Brief Fact Summary.
Plaintiff sued Defendant for breach of a contract to purchase Plaintiff’s goods over ten years. The trial court held that the suit was barred by the Uniform Commercial Code (UCC) statute of frauds. Plaintiff appealed.
Synopsis of Rule of Law.
The statute of frauds under the Uniform Commercial Code does not require that the contract be in writing, but only that there be a sufficient memorandum to indicate that there really was a contract.
Under Illinois law, the statute of frauds precludes enforcement of a services contract that cannot be performed within a year unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith.View Full Point of Law
Anchor Hocking Corp. (Defendant) agreed in principle to become the sole U.S. distributor for Monetti S.P.A. (Plaintiff) food service products for ten years. Plaintiff sent Defendant a draft agreement. Defendant did not sign the draft agreement, but Defendant’s employee drafted a memo that incorporated all of the terms in Plaintiff’s draft agreement and added additional terms that Defendant wanted. The employee initialed the memo. Plaintiff, as was required in its draft agreement, gave Defendant all of the assets of Melform, a Plaintiff subsidiary, which had previously distributed Plaintiff’s food service products. In addition, there was a second Anchor memo, an internal memo Defendant’s letterhead that included in “Exhibit A” all terms of the draft agreement except one. Davis, the drafter of this memo referred to it as the “summary agreement” with Plaintiff. Not long after Defendant wrote this second memo, Plaintiff sued for breach of contract. Defendant argued that the statute of frauds precluded the lawsuit because the agreement was not to be performed within one year and was not in writing. The trial court held that the suit was barred by the Uniform Commercial Code (UCC) statute of frauds. Plaintiff appealed.
Whether the statute of frauds under the Uniform Commercial Code requires that the contract be in writing.
No. The trial court’s ruling is reversed and the case is remanded. The statute of frauds under the Uniform Commercial Code does not require that the contract be in writing, but only that there be a sufficient memorandum to indicate that there really was a contract.
A writing made before a contract is officially formed can satisfy the statute of frauds. Indeed, with respect to writings, “a rule of strict temporal priority is unnecessary to secure the purposes of the statute of frauds,” that purpose being to ensure that a valid contract exists. In this case, it is not necessary to determine whether the Illinois or the UCC statute of frauds applies to the agreement at issue because the agreement satisfies both statutes of frauds. Both of the writings in this case satisfy the statute of frauds. First, the original Anchor memo documenting Plaintiff’s initial draft agreement may have been written before a full contract was formed, but it nonetheless satisfies the statute of frauds. It contained a signed agreement in principle to Plaintiff’s draft agreement. This is sufficient to satisfy the statute of frauds. Moreover, the second memo, in writing and Defendant’s letterhead, contains essentially a copy of the draft agreement and is clear evidence that a valid agreement existed between the parties. Finally, although the UCC does not treat partial delivery of goods as partial performance sufficient to satisfy the statute of frauds, in this case, Plaintiff’s partial performance was handing over an entire business to Defendant in furtherance of the contract. Even under the UCC, this partial performance constitutes an exception to the statute of frauds. Accordingly, the partial performance is another way in which Plaintiff has proven that a valid agreement existed. In accordance with the foregoing, the statute of frauds does not bar Plaintiff’s lawsuit.