Title: Delta Star, Inc. v. Michael's Carpet World

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT: Hassell, C.J., Keenan, Koontz, Lemons, and Goodwyn, 
JJ., and Stephenson and Russell, S.JJ. 
 
DELTA STAR, INC. 
 
 
 
OPINION BY 
v.  Record No. 071674    SENIOR JUSTICE ROSCOE B.STEPHENSON, JR. 
 
 
 
September 12, 2008 
MICHAEL'S CARPET WORLD 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF LYNCHBURG 
J. Leyburn Mosby, Jr., Judge 
 
 
In this case governed by the Uniform Commercial Code –
Sales, Code §§ 8.2-101 et seq. (the UCC), we determine whether 
the trial court erred in failing to apply the UCC's Statute of 
Frauds, Code § 8.2-201, to declare unenforceable a purported 
oral contract for the sale of goods. 
I 
 
Michael's Carpet World (Michael's) sued Delta Star, Inc. 
(Delta Star), seeking to recover the unpaid balance Michael's 
claimed was due on an alleged contract for the purchase and 
installation of flooring in offices of Delta Star.  Delta Star 
responded that it had paid Michael's for the purchase and 
installation of flooring in its entryway and denied that there 
was a contract for the purchase and installation of flooring in 
two of its offices.  Delta Star also filed a plea in bar 
contending that the alleged contract was not in writing as 
required by the Statute of Frauds and, therefore, was 
unenforceable. 
 
The trial court heard the parties' evidence, found that 
Delta Star had breached the contract with Michael's, and entered 
judgment in favor of Michael's in the principal amount of 
$2,565.58.  The court overruled Delta Star's Statute of Frauds 
defense, finding that the contract "satisfied several of the 
exceptions to the statute of frauds set forth in Code Section 
8.2-201." 
 
We awarded Delta Star this appeal in which Delta Star 
contends that the trial court erred (1) "in ruling that the 
contract was enforceable under the statute of frauds on the 
theory that the goods at issue were specially manufactured;" (2) 
"in finding that there was a confirmatory writing establishing 
the existence of a contract for the purchase and installation of 
flooring [in the main office];" (3) in relying "on the customary 
manner of dealing between the parties to establish the existence 
of an enforceable contract;" (4) "in finding that three separate 
work orders constituted a single contract between the parties 
and by ruling that the purchase of the entryway carpet 
constituted part performance of such contract, thereby taking 
the contract out of the statute of frauds;" and (5) "in ruling 
that Delta Star, Inc. admitted in its testimony that there was a 
contract for the flooring in [the main office]." 
II 
 
2
 
On April 22, 2006, Ivan Tepper, President and Chief 
Executive Officer of Delta Star, visited one of Michael's 
showrooms to view flooring options for his office, his executive 
assistant's office, and the entryway to the offices.  Tepper was 
met by Tommy Martin, Michael's sales manager, and viewed the 
samples displayed in Michael's showroom.  Tepper requested 
pricing information on the three types of flooring that he 
selected for the two offices and entryway.  At that meeting, 
Tepper told Martin that his only contact at Delta Star would be 
Tepper's executive assistant, Donna Nash. 
 
On April 25, 2006, Martin measured the three areas at Delta 
Star and submitted three written proposals describing the work 
to be done and the materials to be used for each area.  On May 
2, 2006, Martin discussed with Nash revisions to the proposals.  
On that same day, revised proposals, together with a credit 
application, were sent to Nash.  On May 5, 2006, Nash sent a 
credit application to Michael's seeking "90 days same as cash."  
All transmissions between the parties were made via facsimile.  
 
The conditional sales contract forms used by Michael's were 
prepared on May 31, 2006, and contain a hand-written reference 
to "P.O. #T551" and the notation "Per Phone" in the block for 
the customer's signature.  Delta Star sent Michael's, via 
facsimile, Purchase Order No. T-551, dated July 25, 2006, which 
 
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contains a reference to "[c]arpet for entrance to lobby" and the 
price of $832.22. 
 
Michael's completed installation of flooring in Delta 
Star's entryway and, on August 2, 2006, sent an invoice for 
$832.22.  Nash told Martin to order the tile for the two offices 
and subsequently paid the invoice for the entryway flooring.  
Nash also told Martin that it was important to have the tile 
installed by early November 2006.  When the materials arrived, 
Nash telephoned Martin and told him to install the flooring in 
her office, but not to install the flooring in Tepper's office.  
Martin responded that he could not do what Nash requested 
because the material had already been ordered. 
 
