Cloud Corp. v. Hasbro Inc.

Brief Fact Summary.

Defendant sold Plaintiff a toy that uses a specific powder. Subsequently, Defendant made a new formula for the power. However, at that time, Plaintiff already ordered the powder ingredients based on the old formula. With the extra ingredients, Plaintiff made additional packages. Plaintiff sent Defendant an acknowledgment of the final orders with the additional packages. Defendant refused to accept delivery of or pay for the additional packages. Plaintiff brought suit, and the trial court held for Defendant. Plaintiff appealed.

Synopsis of Rule of Law.

A writing that modifies the quantity of good in a contract may be enforceable if there is sufficient writing, when the seller of a specially manufactured good has partially performed, or when a sufficient confirmation of the contract is present.

Facts.

Defendant, Hasbro Inc., sold a toy that requires the use of a specific powder. Plaintiff, Cloud Corp., packaged and mixed this substance for Defendant, pursuant to the instructions developed by Defendant. Also, Defendant sent Plaintiff a form with the terms and conditions, which indicated that Plaintiff could not violate the terms and conditions, absent written consent. Later, Defendant’s toy began to lose popularity in the market, and Defendant sent the final purchase orders to Plaintiff, who placed the final orders for the powder ingredients. Before the final purchase orders could be given to Plaintiff, Defendant gave Plaintiff a new formula for the powder mixture. The new mixture eliminated one of the expensive ingredients, Laponite. Plaintiff packed and mixed the powder, pursuant to the new formula. Nevertheless, because Plaintiff ordered the powder ingredients, pursuant to the old formula, Plaintiff had extra Laponite. Moreover, Plaintiff used the extra ingredients to pre-package and pre-mix additional packets. Plaintiff sent an order to acknowledge the original orders, which included the additional packages, even though Plaintiff never received a purchase order for the additional packages. Defendant received the acknowledgment order, but did not respond in an express manner. Nevertheless, Defendant’s employee sent an email and spoke on the phone with Plaintiff about the terms of the agreement. The emails contained numbers, which were consistent with Plaintiff’s order numbers, along with a memorandum written and signed by Defendant’s employee. Thereafter, Defendant refused to accept delivery or payment for the additional packages. Plaintiff filed suit for breach of contract against Defendant. The trial court ruled in Defendant’s favor, and Plaintiff appealed.

Issue.

Whether a writing that modifies the quantity of good in a contract may be enforceable if there is sufficient writing, when the seller of a specially manufactured good has partially performed, or when a sufficient confirmation of the contract is present.

Held.

Yes, a writing that modifies the quantity of good in a contract may be enforceable if there is sufficient writing, when the seller of a specially manufactured good has partially performed, or when a sufficient confirmation of the contract is present.

Discussion.

A writing that modifies the quantity of good in a contract may be enforceable if there is sufficient writing, when the seller of a specially manufactured good has partially performed, or when a sufficient confirmation of the contract is present. A sender’s name in an email may sufficiently satisfy the signature requirement, even though a handwritten signature is better evidence of a signature. Nevertheless, a handwritten signature is not required. Furthermore, a seller’s partial performance under an agreement for the sale of specially manufactured goods removes the contract from the Statute of Frauds. Also, if the contract is between merchants, a writing that confirms that the contract was sent within a reasonable time from formation sufficiently satisfies the Statute of Frauds, if the writing is received, the party that received the writing had a reasonable time to know of its contents, and the party receiving the writing did not object within 10 days. Here, Defendant’s employee’s emails with Plaintiff and memorandum were sufficient to satisfy the writing requirement of the Statute of Frauds. Also, the employees name on the email is sufficient to satisfy the signature requirement. Further, the emails and memorandum is also deemed to be part performance under the agreement. Lastly, in this case, the parties are merchants and Plaintiff’s acknowledgement, which was received without an objection, sufficiently satisfies the Statute of Frauds. Therefore, the modification of the contract is enforceable, and the trial court’s ruling is reversed and remanded.