*3 approximately percent one of the steel KEITH, Before MERRITT and Circuit produced country. in this produced It hot Judges, CELEBREZZE, Senior Circuit rolled and cold rolled sheet steel in carbon Judge. alloy grades, as well as pickled and CELEBREZZE, oiled sheet steel. The used sheet Judge. Senior Circuit produce tubing. steel to Mr. Frank Metz- This diversity action for breach of con- ger, Northern Manager, Ohio Sales tract involves issues require us to responsible for all plain- sales to the explore some relatively uncharted areas of tiffs. Article Two of the Uniform Commercial *4 Code, Ohio Rev.Code 1302.01 et seq. 1972, A. the steel industry operated
We vacate the judgment, district court’s at approximately 70%of its capacity. Steel however, to the extent it concludes prices were highly competitive and dis- that adequate notice of given breach was in counts from published prices were given 1974 and remand this question for more customers in an pro- effort to increase the comprehensive findings of fact. making ductive use of steel capacity. On 14, 1972, November Metzger, rep- I. resentative, met with Guerin1 and offered The plaintiffs-appellees (cross-appellants), plaintiffs specific to sell the quantities of Roth Company Steel Products and Toledo rolled, hot pickled cold rolled and steel at Company, Steel Tube are subsidiaries of prices lower substantially than Sharon’s Industries, Roth Inc. Roth produces Steel price”.2 “book Testimony indicated that straight welded tubing for a variety of prices quantities these were to be effec- uses; produces Toledo Steel Tube fabricat- 31, tive from January until December ed steel tubing for use in automobile ex- systems. Guerin, haust Mr. Howard vice- 17,1972, On Metzger November forward- president Industries, for purchasing, Roth served as the ed a communication in the purсhasing agent for form of a letter both corporations 1973, April, until he confirming when was Guerin discussions of No- replaced by Mr. Richard Mecaskey. vember 14.3 The letter indicated that Shar- endar you 1973. We plaintiffs pur- 1. Prior have set to late aside for had per open Rolled, primarily Pickled, tons month December, chased steel on the of Hot market start- ing sources other Black, than Sharon. The November 1972. Hot Rolled meeting apparent purpose open was for the of creat- is on delivery schedule basis. Usual ing long-term, buyer-seller relationship be- about three to four weeks. plaintiffs. tween Sharon and the In our conversation at Sharon on Novem- 14, 1972, ber probability discussed the 2. “Book prices” published prices gener- are the per 500 tons month of Cold Rolled Sheet for ally prod- offered each steel mill for their Cleveland and the same for Toledo. prices, published ucts. These which were product Prices on this $165.00 Ton for Age magazine, vary according type Iron Quality, Finish, Commercial Matte and for Throughout plaintiffs of steel. Quality, Commercial $170.00 sylvania. Commercial Brite charged prices which were less than the “book F.O.B., Sharon, Ton. Both are Penn- price” published by Sharon. prices subject These to in- any general crease to the extent of 3. The letter written by Metzger on November granted industry. increase reads as follows: cases, quality In all extras are in addition Dear Sir: prices. to the above Confirming telephone our conversation of very truly. today, Yours Rolling Range we attach hereto our STEEL Rolled, SHARON CORPORATION for Hot Black and Pickled. = Rolled, Black, Edge Metzger Prices are: Hot Mill /s/ Frank Rolled, Pickled, $140.00 Metzger Ton and Hot Slit F.W. = Manager Edge F.O.B., District $148.00 Ton. Both are Shar- on, Pennsylvania guaranteed and are for cal- capacity at full industry operate in. hot entire sell the 200 tons of plaintiffs on would nearly every Consequently, 1973 and pickled steel each month for $148.00 rolled substantial experienced producer hot domestic ton and that it would sell per delivery.. delays schedule basis open rolled black steel on a The letter also dis- per .ton. $140.00 market condi- changed a result As “the could probability” cussed all tions, to withdraw decided Roth of cold rolled to both sell 500 tons given it had concessions, including those depend- varying prices and Toledo at Steel were notified plaintiffs. rolled steel ordered. ing type on the of cold 23, 1973 and on March this decision Metzger days testified that a few after asserting immediately protested, sent, plaintiffs agreed letter of the Novem- breach price increase 1,000 (500 tons of cold rolled steel in- Febru- ber, as modified agreement, in the each) prices tons at the indicated discussions protest, As a result of this ary. letter. continue to agreed to ensued the discount at steel to the and Gue- sell February Metzger On November, 1972 until June prices of tonnages of hot rolled rin met to discuss the remainder 17 letter. 1973. For in the November steel mentioned rolled steel to to sell Metzger proposed During meeting, Guerin prices higher prices; these tonnage of modified monthly to increase the agreed in the November set forth would than the pickled steel that Sharon hot rolled published letter, lower than the but were from 200 tons to 300 sell to the *5 its other cus- charged prices on which Sharon Metzger agreed, also tons each month. plain- indicated to clearly Sharon, the 300 tomers. Sharon plaintiffs to sell behalf steel to would sell no that May, steel until tiffs Sharon tons of hot rolled black 30, except at June after 1973, tonnage plaintiffs would be monthly when the initial- Although plaintiffs prices. the modified month for per increased to 400 tons сom- accept Sharon’s agree- ly the were reluctant of 1973. To confirm remainder agreed to Sharon’s ment, they finally promise, these increased ton- Metzger noted they primarily because compromise proposal copy of the November nages Guerin’s steel purchase were unable sufficient letter. require- production their to meet elsewhere influenced early In several factors ments.5 con- price the market for steel. Federal also half of Sharon In the second discouraged foreign producers from trols4 in a -filling orders steel; experienced difficulties conversely, pro- domestic importing and In most of 1973 timely fashion. exported portion a substantial ducers capaci- at full operating was an effort to mill domestically, in produced steel any more Thus, produce it could not ty; the do- because federal controls. avoid “blanking” steel, implemented reduced. Sharon supply sharply mestic steel was backlog to reduce addition, policy in an effort industry experienced sub- In policy, blanking Pursuant well as in- orders. increases in demand as stantial or- accept purchase material, refuse to labor, energy and would creases in raw Sharon particular for a material, delivery labor, requested ders that These increased raw costs. produced steel and all the “blanked” month producers steel energy compelled and costs orders. used to fill overdue that month was The increased demand prices. to increase refused sever- policy the Because of this market caused export and the attractive mills were capacity all of the See note infra. because full purchase booked, fully could not June, 1973, nearly supplying In replace Shar- large needed amount of steel requirements. one-third of steel Be- quantities. on’s nearly operating cause of the mills were at all purchase by plaintiffs: they practical al orders issued no had alternative source of they refused book Roth’s orders of 300 tons of steel and believed Sharon’s assurances hot pickled hot rolled steel and 400 tons of that the late deliveries resulted from the October, black delivery general shortage rolled steel for of raw materials and the equitably Toledo’s order of 425 tons of cold need to allocate its pro- limited delivery December, steel among rolled 1973. duction all of its customers. Both October and December were In May, plaintiffs discovered