Martin had never before ordered this type of flooring.  The 
tile remains in Michael's warehouse. 
III 
 
Code § 8.2-201 provides, in pertinent part, the following: 
 
(1) Except as otherwise provided in this section 
a contract for the sale of goods for the price of $500 
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. . . .  
 
(2) Between merchants if within a reasonable time 
a writing in confirmation of the contract and 
sufficient against the sender is received and the 
party receiving it has reason to know its contents, it 
satisfies the requirements of subsection (1) against 
such party unless written notice of objection to its 
 
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contents is given within ten days after it is 
received. 
 
(3) A contract which does not satisfy the 
requirements of subsection (1) but which is valid in 
other respects is enforceable 
 
(a) if the goods are to be specially manufactured 
for the buyer and are not suitable for sale to others 
in the ordinary course of the seller's business and 
the seller, before notice of repudiation is received 
and under circumstances which reasonably indicate that 
the goods are for the buyer, has made either a 
substantial beginning of their manufacture or 
commitments for their procurement; or  
 
(b) if the party against whom enforcement is 
sought admits in his pleading, testimony or otherwise 
in court that a contract for sale was made, but the 
contract is not enforceable under this provision 
beyond the quantity of goods admitted; or 
 
(c) with respect to goods for which payment has 
been made and accepted or which have been received and 
accepted. 
 
In the present case, no written contract that satisfies the 
requirements of subsection (1) of Code § 8.2-201 exists.  
Michael's, however, relies upon the exceptions set forth in Code 
§ 8.2-201(3).  The trial court agreed with Michael's. 
IV 
 
We first consider the trial court's finding that the 
flooring materials were "specially manufactured goods or 
products for [Delta Star] and not readily suitable for sale [to] 
others in the ordinary course of [Michael's] business."  In so 
finding, the trial court relied upon our decision in Flowers 
 
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Baking Co. v. R-P Packaging, Inc., 229 Va. 370, 329 S.E.2d 462 
(1985). 
 
In Flowers Baking Co., a bakery engaged a cellophane-
wrapping manufacturer to measure its cookie trays, determine the 
appropriate size for cellophane wrapping, and design artwork to 
be printed on the wrapping.  The bakery's manager placed a 
verbal order for the wrapping, and the manufacturer sent the 
bakery a written acknowledgement of the order.  229 Va. at 372-
73, 329 S.E.2d at 463-64.  Thereafter, the manufacturer sent a 
sample roll of unprinted wrapping to be tested for sizing on the 
bakery's packaging equipment, and the bakery subsequently told 
the manufacturer to proceed with the order.  The next day, the 
parties met to discuss the proposed artwork.  Later, the 
cellophane wrapping, printed with the bakery's logo, was 
delivered to the bakery.  Id. at 373-74, 329 S.E.2d at 464.  
Approximately ten days after receipt of the wrapping, which 
conformed to the specifications of the order, the bakery's 
manager notified the manufacturer that the wrapping was too 
short and that the printing was not centered.  The bakery 
returned the wrapping to the manufacturer, and the manufacturer 
brought a breach-of-contract action against the bakery.  Id. at 
374, 329 S.E.2d at 464-65.  This Court, relying upon Code § 8.2-
201(3)(a), held that the parties' oral contract was enforceable 
because the cellophane wrapping "was manufactured to the size 
 
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required by [the bakery's] containers, was imprinted with [the 
bakery's] name and unique 'artwork,' and was completely produced 
by the [manufacturer]."  Id. at 376-77, 329 S.E.2d at 466. 
 
The trial court's reliance upon Flowers Baking Co. is 
misplaced because the facts of that case are distinguishable 
from the facts in the present case.  In the present case, the 
flooring samples displayed in Michael's showroom are available 
to all customers, but all flooring materials selected by 
customers must be ordered directly from the manufacturer or 
distributor because Michael's keeps no inventory.  The flooring 
materials chosen by Delta Star were selected from the samples 
displayed, were not altered in any way to suit only Delta Star, 
and were suitable for sale to others in Michael's ordinary 
course of business.  Therefore, the flooring materials were not 
"specifically manufactured" for Delta Star, and the trial court 
erred in ruling that the parties' contract was enforceable under 
Code § 8.2-201(3)(a). 
V 
 
We next consider the trial court's finding that there 
exists a confirmatory writing establishing an enforceable 
contract, under Code § 8.2-201(2), for the purchase and 
installation of flooring in Tepper's office.  We do not agree 
that such a writing exists. 
 
