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Unformatted text preview: Elan Weinreb August 28, 2000 Corporations Fowler v. Pennsylvania Tire Company (“PATire) 326 F.2d 526 (5 th Cir. 1964) Rule of Law: Where the terms and meaning of a contract are clear and not disputed, the contract is to be interpreted according to its language. Only in cases of ambiguity or potential bad faith dealings are the actions of parties scrutinized with regards to adherence to a contract. Case Facts: On May 27, 1960, PATire and Martin entered into a contract, whereby PATire agreed to deliver tires to the latter for resale at prices and terms fixed by Martin. This contract was termed a consignment contract, with title to the tires being expressly reserved to PATire. However, while monthly inventory reports were required, there was no provision for separation of the tires from Martin’s other tires. On April 17, 1962, Martin went bankrupt and files a voluntary petition in bankruptcy. On May 1, PATire filed a petition for reclamation of the tires, claiming that its transference of the tires to Martin was a consignment and not an absolute sale with a right of return. Therefore, the tires should not go to Fowler, the trustee in bankruptcy. The referee in bankruptcy denied PATire’s petition for reclamation, holding that PATire’s transference of the tires to Martin was an absolute sale with a right of return. His reasons: 1) The agreement between PATire and Martin was not recorded; 2) That no signs were posted, as provided for in the Agreement, which disclosed a relationship other than a sales relationship between PATire and Martin; 3) That the tires were not segregated from other merchandise, per the Agreement; 4) Martin ordered the tires without restriction instead of PATire controlling which tires were released to him; 5) Invoices indicated that tires were sold and shipped to Martin; 6) That no tires could be returned to PATire without express authority of PATire. The Agreement between Fowler and Martin expressly indicated that title remained with PATire and not with Martin when the tires were transferred to him. The Agreement also stated that Martin was a bailee. However, the Agreement also provides that its breach by either party is automatic cause for termination. Procedural History and Outcome: As noted, the referee in bankruptcy denied PATire’s petition for reclamation, holding that PATire’s transference of the tires to Martin was an absolute sale with a right of return. The District Court that heard this case reversed this decision, holding that the transference of tires was a consignment for sale, thereby allowing PATire to collect its tires. The court in this case affirmed the District Court, despite Fowler’s argument that the actions of the parties constituted an absolute sale and not a consignment....
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This note was uploaded on 02/14/2008 for the course LAW 7060 taught by Professor Haas during the Fall '07 term at Yeshiva.
- Fall '07