“blanked” months. facts caused believe them to shipment
B. Sharon and delays entirely conducted were not business in 1974. In con- raw differently shortages result of material and Shar- tracts were separately system. Specifically, formed on an order- on’s allocation by-order Normally, 9, 1974, basis. is- May learned on a purchase sued order indicated selling Sharon was substantial amounts of type sought, amount of steel and the subsidiary rolled steel to its Ohio Metal date; requested or- delivery purchase Processing Company. Metal Ohio Process- ders offers to steel and ing operating as a warehouse6 and accepted not effective until by Sharon. selling premium prices. By steel selling accepted by issuing an offer an ac- through warehouse-subsidiary, Sharon form; knowledgment form, in this higher was able obtain than prices feder- agreed ship quantity steel al price permitted. controls otherwise In date, specific usually requested by the date 1974, approximately percent (20,000 fifteen purchaser. acknowledgment form month) tons per monthly of Sharon’s indicated that for the shipment production wаs sold Metal to Ohio Process- would be the prevailing at “[s]eller’s Thus, ing. assert they shipment.” the time of first learned Sharon’s late deliveries entirely were not of raw result material the steel market became even and an shortages system allocation when predictable less than in de- 1973: overall being learned steel was sold to increased, mand deliveries of steel became Processing. Ohio Metal erratic, *6 acknowledged delivery more and dates were rarely observed. actu- Sharon’s The plaintiffs immediately did not act delivery al dates were three to five months Instead, upon information. they this al- promised after delivery dates. remaining lowed orders pend unfilled to Throughout price steadily of steel September, 1974, during the summer. In rose; as a consequence, Sharon’s late deliv- Roth’s on placed orders “hold” due to eries had the effect increasing price of dispute. plaintiffs’ the labor Most of orders goods. October, were cancelled 1974. One final
Although shipments delivery was made on Sharon’s to October 31,1974; plaintiffs although this had consistently delinquent order been inad- throughout 1974, plaintiffs plaintiffs continued to overlooked vertently by the and accept cancelled, the late shipments place and to new thus plaintiffs rejected with plaintiffs orders Sharon. The appar- shipment delivery because had been acquiesced ently pattern ship- in this of late one nearly year agreed made after the de- higher ments and prices.for two reasons: livery date.7 officer, operating Guy
6. Steel warehouses maintain of inventories chief Mr. Sharon’s F. McCracken, generally up rolled steel and can fill orders more testified that Sharon set Ohio subsidiary quickly Although Processing than Metal as a in an effort mills. some warehouses to process steel, priсe many, including circumvent federal controls can because Metal Ohio prices subject price Processing, merely purchase warehouse were not to from the steel this, controls. and mills hold it for resale. Because of prices uniformly higher warehouse than purchase 7. Roth’s 8391 and Toledo’s order No. type mill for the same steel. May order No. 002957 were issued 5,May respectively. 1973 and Order November, agreed than in the higher upon plaintiffs C. The commenced action contract, by to sell steel in refusing of contract April, alleging in breach December, 1973, and failing and seeking expenses to their in October recover some timely delivery make orders to March, In “covering”. agreement. pursuant the 1972 issued to complaint. sought leave to file an amended transactions, regard to the 1974 With amended, complaint, as asserted 41 court had district concluded counts; damages based on plaintiffs sought for delivery breached several contracts the difference between the contract by failing timely delivery or steel make goods at the and the market for It delivery at all. also by failing make The amended time breach was discovered. given that the had ade- concluded $896,- sought damages of complaint total regard notice of those quate breach the exist- 174.60. Sharon’s answer denied accepted. It shipments late year ence of a contract for the calendar $555,- damages of granted the stat- 1973 and raised several defenses: 968.46, for prejudg- but denied their motion frauds, ute of modification of the oral con- Finally, ment interest. it dismissed Shar- tract, commercial fail- impracticability counterclaim, it concluded that on’s because notice It also coun- give ure to of breach. shipment.8 properly rejected Toledo the late terclaimed for based damages rejected by Tole- shipment which was has district appealed October, do in Steel order claim granting court’s damages dismissing order for and the Following the district court discovery, cross-ap- have counterclaim. The partial sum- granted motion deny- from the court’s order pealed mary judgment, concluding that the statute prejudgment interest.9 ing of frauds did not bar the enforcement November, agreement. 1972 oral Fol- II. trial, lowing day a five the district court A. The whether lengthy question exhaustive memoran- threshold issued goods contract for the sale of excess opinion. opinion, dum of the district oral hundred which cannot be concluded an oral contract was of five dollars subject 1972; November, year within one performed formed June, 1302.04 1972, modify requirements attempt, con- both ineffective; 2-201) and O.R.C. Sec. 1335.- tract was and that Sharon had court, response The district by charging prices the contract breached reasonably filled, computation subject partially certain at the time or is No. 8391 was but existing cancellation, nearly calculations market 333 tons was undelivered. reference Sales, filled, partially Royal Inc. ”. Plastics & Order No. was also but values’ Crown *7 Co., delinquent 51 tons remained until October Motorists Insurance Ohio 40 v. Mutual by (1976). App.2d it In 1974 when was delivered and 366 295-96 N.E.2d rejected by Although case, compensable these orders Toledo. the amount of loss can- fixed-price fact, pursuant easily were issued to the con- the of be amount not calculated. tract, they along with damages will be discussed the to be remains unsettled after awarded non-deliveries, eight years 1974 because breach not litigation. of 52, supra. until note discovered 1974. See of uniform code’s statute 10. The commercial pos- consistently take has refused to 8. Sharon (U.C.C. provision, Sec. 1302.04 frauds O.R.C. rejected shipment it of the because be- session 2-201), Sec. states: rejection wrongful. be Because it lieves Except provided as in this section otherwise steel, possession taken resold the has not and goods for the a contract for sale of full in the seeks the invoice counterclaim. is or more not en- of five hundred dollars by way cross-appealed, seeking or defense unless forceable of action have writing denying sufficient indicate there is some review of the district court’s order been pre-judgment has made be- motion interest. that a contract for sale by parties signed party pre-judgment permits and tween We affirm. Ohio law sought by against is or unliquidated whom interest for an claim “where enforcement by agent his authorized or broker. the amount of loss can be ascertained ‘mere 141 summary judg- cross-motions for partial mony, or otherwise in court that a contract ment, 1335.05, concluded that O.R.C. 1302.04 was however, Sec. made.” O.R.C. Sec. (U.C.C. 2-201) Sec. must be viewed as an exception contains no to its requirement exception to the that requirements of O.R.C. contracts which cannot be performed 1335.05, general Sec. statute of year frauds within one must in writing. be Conse- provision, that quently, the November an irreconcilable conflict exists letter, coupled confirmation with certain when a contract within scope falls part Metzger, admissions of Frank both (U.C.C. Sec. 2-201) O.R.C. 1302.04 Sec. 1335.05; (U.C.C. satisfied O.R.C. 1302.04 Sec. Sec. Sec. O.R.C. all contracts 2-201). Because we believe that O.R.C. which are enforceable under O.R.C. Sec. (U.C.C. Sec. 2-201) 1302.04 satisfy Sec. and O.R.C. 1302.04 the requirements of O.R.C. present Sec. 1335.05 an irreconcilable con- Sec. 1335.05.12 Either the writing require- flict, we agree with the district court ments of O.R.C. Sec. 1335.05 must be only the exception uniform commercial viewed as an code’s statute O.R.C. 1302.