The Oral Modification and the Cover Purchase
On February 1, Hearth Roasters (New York) signed a writing with Andes Bean Importers (New Jersey) for 10,000 pounds of washed Colombian coffee at $3.00 per pound, delivery by June 1. The writing stated quantity, price, and delivery date but said nothing about modification. On May 1, the parties spoke by phone. Andes said a frost had cut its supply; the parties orally agreed to reduce the shipment to 7,000 pounds and raise the price to $3.20 per pound. No writing was signed. On June 1, Andes delivered 7,000 pounds, and Hearth accepted and paid $22,400. On June 15, Hearth bought 3,000 pounds from another importer at $4.00 per pound. Hearth now demands $3,000 in cover damages, plus $400 in shipping costs, asserting that Andes breached the original contract by not delivering 10,000 pounds. Andes argues that the oral modification is enforceable and that it owed only 7,000 pounds. Hearth responds that the modification fails under the statute of frauds. Hearth had also told its own customers it would have enough beans for the summer. The parties are merchants. The governing law is the UCC.
1. Is the oral modification enforceable?
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No, not as a modification. UCC 2-209(3) requires the statute of frauds to be satisfied if the contract as modified is within its provisions. The modified deal is for 7,000 pounds at $3.20, or $22,400, which is well above $500. No signed writing evidences the modification. The original signed contract satisfies the statute for 10,000 pounds at $3.00, but it does not support the changed quantity and price. The oral agreement therefore fails as a modification. It could operate as a waiver under 2-209(4), but a waiver can be retracted unless the other party materially changed position in reliance. Hearth accepted 7,000 pounds, but that acceptance does not by itself prove a material change of position; Hearth's summer commitments were its own business decision. On these facts, the original contract controls.
2. What effect does Hearth's acceptance and payment of 7,000 pounds have?
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It satisfies the statute of frauds only for the goods received and accepted under 2-201(3)(c), but the original contract already covered 10,000 pounds. Acceptance does not convert the failed modification into an enforceable agreement to reduce the quantity. Hearth's payment of $22,400 may be part performance, but it is also consistent with part payment under the original contract. At most, the acceptance shows Hearth did not reject the 7,000 pounds; it does not waive Andes's obligation to deliver the remaining 3,000. Hearth can keep the 7,000 and sue for the shortfall. Andes cannot use the oral modification as a defense to the original contract.
3. What damages can Hearth recover?
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Hearth can recover cover damages under UCC 2-712: the difference between the cost of cover and the contract price for the 3,000 pounds not delivered. Cover was $4.00; the contract price was $3.00; the difference is $1.00 multiplied by 3,000, or $3,000. The $400 shipping cost is incidental damages under 2-715 if it was reasonably incurred in covering. But Hearth overpaid on the 7,000 pounds: it paid $3.20 instead of $3.00, an overpayment of $0.20 multiplied by 7,000, or $1,400. Andes can offset that amount. Net recovery is $3,000 plus $400 minus $1,400, or $2,000, plus any consequential damages proven with reasonable certainty. Hearth must have given timely notice of breach under 2-607; its June 15 demand likely satisfies that requirement. Andes's frost argument under 2-615 is weak because it partially performed and did not show that delivery of the remaining 3,000 pounds was commercially impracticable.