Hornell Brewing Co. v. Spivy

Facts:

Plaintiff, a supplier of alcoholic and non-alcoholic beverages, including Arizona iced tea, was approached by defendant about him wanting to become a distributor for plaintiff. Defendant was known as a wealthy and successful beer distributor, so plaintiff orally gave defendant the exclusive right to distribute Arizona products in Canada. This arrangement was later written when defendant requested a letter to secure financing with, but the details of the arrangement were not included.

In a year, defendants' unpaid invoices totaled over $100,000 and their check to pay part of this had bounced. Defendant sent plaintiff a copy of a letter saying that he had been approved for $1.5 million of credit from Vanguard, but this credit never materialized.

Defendant arranged for plaintiff's chairman to speak with Metro, a factoring company, and plaintiff believed it to be a bank that would provide defendant with a line of credit. Plaintiff then offered defendant $300,000 in credit once the previous balance was paid off. However, defendant never paid off the arrears. Defendant instead told plaintiff to contact Metro.

Plaintiff contacted Metro and said that it would resume selling to defendant and offer him up to $300,000 in credit if Metro paid the $79,316.24 arrears by May 2. Metro paid on May 9, and defendant immediately ordered ~$400,000 more of product afterwards. Plaintiff however learned that defendant's warehouse was empty and that he had no staff or trucks for distribution whatsoever but was merely a sham.

Plaintiff wrote to defendant, offering up to $300,000 in credit based on the $1.5 million of credit defendant was approved for, but plaintiff required proof thereof. Defendant did not respond at all. Plaintiff began to discuss with defendant a termination of their agreement, but defendant did not sign such a proposed agreement. Plaintiff therefore sued.