- Sec. 04(C)(2) applicablе.11 (U.C.C. frauds is We or O.R.C. Sec. 1302.04 also believe Sec. 2-201) be interpreted exception the admissions must as an Metzger made Frank satisfy special mandates O.R.C. Sec. requirements 1335.05. of O.R.C. (U.C.C. and, thus, 2-201) Sec. 1302.04 Sec. Generally, when an irreconcilable the oral contract is enforceable. special conflict a exists between statute and The uniform a general statute, commercial code is com- a special pre statute prehensive statutory regulating scheme vails as exception legislature an unless the sales commercial transactions. expressly See O.R.C. has manifested int 1301.04 part Sec. Sec. As ent.13 E.g., State ex rel. Myers v. Chiara scheme, monte, Sec. 1302.04(C)(2) 230, 237, O.R.C. 46 Ohio St.2d 348 N.E.2d 2-201(3)), provides (1976). that a con- O.R.C. 1302.04 tract for sale of goods 2-201) excess five is a special legislative attempt hundred dollars need not be evidenced to tailor the statute of frauds unique to the writing “if party against whom enforce- characteristics a commercial sales transa ment is sought pleading, admits in his testi- Conversely, 1335.05, ction.14 O.R.C. Sec. 1335.05, general agreement expressed Ohio’s statute of tial terms of with such provision, provides, part: frauds clarity they without understandable brought whereby charge No action shall be evidence); Burnett, parol O’Leary the aid of agreement the defendant ... that is (1949). 56 OL Abs N.E.2d performed year not to be within one from the thereof; making agreement upon unless the statutory 13. This rule of construction is codi- brought, which such action is or some memo- 1.51, provides: fied at O.R.C. thereof, writing randum note or is in provision general spe- If a conflicts with a signed by party charged to be therewith provision, cial or local be shall con- person or other some him thereunto or strued, possible, given if so effect is lawfully her authorized. provisions both. If the conflict between the see, Co., Oskey 11. But Gasoline & Oil Inc. v. irreconcilable, special provi- or local Oil, (8th Cir.1976) Continental F.2d prevails exception general sion as an general (applying the statute of frauds where provision, unless the manifest intent is that statutory provisions overlap). the two general provision prevail. Essentially, statutory provision permits sharp 12. Another conflict between O.R.C. Sec. legislative “modify” courts to infer intent 2-201) 1302.04 and O.R.C. Sec. repeal” “partially general statutory pro- or regards sufficiency writing *8 requirement. vision the an from existence of irreconcilable following The official comment special statutory provision. (U.C.C. 2-201) O.R.C. conflict a Sec. 1302.04 with See Sec. indi- writing Ruppert, cates that the is sufficient if State 54 St.2d even mate- v. Ohio 375 implication rial (1978) (repeal by terms of the are contract absent or misstat- N.E.2d 1254 contrast, requires ed. question intent). O.R.C. Sec. primarily legislative 1335.05 is a necessary writing the include all material example, 1302.04(B) pro- Mining terms of 14. For Sec. the contract. See O.R.C. Co. Quarto Litman, 42 Ohio St.2d 326 vides that a N.E.2d 676 between merchants failure re- (1975) (memorandum spond must contain essen- within a time to written reasonable a e.g., obligation. See tions of contractual provision of frauds “general” statute (Me. Innes, variety wide of contractual 356 A.2d encompassing a Dehahn v. by evidenced a obligations which must be admission section 1978). judicial Before the inter- policy of writing. Because of Ohio’s enacted, protection enjoyed parties was exceptions to preting special statutes as even the statute of frauds afforded and because the general provisions, more a the existence of though they admitted plaintiffs and Sharon transactions between or in their testi pleadings in their contract 2 of scope of Article squarely within exception judicial The admission mony. code, we beliеve the uniform commercial specific a represents of frauds the statute need the November oral contract no anomaly: response to legislative satisfy requirements of O.R.C. Sec. a the existence of party admit longer may 2-201). (U.C.C. 1302.04 Sec. exist contract, may establish or facts deposition The court held that the contract, simultaneously claim ence of a satisfied testimony Metzger of Frank Eg., of frauds. benefits of the statute to the statute judicial exception admission Innes, (Me.1978) 356 A.2d Dehahn v. 1302.- of frauds established O.R.C. Sec. judicial admission (the enactment of the 2-201(3)(b)).15 The 04(C)(2) (U.C.C. Sec. was de the statute of frauds exception to concerns the primary dispute appeal litigants unscrupulous signed prevent under representative of a admission scope in a man statute of frauds using 2- 1302.04(C)(2) Sec. purpose); with its intended ner inconsistent whether 201(3)(b)).16 question The is v. Heisdorf Company Packwood Elevator behalf authority to contract on agents with 1977). ques The fer, (Iowa 260 N.W.2d can make an admission principals17 of their admission representative tion whether a 1302.04(C)(2) which satisfies O.R.C. Sec. authority princi to bind his agent 2-201(3)(b)). Sec. judicial exception admission satisfies the pal should be The uniform commercial code statute of commercial code’s to the uniform ought applied to be liberally construed therefore, must be ana provision, frauds O.R.C. promote underlying purposes, considerations. policy of these lyzed pri- The Sec. Sec. exception judicial The admission is to of the statute of frauds mary purpose frauds is based on the statute of parol unfounded asser- protect parties from challenges satisfy court’s may the district Sharon also contract confirmation of the depositions in filed that admissions code’s statute of frauds conclusion may satisfy uniform commercial stаtutory requirements Moreover, for the provision. Sec. 1302.04 con- O.R.C. exception judicial concerning specially to the statute special provisions admission tains ap- judicial provision goods goods pay- admission frauds. The for which manufactured party plies accepted. admits existence These when ment has been made and testimony, by “pleading, or otherwise unique sales field terms are to the commercial 1302.04(C)(2) rights require in court.” O.R.C. often re- and a determination of statutory language 2-201(3)(b)). pro- ferring This to related uniform commercial code beyond contemplates (what admissions additional Sec. 1302.64 consti- visions. See O.R.C. pleadings and in-court acceptance goods). occur in those which testimony. tutes per- no reason for We can discern admissions, deposition mitting but not exception, judicial O.R.C. admission admissions, 1302.04(C)(2). satisfy Con- 1302.04(C)(2) (U.C.C. 2-201(3)(b)), sequently, contained that admissions we hold provides: depositions are within on file with the court satisfy (c) does not A contract which e.g., meaning of “otherwise court.” (A) requirements of of this section division Oil, Oil, Oskey Inc. v. Continental Gasoline & [writing requirements] is valid in but which Cir.1976). (8th 534 F.2d enforceable; respects other party against (2) If whom enforcement Metzger party asserts 17. Neither testimony, sought pleading, or in his admits authority Shar- behalf of to contract on without that a contract for sale otherwise in court Metzger Consequently, assume that on. made, but the contract is not enforceable authority to bind Sharon had actual beyond quantity provision under this November, oral contract. goods admitted .... *9 143 principals rarely maxim that act in a man ence of a require- contract satisfied the ner their inconsistent with own interests. 