Brief Fact Summary. Plaintiff, Bazak International Corp., and Defendant, Mast Industries, Inc., entered in to an oral agreement whereby Defendant agreed to sell close out textiles to Plaintiff. Plaintiff sent purchase orders, but Defendant never delivered the textiles.
Synopsis of Rule of Law. Explicit words of confirmation are not required under the merchant exception to the UCC’s statute of frauds.
Defendant approached Plaintiff with an opportunity to purchase close out textiles. The parties orally negotiated all of the terms except price. The next day the parties agreed to a price of $103, 330. Defendant indicated that Plaintiff would receive written invoices the next day and that the ordered textiles would be delivered shortly. No invoices arrived, but Defendant told Plaintiff that the invoices were on their way.
Later, Plaintiff, upon request of Defendant, sent five purchase orders to Defendant. The same day, Plaintiff received written confirmation that Defendant received the purchase orders. No objection to the terms was made. Defendant never delivered the textiles.
The first four of Plaintiff’s purchase orders are separate orders, but the fifth is a summarization of all of the orders and provides the price. The orders included a printed disclaimer that they are only offers and that they are not a contract unless accepted in writing, but the disclaimer was written in terms of Plaintiff being the seller. Plaintiff signed the forms, but Defendant did not sign them.
Issue. Do the documents qualify as confirmatory writings within the merchant exception to the statute of frauds?
Held. Yes. The documents meet the requirements of the merchant exception to the UCC’s statute of frauds.
Because this case involves the sale of goods for at least $500, it falls under the statute of frauds provision in the UCC. However, there is a merchant exception to the UCC’s statute of frauds provision. The merchant exception allows enforcement of the contract when the contract is between two merchants and a writing confirming the contract, sufficient to bind the sender, is received with reason to know of its contents and is not objected to in writing within ten days.
Defendant argues that for the merchant exception to apply, the alleged confirmatory writing must be held to the higher standard of requiring explicit words of confirmation. However, the Court disagrees finding that the requirement that the writing be sufficient to bind the sender an adequate safeguard.
The Court does not find that the disclaimer on the form prevents it from being a confirmatory writing because the disclaimer clearly indicates it is to apply to situations where Plaintiff is the seller, and not the buyer.
The Court holds that the documents meet all the elements of the merchant exception; therefore, the Court reversed both motions to dismiss granted by the lower court.
Dissent. Points of Law - for Law School Success
Finally, as additional protection against abuse and inequity, we note that the consequence of a failure to give timely written notice of objection to a confirmatory writing is only to remove the bar of the Statute of Frauds. View Full Point of Law
The dissent is concerned that not requiring explicit words of confirmation will unfairly burden merchant sellers. However, the dissenting opinion does not think the court even needs to address this issue in the current case because the plain reading of the purchase orders indicates that they are offers. The dissent argues that setting aside the language indicating the purchase orders are offers, the remaining language is ambiguous. Also, the dissent notes that Plaintiff never indicated to Defendant that the disclaimer on the purchase orders should be disregarded. Discussion.
In the present case, the Court found that the documents met the requirements for confirmatory writings under the merchant exception. The Court did not require that the documents contain explicit words of confirmation. Because the merchant exception applied, the Court allowed Plaintiff to proceed with the breach of contract and fraud