Wheat Contract, Merchant Confirmation, and Drought
In June, Hal, a Kansas wheat farmer and merchant under the UCC, orally agreed to sell 10,000 bushels of wheat to Midstate Elevator at $7.25 per bushel, delivery in September. Midstate immediately sent a signed confirmation stating quantity, price, and delivery; Hal received it but did not object. In August, drought cut Hal's yield to 4,000 bushels, and the market price rose to $9.10. Hal told Midstate he would deliver only 4,000 bushels and would not sell the rest. Midstate sues for breach. Hal argues the oral agreement is unenforceable under the statute of frauds and that crop failure excuses performance. Midstate points to a course of dealing: for five years, Hal had delivered wheat under oral agreements followed by Midstate's confirmations without objection. Midstate also had advanced Hal $5,000 for seed in a separate signed writing that said nothing about the wheat sale.
1. Is the oral wheat agreement enforceable under UCC 2-201? Explain the merchant-confirmation exception and the effect of the $5,000 seed writing.
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The agreement is enforceable under UCC 2-201(2), the merchant-confirmation exception. Hal is a merchant because he deals in wheat. Midstate sent a signed writing sufficient to indicate a contract for sale; it stated the quantity, price, and delivery term. Hal received the confirmation and had reason to know its contents. He did not object within 10 days. The writing is therefore enforceable against Hal even though he did not sign it.
The five-year course of dealing reinforces that Hal knew he needed to object to a confirmation if he disputed the sale. The separate $5,000 seed advance writing does not satisfy the statute of frauds because it says nothing about the wheat sale and does not state a quantity. It may be relevant to the parties' relationship, but Midstate should rely on the confirmation.
The result would differ if Hal were not a merchant, if the confirmation had been materially altered, or if Hal had objected within 10 days. None of those facts is present. Hal's statute-of-frauds defense should fail.
2. Does the drought excuse Hal's failure to deliver the remaining 6,000 bushels under UCC 2-615?
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UCC 2-615 excuses delay or non-delivery when performance has become commercially impracticable because a basic assumption of the contract has failed, and the seller did not assume the risk. Drought can qualify, but Hal must show that the failure was unforeseen and that no reasonable allocation could avoid breach. He must also give timely notice.
Hal's yield fell to 4,000 bushels, so literal performance of 10,000 bushels is impossible. But he is a Kansas wheat farmer; drought is a foreseeable agricultural risk, and the contract contains no crop-failure clause. Courts may still excuse performance if the drought was extraordinary rather than an ordinary risk of farming. The fact that the market price rose to $9.10 does not by itself show impracticability; a price increase is normally not an excuse.
If excused, Hal must allocate production fairly among his customers. He has only one contract, so he should deliver all 4,000 bushels to Midstate and be excused from the remaining 6,000. He cannot keep the wheat and sell it at the higher market price. The court should require notice and a fair allocation. If Hal had other customers, the allocation would need to be reasonable and non-discriminatory.
3. Suppose Hal and Midstate later orally agreed to reduce the quantity to 8,000 bushels. Is that modification enforceable?
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Under UCC 2-209(1), a modification needs no consideration. But 2-209(3) requires the statute of frauds to be satisfied if the contract as modified is within its provisions. The modified quantity, 8,000 bushels at $7.25, is $58,000, so the modified contract is within the statute of frauds. There is no signed writing reflecting 8,000 bushels.
An oral modification may still be enforceable as a waiver under 2-209(4) if the parties' conduct shows waiver, and 2-209(5) allows retraction unless the other party materially changed position in reliance. If Midstate relied on the reduction by not buying replacement wheat, Hal may be bound by the waiver even without a writing. If Midstate did not rely and Hal retracted promptly, the original 10,000-bushel term may control.
The court should examine the parties' words and conduct after the oral agreement. A mere oral promise to reduce quantity, without reliance, is not enough. The original signed confirmation remains enforceable against Hal.