1302.04(C)(2) (U.C.C. ments of O.R.C. Sec. statute, therefore, a prin The assumes that 2-201(3)(b)).18 cipal’s of regarding admission the existence The B. found that a contract is сertain to be well founded. November, during negotiations 1972 be agent We believe that an admission an Sharon, authority with his tween principal bind and disputed contract reliable. equally promised promised and Sharon Agents a duty owe their to act principals specific quantities to sell of steel through in a manner consistent with the principal’s year out calendar 1973. The existence Moreover, agent’s interests. interest scope promises plain made continued that employment assures during tiffs and Sharon ne November agent will act in principal’s best inter gotiations questions present wholly factual short, est. both the principal his separate legal consequences from the which agent identity have an in pro interest attach to subsidiary findings. such Al tecting the principal unfounded oral though may freely this Court review the of obligation. prin assertions Because the legal concerning district court’s conclusion cipal the ability retains the indi choose the existence of an con enforceable oral behalf, viduals able to contract on his an tract, subsidiary its factual determinations interpretation recognizes as admis upheld must be unless they clearly erron sions those made by agents statements eous.19 supports Sufficient evidence authority unduly contract does not bur findings regarding district court’s what the den principal’s protect in being interest Moreover, actually parties agreed upon. we ed from unwarranted assertions of contrac ap believe that the district court properly tual obligation. For these we reasons hold law; thus, plied controlling principles of agents that with authority to their bind hold negotiations we that the November principals to the disputed may contract ad contract, resulted in performed to be mit the existencе of an oral 1973, for the sale of quantities fixed purposes 1302.04(C)(2) of O.R.C. Sec. steel. Sons, 2-201(8)(b)), See. see Alter & Constructors, Inc. v. district court Engineers primarily United & relied Inc., F.Supp. (S.D.Ill.1973), testimony Metzger, Frank to support that the by Metzger admissions of the exist- finding negotiations that November by plaintiffs and testified as follows: ble for for Cleveland and the same for you A. That was the Q. determine that ty A. Yes. vember A. that, “In our could Q. A. The that took 14th agreed Q. Q. Metzger, of 500 tons When Now, Verbatim, Will Do price. recall regarding use, [*] [*] on a shipment? 14, 1972, you only thing you place during an adverse and we in the third you [*] % recall conversation per no. tell the 500 those facts? check conversation on November and we talked about tons at we discussed the tonnage month Cold Rolled sheet s(s [*] agreed us what any I can recall your witness, tons paragraph ‡ [*] to it. meeting? would be availa- records you Sharon on No- Roth [*] sfc Toledo.” Do conversation do recall? probabili- you say felt did deposed % [*] you we Unlike 19. court’s tually mixed F.2d Joint ciates, application A. Yes. A. cussed in Sharon Q. information to Howard Guerin use that amount? purchasing agent]. A. Yes. Q. A. Yes. Q. Q. (6th Cir.1961). Venture promised Those And that— Howard Guerin And I take it For a total of Inc. v. questions findings regarding were the Dayton legal principles. “ultimate (6th each other does not Smith of fact and Cir.1982); 1,000 Rubber agreed International, Inc., numbers question” what tons of Cold Rolled? you conveyed Co., law, that Roth could See, Cordovan Asso- 290 F.2d the district e.g., require of fact parties [plaintiffs’ had dis- K&M ac- or
144
finding
subsidiary
that
the district court’s
concerning
in an
the
agreement
resulted
and
monthly pur-
promised
purchase
of
to
acceptance
issuance and
that
steel:
tonnage
specific
orders for
of
ton-
specific
promised
chase
to sell
that Sharon
per
two hundred tons
month of hot rolled
is
nages
clearly
of steel
еrroneous.
per
oiled
five
ton
pickled and
and
hundred
November,
the
argues that
Sharon
testi-
Metzger
month of cold rolled steel.
agreement
1972
is unenforceable
because
14, 1972,
agree-
fied
on
an
that
November
purchase specific
the
to
promise
concerning
quantity
price
and
of
ment
the
illusory.22
quantities of steel from
Sharon
pickled
hot
rolled
and oiled steel was
obligated
not
to
argues that
it was
Sharon
Guerin,
repre-
and
reached between
purchase
a
was first
ship steel unless
order
the
letter
sentatives
that
confirmation
pur
to
a
issued
that
the
issue
decision
17,1972
the
dated November
reflects
terms
control
wholly
chase
was
within the
order
Metzger’s
agreement.20
testimony
of that
argument
the
assumes
plaintiffs.
of
This
terms
the
17 letter
the
of
November
obligated
buy
to
that
the
quantity
indicate that
the
of cold rolled
issue
purchase
steel
if
to
a
only
chose
initially
steel
tentative
Metz-
figure.
a
obli
that
the
were not
order and
admitted, however,
ger
parties
that both
gated
specific
issue
orders for
to
agreed
the
stated in
proposed tonnage
month. The district
quantity of steel each
the
17
letter.21 Al-
November
confirmation
court, however,
the plaintiff's
found that
might
credible
which
though
evidence exists
steel
buy a
amount of
support
conclusion,
promise
specific
a different
cannot
conclude,
concluded
Metzger’s testimony,
per
month was unconditional and
Instead,
3,
properly
supra.
the
20.
note
confirmation letter.
at trial.
considered all of
evidence adduced
clause,
interpreting
dis
As an aid to
The
court relied on the November
judicial
government
17,
trict court took
notice
1972 confirmation letter as
evidence
price
time of
providing
controls were in effect
1973 contract terms.
In addition to
11617,
11615,
steel,
agreement,
prices
17,
No.
variety
Executive Orders
for
the November
(note);
provision
12
1904
Economic Stabiliza
U.S.C. Sec.
1972 letter contains a
to the effect
1970,
210,
subject
12
Sec. 1904
for
tion Act of
U.S.C.
cold rolled steel are
30, 1974);
(note)
any
granted
(repealed
April
and found
to the
increase
extent
“increase
court,
industry.”
permit
parties
In the district
intended
argued
permitted price
price
that this
modifi-
raise
rolled steel to reflect
clause
cold
any general
government price
to reflect
As a
cation
increase
controls.
increase
construction,
give
general
market
for steel. Sharon cites a number
com
courts
rule
proposition
of cases that
for the
that a
ordinary meaning.
stand
mon
See Alex
words their
modify by implication
Co.,
Buckeye
court cannot
unambiguous
clear and
Pipe
St.2d
ander v.
53 Ohio
Line
express
an
terms of
contract.
241, 246,
(1978).
regard,
N.E.2d
In this
374
146
Co.,
Buckeye Pipe
See Alexander
Line
53
v.
phrase “in
on the
district court focused
(1978);
146
Rose
Ohio St.2d
374 N.E.2d
v.
industry”
granted
crease
contained in
Co.,
York
St.