7
 
At trial, Michael's contended that its written proposals 
and its invoice for the purchase and installation of flooring in 
Delta Star's entryway constituted confirmatory writings.  A 
"writing in confirmation of the contract" presupposes that there 
exists an oral agreement between the parties and necessarily 
follows the formation of such an agreement.  The proposals, 
however, by definition, cannot constitute confirmatory writings 
because a proposal is an offer presented for acceptance or 
rejection.  In submitting its proposals, Michael's sought to 
form a contract, rather than to confirm a contract.∗  Michael's 
invoice for the entryway flooring also cannot serve as 
confirmation of a contract for the purchase and installation of 
flooring in Tepper's office.  The invoice confirms only the 
parties' agreement with regard to the entryway flooring. 
VI 
 
We now turn to the trial court's finding that an 
enforceable contract was established by the parties' course of 
dealing.  Code § 8.2-202 provides, in pertinent part, that the 
"[t]erms with respect to which the confirmatory memoranda of the 
parties agree or which are otherwise set forth in a writing 
intended by the parties as a final expression of their agreement 
                     
 
∗ Similarly, the credit application submitted by Delta Star 
and Michael's sketches regarding the proposed installations 
cannot serve as confirmatory writings, contrary to the findings 
of the trial court. 
 
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. . . may be explained or supplemented . . . by . . . course of 
dealing."  Pursuant to Code § 8.2-202, therefore, the parties' 
course of dealing is relevant only to explain or supplement the 
terms of the parties' contract.  The parties' course of dealing 
cannot establish the existence of a contract.  Therefore, the 
trial court erred in finding that the parties' course of conduct 
established the existence of an enforceable contract. 
VII 
 
Next, we consider the trial court's finding that there 
existed a single contract between the parties and that the 
installation of flooring in Delta Star's entryway constituted 
part performance thereof.  Delta Star contends that, even if the 
present case involves a single contract, rather than three 
separate contracts, the purchase and installation of the 
entryway flooring "does not take this case out of the Statute of 
Frauds."  We agree. 
 
Pursuant to Code § 8.2-201(3)(c), a contract that is not 
evidenced by a sufficient writing is enforceable "with respect 
to goods for which payment has been made and accepted."  In the 
present case, payment has been made and accepted for only the 
entryway flooring.  Therefore, enforcement of any contract based 
upon part performance extends only to the entryway flooring and 
not to the purchase and installation of flooring in Tepper's 
office. 
 
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VIII 
 
Finally, we consider the trial court's ruling that Delta 
Star admitted in its testimony the existence of a contract for 
the purchase and installation of flooring in Tepper's office.  
At trial, Michael's contended that Nash's testimony regarding 
her attempt to cancel that portion of the alleged contract 
dealing with Tepper's office constituted an admission that a 
contract existed because "you can't cancel something unless 
you're admitting that you got a contract and you want to cancel 
it."  Delta Star contends that Nash did not admit that there 
existed a contract for the purchase and installation of flooring 
in Tepper's office. 
 
We agree with Delta Star.  A review of Nash's trial 
testimony reveals that she stated that Delta Star "didn't want 
to act on the estimate [for Tepper's office]."  Nash further 
stated that Delta Star "hadn't agreed to . . . order [the 
flooring for Tepper's office] yet."  Therefore, Nash did not 
admit the existence of a contract for the purchase and 
installation of flooring in Tepper's office, and the trial court 
erred in holding otherwise and in declaring the contract 
enforceable under Code § 8.2-201(3)(b). 
IX 
 
For the foregoing reasons, we hold that the trial court 
erred in overruling Delta Star's Statute of Frauds defense and 
 
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11
in finding that an enforceable contract existed between 
Michael's and Delta Star for the purchase and installation of 
flooring in Tepper's office.  Accordingly, we will reverse the 
judgment of the trial court and enter final judgment in favor of 
Delta Star. 
Reversed and final judgment.