Vanguard Energy Services, L.L.C. v. Shihadeh
2017 IL App (2d) 160909
Ill. App. Ct.2017Background
- Vanguard Energy (plaintiff) supplied natural gas; Shihadeh (defendant), doing business as Creative Designs, purchased gas for his business and agreed to fixed‑price purchases for the 2014–15 and 2015–16 winters.
- February 2014: parties agreed defendant would buy 25% of anticipated needs at a fixed price; plaintiff sent email confirmations in June 2014 for the February agreement (no timely objection alleged).
- June 27, 2014: parties allegedly agreed plaintiff would supply an additional 50% at a fixed price for the same periods; plaintiff did not allege any written confirmation of the June agreement.
- February 2015: defendant terminated services effective April 30, 2015; plaintiff claimed damages for unwinding fixed‑price positions and sued for breach of both agreements (Counts I and II).
- Defendant moved to dismiss under section 2‑619(a)(7), arguing the agreements are barred by the UCC statute of frauds (810 ILCS 5/2‑201) because goods sales ≥ $500 require a signed writing; trial court granted dismissal.
- On appeal, plaintiff conceded statute of frauds applies to natural gas over $500 but invoked two UCC exceptions: the merchant confirmation rule (2‑201(2)) and the specially manufactured goods exception (2‑201(3)(a)).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the merchant‑confirmation exception (UCC 2‑201(2)) applies to the February agreement | Parties are merchants; plaintiff sent an email confirmation of the February deal which was not objected to within 10 days, satisfying the exception | Defendant is not a "merchant" for this transaction and thus the confirmation rule does not apply | Court held defendant is not a merchant (end user of gas does not have knowledge/skill "peculiar to the goods or practices"), so the merchant exception fails |
| Whether the specially manufactured goods exception (UCC 2‑201(3)(a)) applies to the gas contracts | Gas was allocated/set aside for defendant for specific volume, term, and price so it was "specially manufactured" and unsalable to others | The gas had no unique physical characteristic making it marketable only to defendant; any loss was due to timing, volume, or price, not the nature of the goods | Court held natural gas was not "specially manufactured" for defendant; exception inapplicable |
| Whether dismissal under section 2‑619 was appropriate given plaintiff's pleaded facts | Plaintiff argued factual allegations and UCC exceptions should survive dismissal | Defendant argued statute of frauds is a proper affirmative defense on 2‑619 showing no enforceable written contract | Court reviewed de novo and affirmed dismissal: statute of frauds bars enforcement absent applicable exceptions |
Key Cases Cited
- Forms World of Illinois, Inc. v. Magna Bank, N.A., 334 Ill. App. 3d 1107 (Ill. App. Ct.) (bank buying forms was not a "merchant" in that product area)
- Colorado Carpet Installation, Inc. v. Palermo, 668 P.2d 1384 (Colo. 1983) (sets forth four‑factor test for "specially manufactured" goods)
- Webcor Packaging Corp. v. Autozone, Inc., 158 F.3d 354 (6th Cir. 1998) ("specially manufactured" focuses on the nature of the goods themselves)
- Eighteen Investments, Inc. v. NationsCredit Fin. Servs. Corp., 376 Ill. App. 3d 527 (Ill. App. Ct.) (section 2‑619 motion admits legal sufficiency but raises affirmative defenses)