Brief Fact Summary.
Plaintiff sued Defendant, alleging that Defendant had breached the delivery provisions of their contract. Defendant counterclaimed, alleging that the dates it provided were not intended to be firm deadlines and that Plaintiff had orally agreed to extend them. The jury found the contract had been modified and had not been breached. The trial court dismissed Plaintiff’s complaint.
Synopsis of Rule of Law.
Under the Uniform Commercial Code, a contract prohibiting modification except by a signed writing can be orally modified if the oral modification is detrimentally relied upon.
The court held that the state of which a division of a corporation is a citizen for the purpose of determining diversity is the state of which the corporation that owns the division is a citizen.View Full Point of Law
National Metal Crafters (Defendant) sought to manufacture spade bit blanks for Wisconsin Knife Works (Plaintiff). After negotiations, Plaintiff sent Defendant six purchase orders. On the back of the purchase orders was language prohibiting modification of the contract unless it was made in a writing signed by Plaintiff’s representative. The purchase orders had blank spaces for the dates of delivery. Defendant sent written acknowledgments of the first two purchase orders and provided a list of delivery dates. Defendant thereafter orally provided delivery dates for the next four purchase orders. Defendant missed the delivery deadlines in October and November 1981. On January 13, 1983, Plaintiff informed Defendant that the contract was terminated and brought this breach of contract suit, alleging that Defendant had breached the delivery provisions. Defendant countered that the dates it provided were not intended to be firm deadlines and that Plaintiff had orally agreed to extend them. The judge tasked the jury with deciding whether the contract had been modified and, if so, whether the modified contract had been breached. The jury found the contract had been modified and that the contract as modified had not been breached. The trial court dismissed Plaintiff’s complaint.
Whether, under the Uniform Commercial Code, a contract prohibiting modification except by a signed writing may be orally modified if the oral modification is detrimentally relied upon.
Yes. The trial court’s ruling is reversed and the case is remanded for a new trial. Under the Uniform Commercial Code, a contract prohibiting modification except by a signed writing can be orally modified if the oral modification is detrimentally relied upon.
(Easterbook, J.): Section 2-209(4) states that an attempted modification can operate as a waiver. The majority has interpreted § 2-209(4) to require reasonable reliance on an attempted oral modification. However, a reliance requirement is not essential under § 2-209(4). This is clear from the contents of § 2-209(5), which states that an oral waiver can be retracted while the contract is executory unless there is detrimental reliance. Section 2-209(5) shows that the use of the term “waiver” does not automatically mean “reliance” is required. Here, although it was error to instruct the jury as to modification, the jury’s finding that there was a modification is sufficient to resolve the case. The evidence supports the jury’s conclusion that Plaintiff agreed to delayed delivery. This was an attempt at modification that can operate as a waiver under § 2-209(4), and under § 2-209(5), Plaintiff was entitled to revoke this waiver absent Defendant’s reliance. It is unnecessary to determine whether Defendant detrimentally relied, since Defendant is not seeking damages for lost profits. Defendant only seeks to defeat Plaintiff’s claim of breach of contract. The jury finding adequately supports a holding that Defendant is not liable. Therefore, the judgment should be affirmed.
Section 2-209(2) of the Uniform Commercial Code allows for provisions prohibiting modification except through a signed writing. Such a provision must be contained in a signed contract. Here, Defendant signed acknowledgments to the first two purchase orders and led Plaintiff to reasonably believe that Defendant also assented to the last four purchase orders as well. Thus, the clause forbidding modification except by a signed writing was valid, and the jury was improperly instructed to consider whether the contract had been modified. This court notes that it is possible for a provision prohibiting oral modification to be waived. Section 2-209(4) states that an attempt at modification can operate as a waiver of a provision prohibiting modification except by a signed writing. However, this provision cannot be read so broadly that any oral modification operates as a waiver. Otherwise, § 2-209(2) would be rendered superfluous. The reasonable interpretation of § 2-209(4) is to require reasonable reliance upon the oral modification. Reading a reliance requirement into the provision lends more credibility to the party claiming oral modification. Here, the instructions given to the jury were improper because they lack any reference to reliance, and no evidence of reliance was offered at trial.