Potter v. Hatter Farms, Inc.

Brief Fact Summary. Two parties entered into an oral agreement to buy and sell a type of baby turkey.  The parties agreed to all the material terms, except how the baby turkeys would be shipped.

Synopsis of Rule of Law. Promissory estoppel is a defense to the Statute of Frauds ("SOF").

Facts. The Plaintiffs, Charles Potter ("Mr. Potter") and Angelyn Potter (the "Plaintiffs"), operated a turkey hatchery.  The Defendant, Hatter Farms, Inc. (the "Defendant"), was a Turkey grower.  In January of 1979, Mr. Potter testified that he and Gil Kent ("Mr. Kent"), a representative of the Defendant, agreed that the Defendant would by 192,000 poults for eighty cents per poult, plus certain other charges.  The parties did not agree to specific transportation details, but agreed it would not take more than forty hours.  Both sides researched potential transportation options and found that the price would be high, but "not too exorbitant".  In June of 1979, Mr. Potter met with and informed Mr. Kent that two customers from California had approached him about buying the poults. The purpose of this meeting was to determine whether the Defendant still needed the poults.  Mr. Kent testified that he told Mr. Potter to sell the poults to the California buyers because neither party had a way to transport them.  Mr. Potter, on the other hand, testified that by the end of the meeting he was under the impression the Defendant still needed the poults.  Mr. Potter subsequently turned down the California offer.  In August of 1979, Mr. Kent informed Mr. Potter that the Defendant no longer needed the poults.  The Plaintiffs then commenced this action.

Issue. Is there a valid oral contract?
•    Should promissory estoppel be allowed as an exception to the Uniform Commercial Code's ("UCC") SOF?

Held. Yes.  The court first observed there was evidence a valid oral contract existed, notwithstanding a lack of agreement about the transportation term.  To make this determination, the court relied on ORS 72.2040(3).  Additionally, the evidence showed that although shipment of the poults would have been expensive, it was not unreasonably high.
•    Yes, based on U.C.C. §1-103.  Further, that it is a consistent with the obligation of good faith and disallowing promissory estoppel "would allow a party to enter into an oral contract, induce the other party to rely to its detriment and yet completely escape liability under the contract. We do not believe the legislature intended such a result."  Additionally, recognition of a promissory estoppel defense to the SOF "[would] prevent[  ] its use as an instrument of fraud."  Still further, recognition would not discourage merchants from memorializing their agreements. 
•    The court observes that the doctrine of promissory estoppel traditionally has been applied "to supply the element of consideration where to refuse to enforce an otherwise valid promise would work an injustice on a party who relied to his detriment on the promise."  The elements of promissory estoppel necessary to avoid a SOF are:  "1) actual reliance on a promise, 2) a definite and substantial change of position occasioned by the promise and 3) foreseeability to the promisor, as a reasonable person, that the promise would induce conduct of the kind that occurred."
•    The court recognizes "[t]he promissory estoppel exception assures that, when merchants do not avail themselves of the protections provided by the Statute of Frauds, the requirement of good faith is not abrogated."
•    Based on the facts before it, the court concluded Mr. Potter relied on Mr. Kent's promise by rejecting the California buyer's proposal to buy the poults.  Thus, satisfying the actual reliance portion and substantial evidence provision of the promissory estoppel doctrine.  The reasonably foreseeable requirement was also satisfied when Mr. Kent, as a representative of the Defendant, did not tell Mr. Potter in January, 1979, that the Defendant was no longer interested in the poults.

Discussion. This case discusses a common law exception to the SOF that still applies to the UCC.