Garden Ridge v. Advance International

403 S.W.3d 432 (2013)

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Garden Ridge v. Advance International

Texas Court of Appeals
403 S.W.3d 432 (2013)

  • Written by Rose VanHofwegen, JD

Facts

Before the holiday season, home-décor store Garden Ridge L.P. (plaintiff) ordered lighted inflatable snowmen from vendor Advance International, Inc. (Advance), owned by Herbert Feinberg (defendants). Garden Ridge ordered 3,500 eight-foot and 750 nine-foot snowmen waving a “Merry Christmas” broom. Garden Ridge planned to sell the eight-foot snowmen at half price during a one-day Thanksgiving sale and printed an advertising circular with a photo and price. Five days beforehand, Garden Ridge discovered that Advance had sent eight-foot snowmen holding a banner instead of waving a broom. Garden Ridge sold the nine-foot waving snowmen at the promotional price instead, and both versions sold well without customer complaints. Under the liquidated-damages provisions in the parties’ contract, Garden Ridge assessed chargebacks against Advance equal to the entire merchandise cost plus freight for both heights of snowmen, totaling nearly $80,000. Garden Ridge also assessed chargebacks on other shipments for mislabeling or not marking cartons sequentially and sending short or incomplete orders, totaling over $13,000. When Advance demanded payment, Garden Right sued for breach of contract and declaratory judgment that it had complied with the contract. Advance countered that the chargeback provisions were unenforceable penalties. At trial, Garden Ridge representatives testified Garden Ridge made $113,000 profit on the snowmen—all it would have made selling the waving version—and had not suffered any actual harm from other compliance violations. An executive testified the contract set liquidated damages because actual damages were difficult to calculate and that the amount represented reasonable estimates. A buyer testified that Garden Ridge could charge back 100 percent of costs plus freight even for snowmen with the wrong-color buttons, always fully charged back for substitutions, and routinely kept merchandise without paying for it while charging vendors for freight. Finally, Garden Ridge’s CEO conceded that the chargebacks were the “penalty” for not complying with its rules. The jury found in favor of Advance. Garden Ridge appealed.

Rule of Law

Issue

Holding and Reasoning (Christopher, J.)

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