Oral Custom-Goods Contract and the Statute of Frauds

The starting point is UCC 2-201(1). A contract for the sale of goods for $500 or more is not enforceable by way of action unless there is a writing sufficient to indicate a contract, signed by the party against whom enforcement is sought, and stating a quantity. The oral agreement is for goods-custom tanks-and the price is far above $500, so the statute applies unless an exception fits.

The strongest exception is 2-201(3)(a): goods specially manufactured for the buyer and not suitable for sale to others in the ordinary course of the seller's business. The tanks are built to proprietary dimensions and fitting placements and cannot be resold without costly modification. Cedar must also show that it made either a substantial beginning of manufacture or commitments for their procurement before receiving notice of repudiation. Cedar bought $18,000 of white oak, began cutting staves, and completed one tank. That is more than preparation; it is a substantial beginning and a commitment. The exception therefore removes the contract from the statute of frauds.

Ridgeline might argue that Cedar's work was merely preliminary, but the completed tank and the custom oak cut for the project defeat that argument. The result is that the oral contract is enforceable even though no signed purchase order states a quantity.

The text message is probably a writing and may be a signature. Under the Uniform Electronic Transactions Act and E-SIGN, an electronic record can satisfy a writing requirement, and an electronic symbol or process attached to the record with intent to sign can satisfy the signature requirement. The message 'Approved-start fabrication. -M. Chen, Ridgeline' shows intent to authenticate and likely qualifies as M. Chen's electronic signature.

But the text fails the quantity requirement. UCC 2-201 requires the writing to state the quantity of goods. The message says nothing about four tanks, $72,000, or any number. A writing that fails to state quantity is not sufficient to satisfy the statute of frauds, even if it otherwise indicates a contract.

The text is also not a merchant's confirmatory memorandum under 2-201(2). That provision requires a writing sent by one merchant to another that is sufficient against the sender and received by the recipient, who fails to object within 10 days. Here Cedar never sent a confirmation; Ridgeline sent the text. So the text does not independently satisfy the statute. Cedar must rely on the specially manufactured-goods exception, not on the text alone.

Cedar should seek expectation damages, not reliance damages, because the contract is enforceable. Expectation damages place Cedar in the position it would have occupied had Ridgeline performed: the contract price minus the costs Cedar avoided by not completing the remaining tanks, plus incidental damages. Cedar can also recover lost profits if it can prove them with reasonable certainty and they were foreseeable at contracting.

Cedar should document its actual costs: the $18,000 oak purchase, labor on the completed tank, custom welding, and any noncancelable commitments. It must credit Ridgeline for costs saved because the remaining work was not done. If Cedar completed one tank and Ridgeline refused to accept it, Cedar may seek the price of that tank if it was conforming and accepted or if risk of loss had passed; otherwise it should include the tank in its expectation calculation.

Cedar has a duty to mitigate. It cannot simply continue building all four tanks after the cancellation if stopping would avoid loss. The facts state that Cedar cannot stop without losing the oak, which supports recovery for the materials, but Cedar should still avoid unnecessary labor. Ridgeline may argue that Cedar's lost profits are speculative or that Cedar failed to resell or repurpose the tanks. Cedar should also consider promissory estoppel as a fallback if a court found the statute of frauds applicable, but the specially manufactured-goods exception is the stronger route.