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AIRS INT'L, INC. v. PERFECT SCENTS DISTRIBS.

October 17, 1995

AIRS INTERNATIONAL, INC., Plaintiff,
v.
PERFECT SCENTS DISTRIBUTORS, LTD., Defendant.



The opinion of the court was delivered by: INFANTE

 I. Introduction and Background

 This is an action involving agreements for distribution of perfume products in Canada. Plaintiff Airs International, Inc. ("Airs") alleges that defendant Perfect Scents Distributions, Ltd. ("Perfect Scents") breached the parties' 1993 distribution contract. Perfect Scents has "cross-claimed" against Airs and its president, Stephen Marcus, *fn1" alleging that such contract was superseded by a 1994 agreement between the parties, and that Airs has breached this superseding contract. Perfect Scents now moves for summary judgment, contending that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law on both Airs' claims and its cross-claims.

 A. Undisputed Facts

 Airs is a California corporation with its principal place of business in Watsonville, California. Perfect Scents is a Canadian corporation with its principal place of business in British Columbia. The amount in controversy exceeds $ 50,000. *fn2"

 On March 31, 1993, the parties entered into a written contract entitled "Exclusive Distribution Contract" (the "1993 contract"). The 1993 contract gave Perfect Scents the right to distribute Airs' perfume products in Canada. *fn3"

 On August 18, 1994, Airs advised Perfect Scents that the latter had breached the parties' 1993 contract and demanded that Perfect Scents cure its default within a specified period of time. *fn4" Shortly thereafter, the parties agreed to terminate the 1993 contract and, on August 31, 1994, they entered into a written contract entitled "Resolution of Distribution Contract" (the "1994 contract"). *fn5"

 The 1994 contract pertinently provides:

 The 1994 contract was signed by Marcus both in his capacity as a principal of Airs and in his personal capacity as guarantor of Airs' obligations thereunder. *fn7"

 B. Airs' Allegations

 Airs alleges that Perfect Scents breached the 1993 contract, and that Airs lost approximately $ 20,000 from Perfect Scents' failure to purchase merchandise as specified under the contract prior to its termination, as well as an additional $ 95,000 worth of merchandise which Perfect Scents would have been required to purchase had the parties not prematurely terminated the contract. *fn8"

 Airs asserts that it would not have voluntarily terminated the 1993 contract but for the fact that Perfect Scents fraudulently induced Airs to enter into the superseding 1994 contract by falsely representing, both orally and in writing, that Perfect Scents

 
"(a) had cultivated some 140 active customer accounts in Canada and that it should have 200 such accounts by the end of 1994, (b) had aggressively and faithfully serviced those accounts, and (c) had projected Canadian sales of [Airs'] products in 1995 at $ 500,000". *fn9"

 Airs alleges that in actuality Perfect Scents

 
"(a) [had] only 85 or so active accounts (some 40 % less than that represented by [Perfect Scents]), (b) had not contacted some of those accounts in over a year, and (c) because of these inadequacies, could not reasonably expect anywhere near $ 500,000 in sales in 1995". *fn10"

 Airs claims that it is excused from performance under, and is entitled to rescind, the 1994 contract because of Perfect Scents' fraud. Airs intends the service of the summons and complaint to serve as notice of its intent to rescind and an offer to restore all consideration furnished by Perfect Scents. *fn11"

 Airs seeks $ 20,000 plus accrued interest in compensatory damages, $ 95,000 in punitive damages, and ...


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