The New
Life Ins.
127 Ohio
letter, and deter
November 17th confirmation
(1933);
859
Lines
N.E.
Associated Truck
v.
government could
mined
the federal
Baer,
(1956).
346 Mich.
C.
its
of 1973 unless the
to
Sharon notified
charge
customers that
it intended to
the modification. Because
had
used
permissible price
maximum
all of
for
its
position
supplier
its
as the plaintiffs’ chief
products;
concessions,
price
all
accordingly,
price modification,
to extract
the dis-
including those
to the plaintiffs,
made
were
trict court concluded that Sharon had acted
1,
to
April
be rescinded effective
1973. On
by
in bad faith
seeking modify the con-
23,1973,
March
Metzger
Guerin indicated to
alternative,
tract.
In the
the court conclud-
рroposed
considered the
ed that
agreement
modification
price increase to be a breach of
Novem-
voidable because it
by
was extracted
means
ber, 1972 contract.
In an effort
to resolve
duress;
tight
economic
steel market
dispute,
representa-
Guerin met with
prevented
obtaining
28,
tives of Sharon on March
1973 and
and,
elsewhere at an
affordable
asked
Sharon to postpone
price increas-
consequently,
plaintiffs were forced to
es until June or
July,
days
Several
agree
to the modification
order to assure
later,
Meeaskey,
replace-
Richard
Guerin’s
a
supply
continued
of steel. See e.g. Oskey
ment,
sent
letter to Sharon which indi-
Co.,
Gasoline & Oil Co. v. Continental Oil
cated that
the plaintiffs
believed
(8th Cir.1976).
Before (W.D.N.Y.1979); the district 473 F.Supp. Sharon asserted 1313 McNabb, that it properly increased because the Ralston Co. F.Supp. Purina v. parties November, had modified determining par at 1821-83. In whether changed to reflect market eondi- good ticular modification was obtained in compromise agreement, generally 23. Under the purchasers. hot rolled available to Sharon’s basis, shipped sheets were to be on converter Both the converter B base base and Class (both is, while prices”, cold rolled sheets Matte Com- book “below less than the Brite) shipped published mercial be prices charged on Class B all of Sharon’s other basis. These two were not classifications customers. faith, County Authority make two in Erie Water Hen-Gar a court must distinct 1313; Construction, F.Supp. at quiries: party’s whether the is con Official conduct “reasonable stan sistent with commercial Comment O.R.C. Sec. trade,” Summers, dealing
dards fair in the U.S. for and R. J. White Progressive Use and Benefit of Crane Co. v. Law under the Handbook of the Uniform F.Supp. (E.D. n. 1 Enterprises, Code, (1972). 40-41 Commercial Va.1976), parties were in and whether argues decision fact seek motivated to modification *12 consistent with rea seek a modification was compensate honest desire to for commercial of sonable standards fair deal commercial exigencies. Ralston Purina Co. exigencies market made fur ing because McNabb, at 183 F.Supp. (subjective pur a loss. performance ther entail substantial pose damages] extending maximize of [to court, however, made three The district time under performance of contract indi findings which caused it to conclude that cates bad faith and renders modification were not the reason economic circumstances 1302.01(A)(2) (U.C.C. invalid); O.R.C. Sec. sought a modification: it found Sharon inquiry relatively The first is insulated from partially that Sharon was straightforward; party asserting the the increases, raw that Sharon material modification must demonstrate that his de with a slim bargained profit for a contract was cision seek modification the result of assumed the risk margin implicitly and thus factor, costs, a such as increased might come to involve a performance ordinary would cause an merchant to seek a loss, profit overall in 1973 that Sharon’s the contract. modification of See Official in first profit and its the contract Comment O.R.C. Sec. 1302.12 inconsistent with quarter of 1973 were 2-209) (reasonable commercial standards was position that the modification reason); may require objective J. White & Although sought a loss. all of avoid Summers, R. of Handbook Law under marginally these are related to the findings at 41. The second inquiry, regarding U.C.C. question conduct was con whether Sharon’s subjective honesty parties, of is less sistent commercial stan with reasonable Essentially, clearly inquiry defined. this of we do not believe that dealing, dards fair requires asserting the party the modifica a support finding are sufficient to fact, was, tion to that he in demonstrate observe reasonable commer Sharon did not by legitimate motivated a commercial rea seeking a modification. by cial standards son that such a reason is not offered view, findings do not a support In our these merely pretext. as a Ralston Co. v. Purina merchant, Moreover, McNabb, at conclusion that a reasonable F.Supp. 183-84. circumstances, would not have light trier of fact must determine whether a in order avoid a sought means used to obtain modification modification attempt example, a loss.25 the district court’s impermissible an to obtain For slab by overreaching.24 finding modification extortion оr steel contract26 that Sharon’s might party question properly 24. be more ana- a to a contract with Unit- This 26. Sharon was lyzed principles procedural it under uncon- ed Steel which allowed to make States Summers, monthly scionability. purchases ranging steel from a See J. White & R. of slab 25,000 pp. per month maxi- Law under the minimum tons to a Handbook U.C.C. at 45,000 per parties It mum of month. was also a 118-19. The did not brief the issue in tons fashion, party and the district rule with Wierton Steel which court did not a contract grounds; purchase consequently, allowed it to slab amounts those we need 10,000 20,000 per varying not discuss the issue in this between tons context. contracts were entered month. Both of these very price. prior to attractive When at a imply do not mean to We that the desire 1973, however, strengthened the market only permissible a loss is the for avoid reason unable to obtain maximum was seeking existing agree- a modification of an monthly tonnages permitted under these con- ment; only we refer to this reason because it is 30,000 only tons tracts: Steel delivered justification U.S. primary this in- offered in 10,000 per per tons month. month and Wierton stance. wide industry agreement reasonably insulated cost increas- on the foreseea- correct, is goes. Although es so far as it Similarly, profit by ble. the overall earned was able steel slabs seeking party impor- modification pre-1973 prices, findings the district court’s factor; however, finding, tant does not indicate to pur- also it was not able a support conclusion that the decision to chase, at prices, tonnage those sufficient seek a modification was unwarranted. The steel slabs production require- to meet its inquiry profit more relevant into the ments.27 district court also found through product obtained sales of line experienced substantial cost increas- quеstion. This conclusion is reinforced materials, for es other raw ranging from 4% fact product a few lines facts, nearly ton 20%. In of these exigencies;30 affected may be market finding regarding fixed-price contract opportunity to seek modification of steel, more, slab support without cannot goods for the sale of a product an inference that unaffected solely line should not be limited because the market shifts that occurred in product produced some other line substan- *13 Similarly, finding the district court’s that profit. tial November, contract Sharon entered a in final analysis, single most im 1972 which yield only profit would a slim portant consideration in determining not support does a conclusion that Sharon whether decision a to seek modification willing was a to risk loss on the contract. justified whether, is in this context is be finding Absent a that the market