Motion Picture Herald (Nov-Dec 1934)

December 15, 1934 Motion Picture Herald 15 LATE DECISIONS IN CONTRACT SUITS By LEO I PARKER Reviewing new cases involving recent interpretations of law concerning contracts of special interest to theatre management A FEW DAYS ago I received a letter from a theatre owner, as follows: "I have been informed that recently the courts have been rendering decisions in contract cases which contradict old decisions. Is this true, and if so what is the reason? Also, please give me details of a few of the latest higher court cases that have come about because of theatre contracts." The answer to the first paragraph of this letter is that some of the most recent higher court decisions have varied from the older ones. Probably this change may be the result indirectly of the present abnormal business conditions during which many news laws, rules and regulations have been enacted affecting every industry. It is well known that monopolistic practices and price fixing were restricted by the Sherman Act of 1890 and the later Clayton Anti-Trust Law. Section 1 of the Sherman Anti-Trust Act provides in part that "every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce, among the several states or with foreign nations, is hereby declared to be illegal." Section 2 of this law provides that "every person who shall monopolize, or attempt to monopolize, any part of the trade or commerce among the several states, or with foreign nations, shall be guilty of a misdemeanor." The Clayton Act provides that it is unlawful for any person to enter into a contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption or resale within the United States or any territory thereof, if any provision of the contract may be interpreted to mean that either of the contracting parties agree to substantially lessen competition or intend to create a monopoly in any line of commerce. FORMER AND PRESENT LAW OBVIOUSLY any combine or contract by which parties agree to perform certain acts which tend to eliminate competition, and uphold the price for a commodity, has been held to be illegal. For example, in the leading case of Eastern States v. United States (234 U. S. 600, New Yoric) the owners of the same kind of business organized an association and reported to the secretary, for distribution among its members, the names of wholesale dealers who sold directly to consumers. These wholesalers were blacklisted and all of the members of the association refused to transact business with them. This was held to be a violation of the Sherman Act. Also, in American Column v. United States (257 U. S. 377, Tennessee), an association adopted a plan for the gathering from its members daily, and disseminating among them weekly, reports of all sales and shipments actually made, giving the prices, names and addresses of the purchasers, the kind, grade and quantity of the commodity sold and shipped. Its plan also provided for a monthly report giving details of the production of its members during the previous month. Price lists were sent regularly to the members. Monthly meetings were held at which the extensive interchange of reports were supplemented by further exchange of information as to production, costs, etc., at which active and concerted efforts were made to suppress competition by the restriction of production. Particularly in view of the fact that the secretary of the association communicated regularly with the association members and urged curtailment of production and increase of prices, the Supreme Court of the United States held this concerted effort to be unlawful. Recently, however, the restrictions of these two United States laws have to a great extent been raised with a view of increasing commodity prices, increasing wages and improving unemployment conditions. Obviously, many other old established laws have been changed directly and indirectly as a result of these same reasons. PRESENT REQUIREMENTS OF VALID CONTRACTS AFTER A COMPLETE review of the most recently decided higher court decisions it may be held that on this day a contract is valid providing ( 1 ) the obligations assumed by the contracting parties do not violate an industrial code agreement, or a valid United States emergency regulation, or other effective state or city law not superseded by recentlv enacted emergency laws or regulations; 2) the obligations of both parties are definitely fixed ; 3) both parties have proper authority to make the contract and are of legal age; 4) the object or purpose of the contract is legal in consideration of presently effective old laws and new laws and regulations ; 5) neither party practiced fraud to induce the other to make the contract; 6) the period of the contract is definite; 7) both parties are mutually obligated; and 8) the quantity, quality and price is definite. Another important rule of the law is that all contracts are void where only one of the parties promises to perform a service or obligation. A contract is void which has no valid consideration, as each party necessarily must be obligated to perform a definite service. BLOCK SELLING CONTRACT LEGAL THE COURTS recently have held that the method of distribution by sale or lease, or the practice of selling through a common distributor, is open to every producer, large or small, to the extent of his pictures produced. Moreover, in the absence of combination or agreement, the fact that the method of negotiation tends to exclude other independent producers is of itself insufficient to establish any probable tendency toward monopoly. CASE For example, in Federal Trade Commission v. Paramount Famous-Lasky Corporation (57 F. [2d] 152, New York), it was shown that complaint was made of the "block booking" system of leasing films by a producer and distributor to exhibitors. Under such plan films were offered in blocks only. After hearing all of the testimony the Federal Trade Commission rendered a judgment against the producer and distributor directing it to cease and desist "from leasing or offering to lease for exhibition in a theatre or theatres motion picture films in a block or group of two or more films at a designated lump sum price for the entire block or group only and requiring the exhibitor to lease all such films or be permitted to lease none." However, the higher court said : DECISION "Where a practice is not inherently unlawful and unfair, and its legality depends upon its effect, a finding that it has a dangerous tendency unduly to hinder competition or create a monopoly, must be based upon its effect as demonstrated upon the experience of competitors. . . . The mere fact that a given method of competition makes it difficult for competitors to do business successfully is not of itself sufficient to brand the method of competition as unlawful and unfair." Also, it was argued that since the pro