corp., 901 F. Supp. 404 (D. Mass. 1995)(full-text).

Factual Background
Mass Cash Register sells, installs, and services electronic cash registers. Comtrex is a New Jersey corporation that manufacturer, markets, and distributes electronic cash registers used in the food service industry. In 1978, Mass Cash sold cash registers and POS equipment to Dunkin’ Donuts and serviced them.

During conversations between the Mass Cash and Comtrex, there was a “light discussion” on a dealer agreement including negotiations over a geographic region. Mass Cash required three things to be a dealer for Comtrex: (1) exclusivity with respect to specific geographic area encompassing Eastern Massachusetts, Eastern Connecticut, Rhode Island, and South New Hampshire, (2) training for Mass Cash personnel; and (3) Comtrex upgrade its software. Mass Cash order some POS terminals from Comtrex. Discussions continued through 1990.

Mass Cash realized Comtrex could fulfill the needs of Dunkin’ Donuts (a Mass Cash customer) and faxed Dunkin’ Donuts’ electronic cash register requirements to Comtrex. Mass Cash then expressed a desire to formalize a written agreement. The parties orally agreed that (1) Comtrex and Mass Cash would jointly fulfill Dunkin’ Donuts requirements; (2) Mass Cash would sell Comtrex’s products directly to Dunkin’ Donut; and (3) Mass Cash would purchase the equipment at a discount from Comtrex.

However, major issues were unresolved such as whether personnel from Mass Cash or Comtrex would have the responsibility for installation, the costs of service and the nature of a maintenance plan.

Comtrex and Dunkin’ Donuts entered into a relationship to develop software offering Mass Cash a limited role for commission. Mass Cash sued Comtrex for breach of contract, tortious interference with advantageous contractual relationships, unjust enrichment, fraud, and violation of Massachusetts unfair business practices statute. Mass Cash moved for summary judgment.

Summary judgment
To succeed on a motion for summary judgment, the moving party must show that there is an absence of evidence to support the non-moving party’s position. If the moving party shows there is an absence of evidence to support the non-moving party to establish the existence of a triable issue of fact could affect the outcome of the litigation and from which reasonable jury could find for non-movant. Mere allegations are insufficient to defeat a summary judgment motion; rather, the non-moving party must adduce specific, provable facts which establish that there is a triable issue.

Non-movants are required to submit evidence that would be admissible at trial to oppose a properly submitted motion for summary judgment. There must be sufficient evidence favoring the nonmoving party for the jury to return a verdict for that party. If the evidence is merely colorable or is not significantly probative, summary judgment may be granted.

Breach of contract
To recover damages in a breach of contract claim, the plaintiff must prove the existence of a valid binding agreement, defendant’s breach of that agreement and damages resulting from the breach. Whether a document constitutes a contract is a question of law. Where it is mutually understood that a promise is not legally binding, but rather intended to express a present intention, it is not a contract. When “parties contemplate the execution of a final written agreement”, a strong inference is made that they “do not intent to be bound by earlier negotiations or agreement until the final terms are settled.”

The dealer sales agreement did not constitute an enforceable contract between the parties. Comtrex sent Mass Cash various dealer sales agreement, none of which were signed by Mass Cash until January 16, 1991. The dealer agreement was not delivered in accordance with its terms or as required by law.

Parties do not become contractually bound until they mutually assent to bind themselves to an agreement. The language looking to execution of final written contract justifies strong inference that significant items on the agenda of the transactions are still open, and hence, that the parties do not intend to be bound. Where party’s letter hinged upon review and approval by a second party, the second party’s failure to assent to the writing was fatal to first party’s claim that the letter constituted a contract. Businessperson would be undesirably inhibited in their dealings if expressions of intent and the exchange of drafts were taken as legally binding agreements. There was no mutual assent by Mass Cash and Comtrex to the essential terms of an agreement, either during the telephone conversation or in a subsequent letter.

It is axiomatic that contract’s essential terms must be “sufficiently definite so that the nature and extent of the obligations of the parties” are ascertainable. While courts are powerless to write an entire contract, if its meaning can be discerned with reasonable certainty in light of the attending circumstances, the court will enforce it even where the agreement fails to specify durational term. Where the contract fails to specify durational term, it will be construed as one terminable at will be either party upon reasonable notice.

The Massachusetts’ Uniform Commercial Code (UCC) permits a court to consider the circumstances and background between the parties, and tier course of dealing to the extent that such evidence explains or supplements existing contractual terms. M.G.L.A c.106 § 2-202. Accordingly, the parties failed to agree on martial terms militates against the finding of contract under Massachusetts law where such essential terms as the geographic region for particular account, how the servicing of equipment would be handled, and how the parties would share in the service income remained unresolved and there was paucity of evidence concerning course of dealing between the parties which would supply these material terms.

To have a contract enforceable under Massachusetts law, the agreement need not reduced to writing unless required by Statute of Frauds. The Court must first determine whether there was an oral agreement on the essential terms of a contract regarding the Dunkin’ Donuts account. Article 2 of the UCC does not apply to the rendition of services.

Under Massachusetts law, the test for determining whether a hybrid contract for both goods and services falls within the purview of the UCC is “whether the predominant factor, thrust, or purpose of the contract (1) the rendition of service, with goods incidentally involved or is instead a transaction of sale, with labor incidentally involved. As the parties left open the question of which company would be responsible for servicing, and share in the profits from the sales.

