Lead Opinion
The question in this action for breach of an oral contract to sell grain is whether the trial court erred in holding defendant’s statute of frauds defense under the Uniform Commercial Code was defeated by promissory estoppel. We affirm the trial court.
This case was tried to the court at law. The trial court’s findings of fact have the effect of a special verdict and we examine the evidence in the light most favorable to the judgment. We are not bound by trial court determinations of law. Kurtenbach v. TeKippe,
Plaintiff Warder & Lee Elevator, Inc., operates a grain elevator in the town of Webster. The corporation president, Francis Lee, managed the elevator for many years until he suffered a slight stroke in November 1974. He was succeeded as manager by his son James who had been an elevator employee since 1964. The Lees were the only witnesses at trial.
We recite the evidence in the light most favorable to the judgment. Francis Lee was alone in the elevator office on July 4, 1974. Defendant John W. Britten, a farmer in the area, came to the office during the morning with a friend. The elevator had purchased Britten’s grain for years, and he and Lee were well acquainted. At Britten’s request Lee quoted him the price the elevator would pay for new-crop corn and soybeans for fall delivery based on market prices of the prior day.
Britten offered to sell and Lee agreed for the elevator to purchase from Britten 4000 bushels of corn at $2.60 per bushel and 2000 bushels of beans at $5.70 per bushel for October-November delivery.
The elevator did not at that time require a seller to sign a memorandum or other writing to show the agreement. Instead,
It was the custom of the elevator not to speculate in grain but to act essentially as a broker. Thus on July 5, 1974, the elevator sold the same quantities of corn and beans as were involved in the Britten purchase for fall delivery to terminal elevators at Musca-tine for a few сents more per bushel.
Grain prices increased substantially during July. On July 29, 1974, Britten called Francis Lee and said he wished to “call the deal off”. Lee told him: “You cannot call it off. We sold this grain, and we expect delivery this fall.” Britten said he would not deliver the grain.
In an effort to mitigate its loss and to enable it to meet its commitment to sell the grain, the elevator purchased appropriate quantities of new-crop corn and beans from other farmers on and shortly after July 29.
In August 1974, James Lee met Britten on a street in Webster. Britten initiated a conversation in which he said he would not fulfill his agrеement and offered $500 in settlement. Although counsel for Britten objected to the admissibility of the evidence at trial, the objection was untimely and no motion to strike was made. Lee rejected the offer. He told Britten the elevator had sold the grain and expected him to perform under his contract.
Britten sold his 1974 crop elsewhere.
The elevator brought this action against Britten for breach of the oral agreement, seeking as damages the loss it sustained in covering its delivery obligation under the July 5 contracts by which it sold the quantity of grain purchased from Britten. See § 554.2712, The Code. That loss was $6478.34, which was the amount, plus interest, for which the trial court entered judgment.
Britten offered no evidence at trial. He relied solely on the statute of frauds in § 554.2201, The Code. The elevator urged promissory estoppel in bar of the defense.
The statute of frauds applicable to the sale of crops is § 554.2201. Under this statute an oral contract for the sale of goods for a price of $500 or more is unenforceable, with certain stated exceptions. The elevator does not contend any of those exceptions is applicable. Promissory estop-pel is not among them.
Authority for use of promissory estoppel to defeat the statute of frauds, if it exists, must be found under § 554.1103. It provides:
Unless displaced by the particular provisions of this chapter, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.
We have not had occasion to decide whether the provisions of § 554.2201 displace the doctrine of estoppel which would otherwise be available in accordance with § 554.1103. However, other courts which have considered the question have held the doctrine is available. Several of those decisions involved grain sales in circumstances analogous to those in the present case. See Decatur Cooperative Association v. Urban,
When other courts have refused to apply the doctrine they have done so because of a different view of the doctrine of promissory estoppel rather than because of any perceived statutory bar to its use. See Cox v. Cox,
The listing of exceptions to the statute of frauds in § 554.2201 is plainly definitional. The provision does not purport to eliminate equitable and legal principles traditionally applicable in contract actions. Therefore it does not affect the viability of defenses to application of the rule of evidence which it definеs. See White and Summers, Handbook of the Law Under the Uniform Commercial Code § 2-6 at 59 (1972) (“There is every reason to believe these remain good law, post-Code.”).
