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PRESIDENTIAL MOTOR YACHT CORP. v. PRESIDENT MARINE

November 29, 1990

PRESIDENTIAL MOTOR YACHT CORPORATION, Plaintiff,
v.
PRESIDENT MARINE, LTD., Defendant


Stanley S. Harris, United States District Judge.


The opinion of the court was delivered by: HARRIS

 Background

 This is an action for breach of contract. Plaintiff Presidential Motor Yacht Corporation (PMYC) is a Maryland-based wholesale distributor of motor yachts formed in late 1986 or early 1987 as the result of a merger between two yacht distributors, at least one of which had regularly purchased yachts from defendant President Marine, Ltd. (PML), a Taiwanese manufacturer of motor yachts.

 PML granted PMYC the exclusive right to import, sell, and deliver its yachts in the United States (except for Washington and Oregon) and the Caribbean in return for PMYC's promise to purchase a minimum number of boats between 1987 and 1991, according to a December 1986 exclusive dealership agreement. Two conditions attached to the dealership agreement: (1) that PMYC's predecessors were to complete their merger by December 31, 1986, and (2) that PMYC was to have sufficient credit to support the agreed-upon order rate at the completion of the merger. The agreement would become null and void if either condition was not met.

 Following this agreement, disputes arose between PML and PMYC concerning PMYC's ability to purchase the PML boats which it had agreed to buy, PMYC's ability to compensate PML for currency fluctuations between Taiwanese and American dollars as specified in the agreement, and PML's obligation to perform warranty work on PML yachts sold to PMYC customers. On May 30, 1988, PML's Managing Director, Eddie Yeh, notified PMYC that both conditions of the 1986 agreement had been violated and that the agreement therefor was null and void. In the May 30 notification, PML cataloged grievances concerning PMYC's performance under the contract and informed PMYC that it was no longer an exclusive distributor of President Marine yachts.

 In a reply fax dated June 6, William Poteat, president of PMYC, maintained that both conditions of the December 1986 agreement had been satisfied, and rejected PML's contention that the agreement was null and void. According to Poteat's fax, PML's additional grievances were not grounds for nullifying the agreement. Further, Poteat complained about PML's performance under the contract.

 Poteat's June 6 fax was the last direct communication between PMYC and PML until more than three months later. On September 13, 1988, PML's Yeh sent a fax to Poteat reiterating his belief that the December 1986 agreement was null and void, rejecting Poteat's June 6 contention that the agreement was still operative, and threatening a lawsuit. The September 13 fax was sent despite the fact that (1) Karl Von Kirchoff had replaced William Poteat as president of PMYC in the middle of July 1988, and (2) that negotiations concerning a settlement agreement between PMYC and PML had been ongoing since June 1988 and appeared close to completion around the time the fax was sent.

 Beginning in June 1988, Ronald Furfiord, the only authorized PML dealer in the United States other than PMYC, began to act as an intermediary between PML and PMYC. According to Furfiord, PMYC's Poteat asked him in the beginning of June to intervene with PML to see if he could help effect a resolution of PMYC's and PML's disputes. *fn1" Furfiord, however, had some 10 days earlier helped to draft, and then reviewed, PML's May 30 termination and nullification notice to PMYC. Furfiord did not disclose that prior role to Poteat.

 Between June and October 1988 PMYC and PML through Furfiord drafted several settlement agreements. The agreement eventually evolved into a two-part document. Agreement #1 attempted to resolve ongoing financial disputes tied to currency fluctuations and warranty claims. Agreement #2 would have transferred PMYC's exclusive dealership rights to sell PML boats back to PML in return for a percentage of PML sales in PMYC's former United States' sales territory. *fn2"

 During negotiations concerning these agreements, PMYC discovered that PML had arranged to deliver two PML boats to non-PMYC distributors. PMYC apparently did not take any legal action against what it perceived to be a violation of its exclusive distributorship based on the alleged representations of Furfiord that PMYC and PML were in agreement on settlement terms, and that signing of a binding document to that effect was imminent.

 On September 19, 1988, PML's Yeh sent his own version of the agreement to Furfiord for comments. Furfiord sent his initial comments back to Yeh the same day. The next day Furfiord faxed PMYC's Von Kirchoff his latest draft of the agreement. After exchanging draft versions, PMYC and Furfiord both signed a document, believing it to be a final version of the agreement. On September 22, Furfiord sent this partially executed finalized proposed agreement to PML's Yeh. Meanwhile, Yeh had left Taiwan September 20 to attend to business in Europe. Because either he did not or could not locate a fax machine, Yeh did not receive a copy of the partially executed agreement until he left Europe and arrived in the United States.

 Yeh did not sign the agreement upon receiving it in the United States. After attending a boat show in Florida, Yeh traveled to the District of Columbia where he arranged a meeting with PMYC's Von Kirchoff. At that meeting, Yeh refused to sign the agreement. During a meeting the next day, Von Kirchoff served Yeh with process in this case.

 According to PMYC, the version drafted by Yeh (which he agreed to sign) and the later version Yeh refused to sign did not differ materially. PML, on the other hand, contends that language in the partially executed September 22 agreement contained provisions concerning warranty obligations and other items which were not acceptable. Consequently, PML argues that there was no mutual assent and no agreement. PMYC contends that ...


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