shifts and changes cause in of the market or other raw price material increases fore- were conditions, performance unforeseeable of at seeable the time the contract the contract has come to involve a loss. In finding formed —a which was not made— case, the district court found that Shar willingness Sharon’s to absorb a cannot loss by suffered substantial losses perform be inferred from the fact that it contracted ing 29, contract as modified. note See for a profit Finally, smaller than usual. supra. We are convinced that unforeseen findings regarding profits not Sharon’s are exigencies economic existed would sufficient, themselves, by to a con- warrant prompt ordinary merchant to a seek clusion that justified Sharon contract; modification to on the avoid a loss seeking a modification. Clearly, Sharon’s thus, we believe that the district court’s profit initial on the contract28 impor- is an consideration; findings contrary clearly tant errone district find- court’s See, indicate, however, e.g., ous. for and ings that U.S. Use Benefit of at the time sought Progressive Enterprises, modification was Crane Co. substantial future 662, F.Supp. (E.D.Va.1976); losses foreseeable.29 A party who has Official not actually suffered a loss on the contract Comment O.R.C. Sec. 1302.12 may seek a Summers, still modification if a loss 2-209); supra, future White & at 41. money 27. The plain- district court found that suf- Sharon sums of on its contract with the shortage continuing tiffs, fered a enjoyed profits of slab It steel. Sharon overall (when operating found that in 1972 earnings $11,566,000 Sharon was with net of on net sales of substantially capacity) at than $338,205,000. less full it re- 602,277 steel; ceived tons of slab that in 506,596 steel; it received tons of slab indicates, 29. The evidence and the district court 373,898 Thus, in 1974 it received tons. found, exception that with the of hot rolled record is clear that Sharon was in a difficult every Sharon loss on sheets absorbed a rolled position. increased, As for demand steel product steel which it sold the defendants in began higher as Sharon’s mills to work at a though prices even the modified were in capacity, supply steadily slab dimin- during quarters. effect the third and the fourth ished. Apparently, profit Sharon’s record overall The district court noted that first in the operations. result of It was the other obtained $3,089.00 three months of Sharon made profit percent pre-tax one a of less than on its $263.00 on sales to Roth lost on steel sold total sales rolled steel. Although significant to Toledo. Sharon lost pay the increased terms of the contract part analysis, The second honesty fact, any by is refusal pivotal. prices. Consequently, sought “threatened not to price found that Sharon increase pay any sell steel if refus Roth and Toledo viewed as material must be prices July ed to after pay inсreased November, 1972 contract breach and, acted consequently, 1973”' fur- any which would excuse Sharon dispute does not wrongfully. Sharon Thus, reasons performance. ther finding stop selling it threatened to absent a perform its refusal Instead, plaintiffs. steel to the it asserts under the justified contract increase was merely finding such a evidence faith. good and consistent with bad faith and that it has rebutted in two respects. fails in argument This finding. based on that ference of bad faith First, language on which the contractual agree analysis; although coer We most, only permits, Sharon relies cive evidence that a conduct is modification steel; thus, even if increase cold rolled faith, sought of a in bad supported position prima be re showing may effectively facie evidence, have justi- would not been seeking butted enforce the party hot refusing fied in to sell Incentives, E.g., modification. Business refusal rolled steel because America, Inc. v. Sony Corp. F.Supp. higher product. for the More pay (S.D.N.Y.1975)(in econom context of however, the evidence does not importantly, duress, permissible ic conduct coercive ever offered this theo- indicate that Sharon terminate). right of contractual this matter was ry justification as until Elevator, Farmers Inc. v. Jamestown *14 in their representatives, tried. Sharon’s Mills, (8th General 552 F.2d 1290 Cir. testimony, attempt to justify did not Shar- 1977) legal insistence a (“good upon faith steel at 1972 in ship prices on’s refusal to right coercive which one be effect] [with Furthermore, none of the con- this fashion. duress, usually lieves he has is not even if it contain this temporaneous communications and, party turns that is out that mistaken short, justification action. for Sharon’s fact, right”); has no such White & Sum we can evidence in the record which find no mers, (good at 41 faith exists if a supra, this theory offered as indiсates that Sharon party permits party that contract believes the time the modification justification seeking perform modification to refuse to if we that sought. Consequently, was believe effected). Although modification not the district court’s conclusion that Sharon agree principles, statement of Sharon’s by using acted in faith coercive conduct bad we do agree not that has rebutted to modification is not extract the inference of bad faith that rises from Therefore, we clearly hold that erroneous. its coercive conduct. Sharon asserts that November, modify to attempt Sharon’s its unilaterally prices decision to raise was contract, compensate in order to 1972 based in the language November performance which made increased costs prices 1972 letter which it to raise allowed loss, to is ineffective because come involve any general industry-wide extent of in a manner not act consistent Sharon did increase. Because in the steel requirement honesty increased, with Article Two’s industry had Sharon concludes perform its re- in fact when it refused justified prices. its raising under the contract at maining obligations justified raising Because it was the con price, prices.31 tract 1972 bound faith, found, the issue we do reach 31. The court also as an alterna- of Sharon’s bad district ground, modification also tive modification whether contract that the was voidable agreed We of economic duress. modifica- voidable because because the note, See, however, proof Oskey means e.g., that coercive tion duress. due to economic Oil, necessary Royale con- to establish that a 534 were used is Gasoline & Co. Continental (8th Cir.1976). because of economic duress. F.2d Because we conclude traсt voidable Normally, it cannot be used a result Id. at 1286. the modification was ineffective as prove occurred, III. that an unforeseeable event of the event non-occurrence was a A. The concluded that basic assumption underlying agreement, accept refusal purchase Sharon’s certain performance and that the event rendered orders requesting delivery during the impracticable 1302.73 months of October and December of 1973 2-615). See, e.g., Neal-Cooper Grain resulted in a breach of the November Company 1972 oral v. Texas Sulfur agreement.32 Company, Sharon asserted the Gulf (7th Cir.1974). affirmative commercial impracti- defense of F.2d The evi- cability,33 arguing that demand far sur- dence in supports this case Sharon’s asser- passed its production capabili- decreasing tions that an unforeseeable raw material ties. Because the contract of Novem- oral shortage occurred and non-occur- ber the presup- was based shortage rence of such a was a basic as- posed condition raw materials suffi- 14,1972 sumption the November underlying cient to obliga- meet contractual Sharon’s dispute oral The primary contract. involves available, tions would be and because suffi- question whether the raw material cient raw materials unavailable to shortage ability per- rendered Sharon’s demand, meet per- Sharon claims that strict November, form the