If § 554.2201 were construed as displacing principles otherwise preserved in § 554.1103, it would mean that an oral contract coming within its terms would be unenforceable despite fraud, deceit, misrepresentation, dishonesty or any other form of unconscionable conduct by the party relying upon the statute. No court has taken such an extreme position. Nor would we be justified in doing so. Despite differences relating to the availability of an estoppel defense, courts uniformly hold “that the Statute of Frauds, having been enacted for the purpose of preventing fraud, shall not be made the instrument of shielding protecting, or aiding the party who relies upon it in the perpetration of a fraud or in the consummation of a fraudulent scheme.” 3 Williston on Contracts § 553A at 796 (Third Ed. Jae-ger, 1960). The estoppel defense, preserved on the same basis as the fraud defense by § 554.1103, developed from this principle. “The Statute was designed as the weapon of the written law to prevent frauds; the doctrine of estoppel is that of the unwritten law to prevent a like evil.” Id. at 797-798.
We have found no reported decision in any jurisdiction holding that the statute of frauds in the Uniform Commercial Code, defined as it is in § 554.2203, displaces principles preserved in § 554.1103. We do not believe that our legislature intended for it to do so.
We hold that the provisions of § 554.2201 do not displace the doctrine of estoppel in relation to the sale of goods in Iowa.
We recently discussed the elements of promissory estoppel in Merrifield v. Troutner,
In the landmark case Miller v. Lawlor, supra, the court defined the doctrine in similar terms and did not limit its application to situations involving unilateral promises.
The issue is whether one has acted to his detriment in reliancé upon the promise of another, and it is immaterial whether that promise was unilateral or bilateral. See, generally, Williston, supra, § 553A.
Specific circumstances which justify use of the doctrine as a means of avoiding a statute of frauds defense are now expressed in Restatement (Second) of Contracts § 217A (Tent. Draft 1-7,1973), as follows:
(1) A promise which the promisor should reasonably expect to induce action or forbearance on the рart of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy grant*343 ed for breach is to be limited as justice requires.
(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant:
(a) the availability and adequacy of other remedies particularly cancellation and restitution;
(b) the definite and substantial character of the action or forbearance in relatiоn to the remedy sought;
(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence;
(d) the reasonableness of the action or forbearance;
(e) the extent to which the action or forbearance was foreseeable by the promisor.
This section complements Restatement (Second) of Contracts § 90, the predecessor of which we previously approved. See Miller v. Lawlor, supra. We now approve and adopt the standard in § 217A.
This standard moots the question whether Restatement of Contracts § 90 was intended to defeat the statute of frauds. See Annot.,
In order to obtain the benefit of the doctrine of promissory estoppel to defeat a statute of frauds defense, the promisee must show more than the nonperformance of an oral contract. See 3 Williston on Contracts § 553A (Third Ed. Jaeger, 1960). Under § 217A the defense cannot be overcome, when it is otherwise applicable, unless the promisee proves (1) the promisor"! should reasonably have expected the agreement to induce action or forbearance, (2) such action or forbearance was induced, and (3) enforcement is necessary to prevent in- i justice. * — ‘
In determining whether injustice can be avoided only by enforcement of the promise, the circumstances listed in § 217A(2) must be considered. In this manner, § 217A provides a means of deciding whether the equities support enforcement of the agreement.
We must now decide whether the trial coúrt erred in applying the doctrine of promissory estoppel in this case.
Britten contends the elevator should not have the benefit of the doctrine because it did not plead it and did not prove he knew it would rely on the oral agreement.
We find no merit in his first contention for two reasons. The statute of frauds was asserted in Britten’s answer. The elevator might have pled promissory estoppel if the court had ordered a reply, but no reply was ordered. See rule 73, Rules of Civil Procedure. Furthermore, counsel for the elevator twice invoked the doctrine on the record during the course of trial, and Britten did not challenge its failure to plead it at any time in the trial court. Under these circumstances he may not complain on appeal of the elevator’s failure to plead it.
Although Britten’s second contention presents a closer question, we also find it is without merit. We do so because
We conclude that the elements of promissory estoppel were supported by substantial evidence. In keeping with the standard in Restatement § 217A, we hold that injustice сould be avoided only by enforcement of Britten’s promise. The trial court did not err in holding the agreement was enforceable despite the statute of frauds defense.
AFFIRMED.
Dissenting Opinion
(dissenting).
