2017 IL App (2d) 160909
Ill. App. Ct.2017Background
- Vanguard Energy (seller) supplied natural gas to Ibrahim Shihadeh d/b/a Creative Designs (buyer) from 2009–2013 and negotiated fixed-price purchases for 2014–15 and 2015–16.
- February 2014: parties agreed (and Vanguard emailed a confirmation on June 18 and 20) that buyer would take 25% of anticipated winter needs at a fixed price (February agreement).
- June 27, 2014: parties allegedly agreed Vanguard would supply an additional 50% of anticipated needs at a fixed price (June agreement); no written confirmation of the June agreement was alleged.
- Buyer terminated Vanguard’s services effective April 30, 2015; Vanguard warned termination would require the seller to unwind fixed-price positions and claimed damages when buyer insisted on termination.
- Vanguard sued for breach of the two agreements (counts I and II). Buyer moved to dismiss under 735 ILCS 5/2-619(a)(7), arguing the UCC statute of frauds (810 ILCS 5/2-201) barred enforcement absent a writing.
- Trial court dismissed both counts; on appeal Vanguard conceded the UCC statute of frauds facially applied but invoked two exceptions: the merchant-confirmation exception and the specially-manufactured-goods exception.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether buyer is a "merchant" under UCC §2-104 so the merchant-confirmation exception (§2-201(2)) applies | Buyer is a businessperson and received Vanguard’s e‑mail confirmation without timely objection, so he qualifies as a merchant and the confirmation satisfies the statute of frauds | Buyer is an end user/ultimate consumer of natural gas and lacks specialized knowledge/skill in the gas trade, so he is not a merchant | Buyer is not a merchant; merchant-confirmation exception does not apply |
| Whether the gas contracts fall under the "specially manufactured goods" exception (§2-201(3)(a)) | Fixed-price gas was set aside by Vanguard for specific time, volume, and price, making it effectively "specially manufactured" and unsalable to others | Gas has no unique physical characteristics making it unsaleable to others; market loss or resale difficulty does not show special manufacture | Exception inapplicable; goods were not "specially manufactured" for buyer |
Key Cases Cited
- Forms World of Illinois, Inc. v. Magna Bank, N.A., 334 Ill. App. 3d 1107 (2002) (end‑user purchaser is not a "merchant" for purposes of UCC merchant‑confirmation exception)
- Colorado Carpet Installation, Inc. v. Palermo, 668 P.2d 1384 (Colo. 1983) (four‑factor test for specially manufactured goods and focus on goods’ intrinsic characteristics)
- Webcor Packaging Corp. v. AutoZone, Inc., 158 F.3d 354 (6th Cir. 1998) ("specially manufactured" refers to nature of goods, not unusual production process)
- People v. Maggette, 195 Ill. 2d 336 (2001) (principle that courts give plain statutory language its ordinary meaning when discerning legislative intent)