Summary
affirming judgment of district court that notice received within six months was unreasonable, although defendant-farmer failed to object to its contents in writing within 10 days
Summary of this case from Conagra, Inc. v. NierenbergOpinion
No. 41330.
Filed March 8, 1978.
Contracts: Uniform Commercial Code: Words and Phrases. Receipt of a written confirmation of an oral contract more than 6 months after the oral contract was made was not a receipt "within a reasonable time" as required by subsection (2) of section 2-201, U.C.C.
Appeal from the District Court for Kimball County: JOHN D. KNAPP, Judge. Affirmed.
Fred J. Hurlbut, for appellant.
O'Brien Huenergardt, for appellee.
Richard P. Nelson and William J. Morris, for amicus curiae.
Heard before WHITE, C. J., SPENCER, BOSLAUGH, McCOWN, CLINTON, BRODKEY, and WHITE, JJ.
Kimball County Grain Cooperative, plaintiff and appellant herein, brought this action against Earl Yung to recover damages for the breach of an oral contract to sell wheat. Plaintiff alleged that on July 26, 1973, the defendant orally agreed to sell it 15,000 bushels of wheat at the price of $3.10 per bushel for future delivery; that a written confirmation of the oral contract had been delivered to the defendant, who did not object thereto within 10 days; and that the defendant had breached the contract by failing to deliver the wheat on or before January 31, 1974. Plaintiff prayed for damages of the difference between the contract price and fair market price of 15,000 bushels of wheat on the date of the alleged breach. Defendant entered a general denial to the allegations of the plaintiff, and also raised the statute of frauds as a defense. Trial was had to the District Court for Kimball County, sitting without a jury.
The District Court found that the parties had entered into an oral contract as alleged by the plaintiff, but concluded that it was not enforceable under the statute of frauds applicable to sales of goods, under section 2-201, U.C.C. The findings of the trial court in support of this conclusion were that (1) the defendant had not signed any writing sufficient to indicate that a contract for sale had been made between the parties; (2) the defendant was not a "merchant" as defined in section 2-104, U.C.C., and therefore the "merchant exception" to the statute of frauds, subsection (2) of section 2-201, U.C.C., did not apply; and (3) even if defendant was a "merchant," the oral contract was not enforceable under subsection (2) of section 2-201, U.C.C., because the defendant had not received a written confirmation of the oral contract "within a reasonable time." The District Court dismissed plaintiff's petition. Plaintiff has appealed, contending that the trial court erred in holding that the oral contract was not enforceable under the statute of frauds. We affirm the judgment of the District Court.
Plaintiff, a grain cooperative, is in the business of buying grain from farmers and selling it to terminal grain elevators. Approximately 80 percent of its purchases from farmers are made under oral contracts. The farmer usually telephones the plaintiff and inquires about price, and then agrees to sell a specified amount of grain at the quoted price. It has been plaintiff's practice to draft a written contract shortly after the oral agreement is made with the farmer, and hold it for signature. The farmer then signs the written contract the next time he comes to plaintiff's elevator. The plaintiff has had no practice of mailing or otherwise delivering written confirmations of oral agreements to farmers, but relies on them to come to the elevator and sign the written contract.
On July 26, 1973, the defendant telephoned the plaintiff and orally agreed to sell it 15,000 bushels of wheat at the price of $3.10 per bushel for delivery in January 1974. In accordance with its practice, the plaintiff drafted a written contract and held it for defendant's signature, but the defendant did not go to the plaintiff's elevator and sign that contract. Although the plaintiff attempted, unsuccessfully, to telephone the defendant several times between September 1973, and January 1974, and remind him of the contract, the plaintiff made no attempt to deliver the written contract or any other writing to the defendant during that period of time. On January 30, 1974, plaintiff's general manager did deliver the written contract to the defendant. The defendant neither signed it, nor did he object to its contents in writing within 10 days after he received it. The defendant ignored plaintiff's subsequent requests to deliver the wheat, and never did deliver any amount of wheat to the plaintiff under the oral agreement of July 26, 1973.