I respectfully dissent. The contract in issue falls squarely within the language and intent of the statute of frauds, § 554.2201, The Code 1973. The majority opinion, in my view, misapprehends and misapplies our rules relating to promissory estoppel. Further, the facts in this case do not bring it within the new principles pioneered in this decision.
I. In 1965 the Iowa legislature enacted the “Uniform Commerсial Code — Sales.” Sixty-First General Assembly, ch. 413, § 2101. It was “a complete revision and modernization of the Uniform Sales Act.” D. Stanley & C. Coulter, Iowa Code Comment, 35 I.C.A. § 554.2101 at 118 (1967). Section 554.2201, the UCC’s statute of frauds, underwent a substantial liberalizing overhaul designed to eliminate undesirable and overly technical features of the former law. See D. Stanley & C. Coulter, supra, at 145-48; 3 R. Dusenberg & L. King, Sales & Bulk Transfers under the UCC § 2.05 (1978); R. Hudson, Contracts In Iowa Revisited, 15 Drake L.Rev. 61, 75-77 (1966); A. Squillante, Sales Law In Iowa Under The UCC — Article 2, 20 Drake L.Rev. 1, 61-65 (1970).
At the same time the statute was modified to clarify that its exceptions were limited to those contained in its provisions. Before 1919 the predecessor to § 622.32, our general statute of frauds, covered “sale[s] of personal property.” Seе § 4625, The Code 1897. In 1919 the Uniform Sales Act and its statute of frauds were enacted and the general statute was correspondingly revised. Compare §§ 554.4 and 622.32, The Code 1962. The catch-all exception in § 622.33, “or when there is any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds,” ceased to be applicable to sales of goods. Retained as applicable, however, were the “failure to deny” and “oral evidence of the maker” exceptions contained in § 622.34 and .35 respectivеly. See § 554.5, The Code 1962.
The lead sentence in § 554.2201 now provides: •
Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.
(Emphasis provided.) The § 622.34 and .35 exceptions are now incorporated in (3)(b) of the section. The specific limitation of exceptions to those contained “in this section” reflects a mаrked change from former § 554.4.
With exceptions to the statute of frauds now specifically limited by the terms of the statute to those enumerated in its provi
Displacing § 554.1103 with the exceptions in § 554.2201 does not render ineffectual the common-law principles contained in the former. First, they supplement other sections of the UCC except those, like § 554.-2201, which provide otherwise. Second, the victim of fraud who has no legal remedy because § 554.2201 prevents proof of the oral contract is not left out in the cold. The equitable remedy of restitution is not dependent upon proof of a contract. The basic elements of equitable estoppel and fraud are (1) intentional misrepresentation, (2) innocent, reasonable and foreseeable reliance, and (3) injury. See Walters v. Walters,
The limiting language of § 554.2201 аt least ought to displace a doctrine which would gut the legislative intent of the statute. Distilled to its essence, § 217A, as interpreted by the majority, provides that if one contracting party should know the other contracting party will rely on the contract and injustice will result if the oral contract is not enforced, the statute of frauds will be ignored. It is a rare case when either promisor in a bilateral contract does not rely on the contract. Del Hayes & Sons, Inc. v. Mitchell,
But the § 554.2201 statute of frauds obviously is designed to suffer these injustices in isolated oral contract cases in favor of the general public policy to reduce fraud and perjury, curtail litigation and controversy, and encourage written contracts in sales of goods for a price of $500 or more. It is significant that by trial time the plaintiff corporation in the case at bar was using written sales contracts with its customers.
Adopting §§ 90 and 217A as an unwritten exception to § 554.2201 will not only encourage oral contracts, it will bring a massive infusion of litigation to our overloаded courts. Trial courts will be compelled to determine, on an ad hoc basis, whether there was a contract, whether the promisor could “reasonably expect” the other party to rely on it, whether reasonable action or forbearance resulted, whether “justice requires” a remedy, and otherwise engage in the delicate balancing maneuvers mandated by § 217A(2).
In the final analysis, the majority opinion means written contracts are unnecessary in initial purchases of agricultural products, probably Iowa’s largest economic marketplace and involving almost three billion dollars worth of goods each year. We should proceed down that road with great caution.
