Hornell Brewing Company is a supplier and marketer of alcoholic and nonalcoholic beverages, including the popular iced tea drink, Arizona. In 1992, Stephen A. Spry and Don Vultaggio, Hornell’s chairman of the board, made an oral agreement for Spry to be the exclusive distributor of Arizona products in Canada. The initial arrangement was an oral agreement, and in response to Spry’s request for a letter that he needed to secure financing, Hornell provided a letter that confirmed the distributorship.
During 1993 and 1994, Hornell shipped beverages on 10-day credit terms, but between December 1993 and February 1994, Spry’s credit balances grew from $20,000 to $100,000, and a $31,000 check from Spry was returned for insufficient funds.
In March 1994, Hornell demanded that Spry obtain a line and/or letter of credit to pay for the beverages to place their relationship on a more secure footing. An actual line of credit never came about. Hornell did receive a partial payment by a wire transfer on May 9, 1994. Spry ordered 30 trailer loads of “product” from Hornell at a total purchase price of $390,000 to $450,000. Hornell learned from several sources, including its regional sales manager Baumkel, that Spry’s warehouse was empty; that he had no managerial, sales, or office staff; that he had no trucks; and that his operation was a sham.
On May 10, 1994, Hornell wrote to Spry, telling him that it would extend up to $300,000 of credit to him, net 14 days cash “based on your prior representation that you have secured a $1,500,000 U.S. line of credit.” Spry did not respond to this letter. After some months of futile negotiations by counsel, Hornell filed suit. Has there been a breach? What are the parties’ rights? [Hornell Brewing Co., Inc. v Spry, 664 NYS2d 698 (Sup Ct)]