The Franchise Memorandum

A federal court in Pennsylvania granted a manufacturer's motion for summary judgment on a distributor's breach of contract claim in Precision Industrial Equipment v. IPC Eagle, 2016 WL 192601 (E.D. Pa. Jan. 14, 2016), finding that the claim was barred by the statute of frauds. Precision, a seller and servicer of industrial and commercial cleaning and maintenance equipment, had entered into an oral agreement with IPC to market and distribute IPC's products. Precision alleged that during their discussions, IPC agreed not to sell directly to any of Precision's customers. When a dispute arose over IPC's direct sales to a national account that previously did business with Precision, Precision brought suit alleging breach of contract and various state law tort claims.

The court held that Precision's breach of contract claim was barred by Pennsylvania's statute of frauds, which prohibits the enforcement of any contract not memorialized in writing for the sale of goods exceeding $500. While Pennsylvania law recognizes exceptions to the statute of frauds, the court determined it inapplicable in this case. One exception applies when the party against whom enforcement is sought admits a contract for sale was made. A contract is enforceable under this exception only with respect to the quantity of goods sold between the parties. Under another exception, known as the part performance exception, the statute of frauds is unenforceable when payment has been made or accepted. Here, the court considered both exceptions and determined the agreement was only enforceable as to the sale of goods between Precision and IPC and not what Precision was trying to enforce against IPC.