2591028 Ontario Limited v. Advacare Inc.

Background

The dispute involved an alleged breach of a contract for SciCam Optim 1 Wipes and SciCam 33TB Wipes. Between August 21 and August 24, 2020, Ari Brown, Advacare's President, and Gabriel Kalfa, Focus Global's Director of Sales, formed the agreement through WhatsApp messages. The original agreement called for 120,288 units at $31.50 per unit, for a total price of $3,789,072. Brown sent a 10% deposit on August 27, 2020.

Some goods were delivered on time, but the COVID-19 pandemic delayed delivery of the remaining goods. The parties then modified their agreement: Advacare would accept the delayed goods at $25 per unit. Kalfa confirmed the revised price, and Brown asked him to update the invoice. Kalfa also applied $125,000 of the original deposit to another order the parties were working on.

In October 2020, Brown expressed concern that market prices had fallen below the modified contract price. He asked whether someone else could take over the order or whether the price could be renegotiated. Kalfa responded that the price was fixed under the amended agreement and that the order had been allocated to Advacare. Ontario shipped the goods under the revised schedule, but Advacare refused to accept them or pay the remaining balance.

Claims and Motions

Ontario asserted claims for breach of contract, promissory estoppel, negligent misrepresentation, and account stated. It moved for summary judgment on its complaint and sought dismissal of Advacare's counterclaims. Summary judgment is appropriate when the evidence shows that no genuine dispute over an important fact requires a trial and the moving party is entitled to judgment under the law.

Court's Analysis

The court held that the parties had formed a valid contract. Kalfa made an offer concerning the goods, Brown accepted it, and the parties later agreed on the quantity and price. The court also found that the parties validly modified the contract by agreeing to delayed delivery in exchange for a reduced price. Brown stated that he would accept the delayed goods at $25 per unit, Kalfa confirmed the change, and Brown requested and received an updated invoice.

The court held that Ontario adequately performed the modified agreement. Although delivery was delayed, the delay was addressed by the agreed modification. Advacare breached the contract by refusing to accept the goods and refusing to pay the remaining balance, which Ontario identified as $2,174,266.80. Ontario also alleged that it had been unable to fully reduce its losses because it sold some goods at a loss and could not sell others before they expired.

Advacare argued that Ontario breached an implied warranty that the goods would be suitable for ordinary sale because Ontario apparently did not file a required notice of arrival with Customs and Border Protection. The court distinguished between the regulatory requirements. It found that the goods were registered with the Environmental Protection Agency and properly marked, making them legally saleable in the United States. Although the goods apparently were not detained at the border, they were delivered to Advacare and could be resold. The court therefore found no breach of the implied warranty of merchantability and no remaining factual dispute that prevented summary judgment.

The court rejected Advacare's breach-of-contract counterclaim. It found that the alleged failure to file the import notice did not make the goods unsellable and that Advacare could not cancel the contract merely because the contract did not expressly state that cancellation was prohibited. The court also rejected and dismissed Advacare's negligent-misrepresentation counterclaim because the goods were merchantable and properly registered.

Disposition

The court granted Ontario's motion for summary judgment as to its breach-of-contract claim. Because the court found a breach of contract, it dismissed Ontario's promissory-estoppel claim. It also dismissed Ontario's negligent-misrepresentation and account-stated claims, finding that those claims were not appropriate on these facts. Advacare's counterclaims were dismissed.

The court stated that liability had been determined but damages remained open. It referred the damages issue to United States Magistrate Judge Ona T. Wang for determination, after which the matter would return to Judge Hellerstein for entry of judgment. The Clerk was directed to terminate ECF No. 73.