Scoular Company v. Denney
Facts
Denny (D) grows, and Scoular Company (P) buys and resells, millet, a grain used for, among other things, birdfeed. Denny and Scoular have transacted business in the past on numerous occasions. On May 30, 2002, they discussed a forward contract for 15,000 bushels of millet. Denny wanted $5 per hundredweight. Scoular said that price was not then available. Even so, four days later, relying on Denny’s offer, Scoular sold the millet to a buyer at a rate sufficient to meet Denny’s price. Scoular tried to reach Denny by telephone to inform him of the sale. On June 27, 2002, Scoular spoke with Denny and mailed him a written and signed purchase contract. Denny did not check his mail and never signed or returned the purchase contract. At harvest, the market price of millet had trebled. Denny delivered to a grain operator in Paoli.
Scoular sued Denny for monetary damages, based on claims of breach of contract, promissory estoppel, and unjust enrichment. The trial court held that Denny had entered into and breached an enforceable contract to sell 15,000 bushels of millet at $5 per hundred weight of product and Scoular was entitled to recover $82,500 in damages. Denny appealed, contending that under 2-101 he could not be bound to a contract based only on his oral offer to sell; that Scoular’s contracting to sell the millet to a third party did not constitute an acceptance of his offer; and if a contract was entered into, it was not enforceable because it was not in writing and signed by both parties.
Issue
- Under UCC 2-206 does performance with a third party constitute acceptance if notice of that performance would not reasonably reach a seller?
Holding and Rule of Law
- No. Under UCC 2-206 performance with a third party does not constitute acceptance if notice of that performance would not reasonably reach a seller.
Denny contends he could not be bound by a ‘firm offer’ because the offer had not been made in writing. The purpose of 2-205 is ‘to modify the former rule which required that ‘firm offers’ be sustained by consideration in order to bind, and to require instead that they must merely be characterized as such and expressed in signed writings. It establishes a type of offer that, although not supported by consideration, is nonetheless irrevocable. It is not intended to provide the exclusive mechanism by which a valid (though perhaps revocable) offer can be made.
The trial court found that Denny had made a ‘firm offer’ as that term is employed in the grain industry. Comment 2 to 2-205 holds that firm offers made by oral communication and relied upon without more evidence ‘remain revocable under this Article. Denny’s oral offer could, if timely accepted, form the basis of a valid contract.
An offer may be accepted within a reasonable time unless the offer has been revoked by the offeror or rejected by the offeree. Denny claims that Scoular had rejected it when Scoular failed then to agree to pay the price he was asking. The trial court found that Scoular had no in fact rejected. All the company said was that price was ‘not then available.’
Acceptance is defined as words or conduct that, when objectively viewed, manifests an intent to accept the offer. Whether there has been acceptance is determined by an objective or reasonable person standard. Section 2-206 does not alter the general rule that communication is required of the acceptance of the offer for a bilateral contract while it is not required of the acceptance of the offer for a unilateral contract. The exception applies when the offeree relies on the beginning of performance as the mode of acceptance, and, in that instance, the offeree must notify the offeror of the acceptance within a reasonable time.
The trial court concluded that a contract was made when Denny sold the millet to another buyer on June 3. We reject the notion that a contract with a third party effected an acceptance, either on the ground that it constituted performance in response to an offer for a unilateral contract under § 2-206(2), the beginning of performance under a bilateral contract. Denny offered to sell to Scoular. Scoular’s deal with a third party cannot be held to have rendered performance constituting acceptance of an offer for the unilateral contract with Denny.
If Scoular’s contract with a third party was considered ‘beginning performance’, we would nonetheless conclude that it would not qualify as ‘acceptance’ under § 2-206(2). Whether a particular medium is ‘reasonable under the circumstances’ to constitute acceptance, and whether there has been an acceptance, as determined by a reasonable person standard, are ordinarily questions of fact for a fact finder to resolve. Scoular did nothing to earmark Denny’s millet as the source of the millet sold.
As for the June 27th phone call, the trial court made no finding of an agreement reached on that date. Scoular sent a written purchase contract. The court found only that the purchase contract was a confirmation of the contract discussed over the phone. In view of the court’s finding that the contract had been formed at an earlier time, as a result of Scoular’s conduct, the implication is too tenuous to uphold the trial court’s judgment with any degree of confidence. A remand is necessary for the trial court to determine if there was an acceptance of Scoular’s offer.
Disposition
Reversed and remanded.