Subsection (1) of section 2-201, U.C.C., provides that a "contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker." This provision applies to the contract in the present case because crops are included within the definition of "goods" in section 2-105, U.C.C., and the contract price exceeded $500.
Subsection (2) of section 2-201, U.C.C., which establishes an exception or modification to the rule set forth in subsection (1), provides: "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received." The parties agree that unless the provisions of subsection (2) apply in this case, the oral contract in question is unenforceable under subsection (1). Under the facts of this case, subsection (2) can only apply if the defendant was a "merchant" when he entered into the oral contract, and if the written contract was received by the defendant "within a reasonable time."
The question of whether a farmer who sells his crop is a "merchant" as defined in section 2-104, U. C. C., has not been decided in this state. Courts in other jurisdictions are sharply divided on the issue. Cf. Sand Seed Service, Inc. v. Poeckes, 249 N.W.2d 663 (Iowa, 1977); Decatur Cooperative Assn. v. Urban, 219 Kan. 171, 547 P.2d 323 (1976); Lish v. Compton, 547 P.2d 223 (Utah, 1976), with Nelson v. Union Equity Co-op. Exchange, 548 S.W.2d 352 (Tex., 1977); Sierens v. Clausen, 60 Ill.2d 585, 328 N.E.2d 559 (1975); Rush Johnson Farms, Inc. v. Missouri Farmers Assn., Inc., 555 S.W.2d 61 (Mo. App., 1977). We need not resolve that issue in the present case, however, because even assuming, without deciding, that the defendant was a "merchant," the oral contract is unenforceable under the statute of frauds.
Subsection (2) of section 2-201, U.C.C., requires that a writing in confirmation of an oral contract be received "within a reasonable time." In the present case the oral contract was made on July 26, 1973. The defendant received no writing in confirmation thereof until January 30, 1974, more than 6 months after the oral contract was made, and only 1 day before the last possible delivery date under the oral contract.
Section 1-204, U.C.C., provides: "What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action." In Lish v. Compton, supra, the court held that a delay of 12 days between the oral contract and the receipt of a written confirmation was unreasonable. The court found no excuse for the buyer waiting 12 days before sending to a farmer a written confirmation of an oral contract for the sale of grain when the market price of the grain involved was constantly rising. In Cargill, Inc. v. Stafford, 553 F.2d 1222 (10th Cir., 1977), a delay of approximately 1 month was held unreasonable.
There can be no doubt that the defendant in this case did not receive a writing in confirmation of the oral contract within a reasonable time. The plaintiff made no pretense of complying with subsection (2) of section 2-201, U.C.C., as its manager stated that it had no policy of sending written confirmations of oral contracts to farmers, but instead relied on the farmers to come to plaintiff's elevator and sign a contract. The delay, for which there was no adequate excuse, was more than 6 months, and the written contract was delivered to the defendant only 1 day before the final possible date of delivery under the oral contract. The purpose of subsection (2) of section 2-201, U.C.C., was to put professional buyers and sellers on an equal footing by changing former law under which a party who received a written confirmation of an oral agreement of sale, but who himself had not signed anything, could hold the other party to the contract without himself being bound. See, 1 Hawkland, A Transactional Guide to the Uniform Commercial Code, 1.1201, pp. 25 to 27 (1964); White Summers, Uniform Commercial Code, 2-3, pp. 47, 48 (1972). In view of the nature and purpose of this statutory provision and under the particular facts of this case, it cannot be said that the defendant received the written contract within a reasonable time. Therefore subsection (2) of section 2-201, U.C.C., is not applicable, and the oral contract is unenforceable under subsection (1).
The parties have raised other issues on appeal, including the sufficiency of proof with respect to damages. In view of our conclusion that the oral contract is not enforceable, we need not reach these issues. The judgment of the District Court is affirmed.
AFFIRMED.