commer- formance of the contract excused cially impracticable. believe that We Shar- 2-615).34 O.R.C. Sec. 1302.73 affirmatively on failed to demonstrate that court, however, The district found that alleged perform inability to was caused policy accepting Sharon’s more existing shortage. raw material filling orders than it was was the capable Therefore, we affirm district court’s inability direct cause of perform Sharon’s denying decision relief under O.R.C. pursuant the terms November 2-615). Sec. 1302.73 rejected 1972 oral agreement and impracticability commercial defense. successfully To assert the af impractica firmative defense of Generally, party asserting the de commercial fense of commercial impracticability bility, party must must show that the unfore permitted by void a contract modification which has been tion are O.R.C. sought good faith; a contract if modification *15 faith, good pre- has in been found to be then sumably wrongful no coercive means have statutory provision 33. The on Ohio commercial been used to extract the modification. impracticability 1302.73(A) Sec. O.R.C. (U.C.C. 2-615(a)). provides part, It Sec. in 32. The evidence in indicates June of 1973 that: Sharon informed it would refuse Delay delivery non-delivery in or in whole or any purchase further hot rolled orders for de part by livery in a seller is not a breach purchase ... of his in cold October and rolled or duty performance delivery for sale if ders for under a contract in December. Since Sharon obligated purchase agreed impracticable by accept to Roth’s as has been made orders contingency for hot rolled steel in October and Toledo’s occurrence of a non-oc- purchase orders rolled assumption for cold steel in Decem currence of which was basic ber, refusing perform Sharon’s to June letter made which the contract was .... anticipatory repudiation amounted to an of the agreement. See November oral 1972 34. Sharon also defense of commer- raises the Republic Compass Government Communications, China v. impracticability regard cial to its in- F.Supp. (D.Colo. 473 1306 production creased which costs occurred as a 1979) (seller’s unequivocal perform refusal to regard, In this result of the steel crisis. anticipatory word or conduct constitutes pro- district court found that Sharon’s overall repudiation). statutory provision Ohio’s re by approximately duction costs increased 15% garding repudiation anticipatory establishes a production, in 1973. Increases in the cost of permissible ag number of alternatives that an however, not, more, support do absent a claim grieved party may pursue. O.R.C. Sec. 1302.68 impracticability. E.g., Transat- of commercial Roth, 2-610). repu at the time of States, Financing Corp. lantic v. United 363 diation, suspend performance, chose to (D.C.Cir.1966). F.2d 319 Official pur whereas submit Toledo chose to December 1302.73 Comment performance chase orders and await for a com mercially Both reasonable time. courses of ac- 150 arrange- the 1973 contractual predi excuse is B. Unlike
seeable event which beyond party’s Sharon, cated is due to factors ment between Corp. control. Chemetron v. McLouth Steel during 1974 involved a series of sale of steel aff’d, Corp., (N.D.Ill.), F.Supp. purchase on individual or- contracts based (7th Cir.1974). This rule of law is F.2d agreed acknowledgements. ders and re simply a restatement of the causation was the for these individual contracts quirement of O.R.C. 1302.73 shipment. the time of prevailing price 2-615); if the factors which create the 1974, the year the calendar Throughout party of the event are within the control increase in steady prompted steel crisis then asserting impracticability, commercial and, thus, prices. in book steel demand of the is the result inability perform to it a number of admits that delivered itself. party’s rather than the event conduct well after purchase orders continued The record indicates that Shаron In the district agreed delivery dates. pur amount of accept unprecedented to de- court, alleged that these late half of 1973 during chase orders the first of contract.36 liveries amounted to breach though it knew that raw materials even the affirma- asserted response, In In of these supply.35 were in short impracticability tive of commercial defense facts, we believe that sufficient evidence to O.R.C. Sec. pursuant conclusion that supports district court’s plain- court held that 2-615). The district was a result inability perform Sharon’s to claim breach of contract tiffs waived policy accepting purchase of its far more ninety days or less delivery delays fulfilling, capable orders than it was regard performance.37 With their course existing shortage rather than a result however, ninety days, excess of delays in of raw materials. purchase Finch, Planning regard No. George order Director of tract. With Mr. D. Sharon, argues to deliver steel testified that that its failure and Production for early began “change sched- to run behind issuance of orders”. was due to Roth’s Essentially, change influx of orders ule because of the tremendous are alterations in orders shortage Although testi- requested specifications. and the of materials. Finch also bookings perhaps changes speci- recognized fied that Sharon’s forty-three years greatest he had seen in his delay shipment, cause a fications could industry the increase in the the steel and that prove specific found that Sharon failed purchase backlog blank- order led to Sharon’s changes type specification would de- ing policy. Moreover, lay delivery. the district court subsequent change orders issued found that 36. Plaintiffs also claim breach of contract for delivery agreed were the result of dаte pursuant Sharon’s failure to deliver steel “put attempt fires” caused out Roth’s purchase early 1973 and 1974 orders. Octo- in accordance failure to deliver steel ber, plaintiffs outstanding cancelled all delivery agreed date. Since we be- with the delivery pursuant orders. Since findings clearly are not errone- lieve that these ous, purchase orders more than 1974 cancelled the district court’s conclusion we affirm late, ninety days the district court’s we affirm non-delivery pursuant to of steel that Sharon’s *16 amounted conclusion that these non-deliveries purchase breach 8391 amounted to a order No. 38, infra. to a breach of contract. See note of contract. Moreover, that the district court we believe properly plaintiffs’ cancella- determined that plaintiffs placed The record indicates 37. right operate a waiver of their tions did not as knowledge orders with full for non-deliveries. to assert breach of contract days delivery delays up in were common to 90 1302.01(A)(14) (U.C.C. 2- Sec. Sec. O.R.C. Moreover, accepted industry. (U.C.C. 106(4)); Sec. 2- O.R.C. Sec. 1302.94 prices. paid prevailing and book late deliveries 720). per- consistent course In non-delivery Plaintiffs also raise claims formance, plaintiffs waived that the we believe involving purchase No. orders No. 002957 and on right contract based assert breach of their delivery delays up in 1973. Purchase 8391 which were issued days. Sec. O.R.C. and No. 002957 is discussed at notes 52 order 2-209(4)); (U.C.C. 1302.12(D) O.R.C. Sec. Sec. purchase order No. infra. Roth cancelled 2-208(3)). (U.C.C. 1302.11(C) See Official Sec. October, early Again, in we believe (U.C.C. Sec. Sec. 1302.01 Comment 2-106). O.R.C. operate did not as a waiv- that this cancellation right plaintiff’s of con- er of to assert breach production the district court concluded that ble we participants, believe that comрly express failure terms of its production Sharon failed to allocate 1302.73(B)(U.C.C. 2-615(b)) O.R.C. Sec. Sec. deliveries in a fair and reasonable manner any relief barred based commercial im- required as by 1302.73(B) O.R.C. Sec. and, thus, that practicability, these late de- (U.C.C. 2-615(b)). Sec.
