In June 1990, the debtor entered into a purchase/supply agreement with a group of stores operating under the trade name, "Cheap John's".
What is perhaps most strange in this case is that the debtor and Cheap John's never utilized purchase orders and as originally drafted the L/C did not require presentation of a purchase order.
Apparently in the latter part of 1994, Cheap John's was in financial trouble and failed to pay for goods it had purchased from the debtor.
In order to get around the L/C's requirement that the debtor present a purchase order as part of its drawings under the L/C, the debtor on four different occasions submitted one of the following documents: The original purchase/supply agreement; An affidavit from the debtor's vice president setting forth the procedures it had used to fill open purchase orders; A July 16, 1992 letter from Cheap John's to the debtor, some 2-1/2 years before the L/C drawings, authorizing treatment of electronically transmitted purchase orders by Cheap John's to the debtor as "authorized purchase orders"; and A document dated April 15, 1994 which purportedly amends the July 16, 1992 letter (which is titled "Service Agreement for Cheap John's/Wise Buys").
While a purchase order could take any number of different forms, Chemical did not have to be familiar with the practices of the debtor and Cheap John's and/or what constitutes a purchase order based on the customs and practices of their industry.
Robinson, a 27-year-old former head of grocery for Sinew Corp., operator of Cheap John
and Wise Buy discount stores, says prices at the Advantage stores will beat those at traditional supermarkets by 20% to 25%.