It is just as clear the majority is moving against a long-time trend:
This attitude [to extend exceptions to the statute of frauds] has given way gradually, and from quite an early period the statute of frauds has frequently been spoken of as a most beneficial statute which should be liberally construed to effect its object. The wisdom of the statute is a matter within the control of the legislature, not the judiciary, but it has been said to be justified by long experience. The tendency has long been to*346 restrict rather than to enlarge and multiply the cases of exceptions to the statute, and the right to invoke the statute as a defense is no longer regarded with disfavor. The courts should not be tempted to turn aside from its plain provisions merely because of the hardship of the particular case. They should not be controlled by the consequences following upon an application of the statute, or deem obnoxious a law which the legislature has placed in the statutes and allowed to remain for many years, and they cannot disregard the statute. They certainly should refuse to sanction such a construction as would permit the evils that the statute was intended to prevent.
73 Am.Jur.2d Statute of Frauds § 511 (1974).
II. Aside from the above factors, I am convinced promissory estoppel is not an appropriate device to serve as an exception to the statute of frauds.
Promissory estoppel is related to equitable estoppel and the two are frequently confused. 1 Williston on Contracts § 140 at 607-09 (3d ed. 1957). We recently defined the two in Merrifield v. Troutner,
But there is no logical basis for using either equitable doctrine to enforce a bilateral, executory contract. The exchange of promises provides the requisite consideration tо make such a contract valid and enforceable if its existence can be proved. To hold plaintiff corporation’s immediate resale of defendant’s grain constitutes detrimental reliance and makes defendant’s promise to sell enforceable is unnecessary and distorts basic precepts of contract law.
Worse yet, a rule that such detrimental reliance (which is in every bilateral, execu-tory contract to some degree) permits the promisee to avoid the statute of frauds misconceives the nature and purpose of § 554.2201.
The § 554.2201 statute of frauds is only a rule of evidence. Stauter v. Walnut Grove Products,
Many courts have declined to create an additional exception based on promissory estoppel. They continue, as I am convinced we should, to view promissory estoppel as a doctrine of equity which provides only a means of enforcing unilateral promises, not a method of proving bilateral contracts. See, e. g., Cox v. Cox,
The majority distinguishes these cases as based on a viеw of promissory estoppel not held in Iowa. I cannot agree. Each appli
In Miller v. Lawlor,
Although the relevаnt element in these cases has been termed “a clear and definite oral agreement,” taken in the context of each case the word “agreement” was always used in the sense of a unilateral, gratuitous promise, not a contract. The majority perpetuates this inaccurate terminology.
Our cases on this point trace back to Lawlor where this court clearly grounded its use of the doctrine on unilateral promises by quoting, inter alia, § 90 of the Restatement of Contracts, still in effect.
I agree that new § 217A (aided by revised § 90 as it is interpreted under the tentative draft) moots these problems and blends unilateral and bilateral promises, but that is why I would not adopt them. The tentative draft has essentially created a concept which is indistinguishable from promissory estoppel and applies it to bilateral contract proof problems.
The effect of promissory estoppel on § 554.2201 under the majority opinion is devastating. If the statute is to be repealed the policy decision should be left with the legislature.
III. Finally, it should be noted the facts in this case would not warrant application of § 217A of the Restatement Tentative Draft.
Imposition of § 217A would require proof the defendant seller in this case “should reasonably expect” that the plaintiff corporation would promptly resell the grain. There is no evidence in the transcript in this ease to show defendant either knew this was plaintiff’s practice or that it was a custom in the industry.
Majоrity seeks to supply this crucial missing proof by asserting “it is reasonable to believe a farmer who sells grain regularly to country elevators knows they may immediately sell the grain which they purchase.”
Majority seems to be judicially noting not only what defendant knew about elevator operations but also the sales practices in a private industry. I doubt these matters qualify for judicial notice as being within common knowledge or capable of certain verification. Motor Club of Iowa v. Department of Transp.,
I would reverse and remand for a new trial, during which proof of the alleged contract would be regulated by § 554.2201 undiluted by promissory estoppel.
Dissenting Opinion
(dissenting).
I join in division III of the Chief Justice’s dissent. I am also in agreement with that dissent on what I perceive as the two essential and central points made in the first two divisions.
First, the legislature has made a determination that certain injustices which may occur under the auspices of the statute of frauds are outweighed by benefits conferred by that statute. This the legislature has the right to do. I would defer to that body’s judgment.
Second, some difficulty has arisen because this court has not given recognition to the fact that the statute of frauds is not an appropriate defense in a case in which promissory estoppel is proposed as a consideration substitute. I would not now rely upon those faulty cases to erroneously emasculate the statute in cases where it is applicable: those involving a bilateral agreement.