Under the written confirmation exception to the Statute of Frauds, failure to answer a written confirmation of a contract within ten days of receipt is sufficient against both parties under the exception. M.G.L.A. c. 106 § 2-201. To satisfy the written confirmation exception to the Statute of Frauds found in the UCC, the writing must (1) evidence contract for sale of goods, (2) be ‘signed’ by the party to be charged, and (3) contain a quantity term. The letter failed to meet the requirements for the written confirmation exception. Although the purported agreement was not signed and specified a percentage of list price to be paid to party for the first 750 cash registers and lesser percentage for all cash registers over 750 the letter was devoid of any specific quantity term and instead contemplated the sale of an indefinite number of cash registers.

Under Massachusetts law, the doctrine of promissory estoppels may preclude the use of the Statute of Frauds in defense. In order for promissory estoppels to apply, there must be (1) representation or conduct amounting to a representation intended to induce a course of conduct on the party of the person to whom the representation is made; (2) act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made; and (3) detriment to such person as a consequence of the act or omission. An essential element under the promissory estoppels theory is that there is an unambiguous promise and that the party to whom the promise was made reasonably relied on the representation. Comtrex’s alleged promise that it would not cut out Mass Cash and deal directly with Dunkin’ Donut could not form a basis to support a promissory estoppels claim. Mass Cash failed to show that it relied on the promise to its detriment and its claim it lost its prior business as dealer to Comtrex’s competitor was not supported by evidence in the record.

In a claim of unlawful interference with contractual relations, the plaintiff must prove that he had a contract with a third party and the defendant “knowingly induced the third party to break that contract”. Additionally, the defendant’s conduct must be only intentional but “improper in motive or means, causing harm to the plaintiff”. Mass Cash does not offer any evidence of a contract between Dunkin’ Donuts and itself.

Under Massachusetts law, a claim of intentional interference with advantageous business relations requires a proof of four elements: (1) the existence of a business relationship or contemplated contract of economic benefit; (2) defendant’s knowledge of such relationship; (3) the defendant’s intentional and improper interference with that relationship’ and (4) the plaintiff’s loss of advantage as a direct result of the defendant’s conduct. Interference is not enough to support liability unless the inference “is wrongful by some measure”. Defendant’s liability may arise from improper motives or from the use of improper means. Thus, it is essential that the defendants acted without lawful cause.

Mass Cash’s claim for interference with advantageous business relationship is without merit. Mass Cash failed to direct the Court to any improper interference on part of Comtrex. Mass Cash failed to identify, aside from the contract between the parties, what damage it suffered as result of manufacturer’s conduct and Comtrex’s conduct in seeking certain assurances from potential customer merely furthered its interest as a competitor.

A court in equity generally may impose a constructive trust “in order to avoid the unjust enrichment of one party at the expense of the other where the legal title to the property was obtained by fraud or in violation of a fiduciary relation”. A constructive trust may also be imposed to avoid the unjust enrichment of one party at the expense of the other where information confidentially given or acquired was used to the advantage of the recipient at the expense of the one who disclosed the information. Mass Cash has presented no evidence of fraud, mistake, breach of fiduciary duty or breach of contractual duty.

Under Massachusetts law, an implied contract claim requires proof that measureable benefit was conferred by one party upon the other, reasonable person in other party’s position would have expected to pay for the services accepted, and the party furnished the services with the reasonable expectation of securing compensation from the other party. Similarly, quantum meruit permits the recovery in law for the fair value of services in the absence of contract.

The law creates an obligation under a quasi or implied contract theory “for the reasons of justice, without any expression of assent and sometimes even against a clear expression of dissent”. Considerations of equity and morality play a large part in constructing a quasi contract.

Where unenforceable contract is found, Massachusetts court permits quantum meruit recovery on the theory of unjust enrichment.

In Massachusetts, no implied contract will be found in the absence of benefit conferred. The existence of an implied-in-fact contract is a factual question for the jury. Comtrex repeatedly tried in vain to gain access to that account and even after negotiations fell apart, Comtrex offered fee to supplier for Mass Cash.

An action for fraud will lie where the defendant makes “a false representation of material fact with knowledge of its falsity for the purpose of inducing plaintiff to act thereon, and the plaintiff relied upon the representation as true and acted upon it to its damage. Fraudulent intent may be proved by statements made as of the party’s own knowledge, which is false, provided the thing stated is not merely matter of opinion, estimate, or judgment, but is susceptible of actual knowledge. Generally, “false statements of belief, of condition to exist in the future, or of matters promissory in nature are not actionable under Massachusetts law. To infer that deceit is at work any time contractual negotiations sour is untenable. Until all essential terms of the contract are settled, it cannot reasonably be said that there is meaningful intention which can be misrepresented. Mass Cash cannot maintain an action in fraud based on the state made by Comtrex where Mass Cash failed to demonstrate any reliance on the falsehood.

To fall within the purview of the Massachusetts unfair business practices statute, conduct between businesspersons must be within at least the penumbra of some common-law, statutory, or other established concept of unfairness and it must be immoral, unethical, oppressive, or unscrupulous. M.G.L.A. c. 93A §2(a). The complained of conduct must attain level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce. Mass Cash’s claim failed since the Court was unable to find tortuous or otherwise unscrupulous activity on the part of the manufacturer.

The District Court held that (1) supplier’s letter did not evince agreement as to material terms and thus was not an enforceable contract; (2) even if the parties had reached an oral agreement, the Statute of Frauds would have barred its enforcement; (3) lack of contract precluded claim for tortuous interference with advantageous contractual relationship; (4) claim for intentional interference with advantageous business relations was without merit; (5) disputed issues of material fact remained with respect to unjust enrichment claim; (6) question for jury existed as to claim of quantum meruit; (7) supplier failed to prove fraud; and (8) manufacturer’s conduct did not fall within the purview of Massachusetts unfair business practices statute.