Swift Spinning Mills, Inc. v. Susan Mills, Inc.

A-6768-96T1, (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: November 9, 1998

UCC; STATUTE OF FRAUDS—Invoices and demand letters can serve to satisfy the UCC’s merchant’s exception to the Statute of Frauds.

A knitting mill was related through partial common ownership to a fabric dye house that also knitted yarn into fabric. The dye house wanted to purchase yarn from a manufacturer, but its credit was unsatisfactory. After a number of alternate arrangements, a time came when the knitting mill purchased a substantial amount of yarn through the manufacturer and directed it to be shipped to the dye house. All invoices and shipping documents indicated that the knitting mill was the buyer. The invoices were sent to the mill, not to the dye house. Apparently, the common owner made an arrangement whereby the dye house made direct payments to the manufacturer for yarn purchased by the knitting mill, but the manufacturer was not a party to that agreement. When only part of one large invoice was paid, the manufacturer wrote to the knitting mill, demanding payment. Payment was made, but shortly thereafter, this process was again repeated. Not much later, the dye house went out of business, and then was forced into bankruptcy by its creditors.

Under the Uniform Commercial Code, consumers have greater protection in transactions than do merchants. Possibly for this reason, the knitting mill contended that it was not a merchant because it did not hold itself out as having knowledge or skill peculiar to the practices or goods involved in this action. The Court quickly rejected this argument, pointing out that the knitting mill, which was involved “as a professional buyer and seller,” qualified as a merchant. The second argument made by the knitting mill was that the invoices did not satisfy the written confirmation exception to the Statute of Frauds in the UCC. In response, the manufacturer argued that either the invoices or the demand letters satisfied the written conformation exception. Although the UCC Statute of Frauds is satisfied where (1) there is a writing; (2) that shows that a contract was made; (3) and it is signed by a party to be charged; (4) and it states a quantity term, there is an exception for transactions between merchants. That exception provides that the Statute of Frauds is satisfied if, within a reasonable time, a writing in confirmation of the contract is sent, the party receiving it has reason to know its contents, and that party does not give a notice of objection within ten days after receipt of the confirmation. Under the merchants’ exception, the confirmation need not be signed by the party against whom enforcement is sought. Because the manufacturer’s invoices and bills indicated the quantity, the customer number, the buyer, the place of delivery, the customer’s purchase number, and the price term, they clearly indicated that the parties entered into a contractual relationship. In addition, the manufacturer’s demand letters were sent within a reasonable amount of time and were also sufficient to constitute a written confirmation. Furthermore, the knitting mill accepted invoices for the goods knowing that the manufacturer would not sell goods to the dye house because of the credit risk. It voluntarily submitted its financial statements in connection with the purchase of goods which were to be shipped to the dye house. As a result, the knitting mill could not claim that the UCC Statute of Frauds was a defense for goods sold and delivered based on its course of performance.