liveries were a breach. system Because a reasonable allocation performance
A seller whose be is a prerequisite pursuant to relief to O.R.C. partially impracticable comes must allocate (U.C.C. 2-615), Sec. 1302.73 Sec. affirm production and deliveries before contractual holding the district that delays court’s in obligations are excused O.R.C. Sec. excess of amounted to a ninety days breach 1302.73(B) (U.C.C. 2-615(b)).38 Sec. Gener of contract. ally, 1302.73(B) (U.C.C. O.R.C. 2- Sec. 615(b)) requires seller sys that the devise a IV. tem of allocation is “fair and reason argues plaintiff’s Sharon failure Although statutory able.” provision this give required notice of breach as does list all of the factors to be con 1302.65(C)(1) O.R.C. Sec. Sec. 2- in particular sidered whether a determining 607(3)(a)) them seeking bars reasonable, remedy allocation system is fair and for the price increase and blanked require months participation does sellers to limit in 1973 and the late allocation deliveries and non-de- system customers under liveries in district court contract and 1974. The conclud- regular customers. Thus an ed that system partici necessary allocation which includes notice was not with re- pants gard other than to the late deliveries which customers under contract were ac- regular cepted, customers is unreasonable. because had actual Sharon knowl- edge that shipments delinquent, McCracken, Mr. executive vice- 1301.01(Y)(1) Sec. 1- president and operating chief officer of 201(25)(a)), that, if notice was neces- Sharon, testified that established a Sharon sary, the plaintiffs gave adequate notice to steel warehouse by “activating” a wholly by indicating they regarded Sharon owned Ohio subsidiary called Metal Process the late increase 1973 and deliveries ing Company in or February March in 1974 to be breaches contract. Fur- purpose avoiding price for the control ther, that, the district court concluded March, and that begin di event, any notice of breach not neces- verting steel to subsidiary warehouse. sary for steel which was ordered but never Although Processing Ohio Metal was incor requires delivered because 2-607 notice porated in the record contains no evi only accepted with regard goods. subsidiary dence that this was either a cus tomer under reg contract with Sharon or a analyzing question, threshold ular customer of when issue required. Sharon es is whether notice is system.39 tablished its 1302.65(C) allocation Because assert that O.R.C. has failed to 607(3)) requires demonstrate notice subsidiary permissi- readily was within the class of when the be breach cannot discover- reasonable, seller, performance only partially (em- A whose manner which is fair and event, phasis added). affected an unforeseeable must estab- production lish that his allocation of and deliv- began 39. The record indicates allo- requirements eries fulfills the of O.R.C. Sec. cating Initially, in the fall of 1973. 1302.73(B) 2-615(b)). This section *17 system decision to of establish a allocation was requires a seller to: by officer, operating made Sharon’s chief Wal- among production his Allocate and deliveries testimony George Gregg. ter E. of The D. reg- customers but may option at his include Finch, production planning, director of cor- ular customers not under then contract as Sharon, testimony Gregg’s roborates requirements well as his own for further fact, system implemented their allocation in the may any manufacture. He so allocate fall of 1973.
152
“ample
him
goods
by giving
opportunity
a
seller
possess
ed because the tendered
defect, inspect the
in-
goods,
to cure the
Jay
latent
Zimmerman
v. Gen
defect.
Co.
vestigate
may
claim or do whatever
Inc.,
1198, 1204(E.D.
Mills,
F.Supp.
eral
327
himself
necessary
properly
be
defend
Mo.1971).
support
position,
In
of their
damages while the facts
or minimize his
that most of
in
plaintiffs note
the cases
the parties.”
are
the minds of
fresh in
2-607(3)
volving
are
of
U.C.C. Sec.
breach
concerning
goods.
defective
warranty cases
v.
Alliance Industries
Black Claw
Standard
E.g.,
Joint Venture v.
Inter
K & M
Smith
son,
813,
(6th Cir.1978) (cita
587 F.2d
826
national,
(6th Cir.1982);
1106
669 F.2d
Airlines,
omitted); Eastern
Inc. v.
tions
Industries,
Alliance
Inc. v. Black
Standard
Corp., 532 F.2d
Douglas
McDonnell
Co.,
(6th Cir.1978)
F.2d 813
Clawson
587
(5th Cir.1976).
J. White & R.
972-73
See
denied,
cert.
U.S.
S.Ct.
Summers,
These
pur
at 344.
same
supra,
(1979).
L.Ed.2d 396
requiring
are
of
poses
by
served
notice
goods
are
in instances where
breach
plaintiffs’ posi
that the
We believe
late, or
performance
is
conforming, but
language
tion is
with the
inconsistent
higher
at a
than the contract allows.
1302.65(C)(U.C.C.
statute. O.R.C. Sec.
Sec.
Often,
a
failure to conform to
seller’s
of
be
2-607(3)) requires notice
breach to
not
a
may
amount to
terms
the contract
given
a reasonable time after
“within
[the
his
example,
perform
clear breach. For
buyer] discovers or should have discovered
may
ance
conform for reasons which
added).
any
(emphasis
breach ...”
The
beyond
are
his control
which would
“any
clear
breach”
language
indicates
perform.
excuse his failure to
See O.R.C.
to all
applies
statute
breaches in which
Also,
cus
1302.73
Sec.
Sec.
goods
accepted.
of a
language
permit
usage
tom or
of trade often
devia
given
plain meaning,
statute
its
must be
performance,
tions in
see O.R.C. Sec. 1302.-
unless
legislature
the intent of the
or the
2-103(l)(b));
01(A)(2) (U.C.C.
O.R.C.
Sec.
purposes
by the statute would be
served
2-208);
1302.11(C)
Sec.
a seller
Sec.
interpretation.
frustrated
such
is
may
performance
acceptable,
his
believe
Porterfield,
Youngstown
v.
21 Ohio
Club
strictly
even
it does not
conform
though
83, 86,
262 (1970).
St.2d
255 N.E.2d
See
generally, O.R.C.
the contract.
See
Sec.
Hochfelder,
Ernst & Ernst v.
425 U.S.
2-504);
Sec.
We believe that questions parties bitterly which the have so properly used the warehouse in com contested past eight years.54 for the Re- puting damages pursuant however, grettably, bring we cannot U.C.C. 2-713. Normally, the market end; long costly litigation to an computing damages to be used in un must findings remand this case for factual *22 der price prevailing U.C.C. Sec. 2-713 is the regarding the timeliness of plaintiffs’ notice in the market buyer “in which the would of breach in 1974.
have
sought
obtained cover had he
relief.”
Accordingly, we
part,
affirm in
vacate in
Official Comment
O.R.C.
part,
proceedings
and remand for further
Plywood
See Everett
not inconsistent with this opinion.
States,
Corp. v. United
ing the District Court I, therefore, made. re- already it has
spectfully portion dissent from that opinion vacating
Court’s the District damages order for the awarding
Court’s remanding
1974 late deliveries and the case findings plain- as to the timeliness of
tiff’s notice of breach. RHODES, Debtor,
J. Kenneth
Plaintiff/Appellee, STEWART, Trustee,
Larry al., et
Defendants/Appellants.
No. 81-5820. Appeals,
United Court of States
Sixth Circuit.
Argued Oct. April
Decided *24 Leech, Jr., Atty.
William M. Gen. Tenn., (ar- Eyler, Atty. Kate Asst. Gen. Gen., gued), Jimmy Creecy, Deputy Atty. C. plaintiff/appellee. for Stewart, Nashville, Tenn., pro se. Larry Nashville, (argued), Harry D. Lewis Tenn., plaintiff/appellee. Brown, Huff, Margaret Atty.,
Joe B. U.S. Nashville, Tenn., curiae for amicus U.S. Smith, Assoc.) (Am. Bankers William H. D.C., for Crotty, Washington, Michael F. Bankers Ass’n. curiae American amicus