IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 94-41228

CREST RIDGE CONSTRUCTION GROUP, INC.,

Plaintiff-Appellee,

versus

NEWCOURT INC.,

Defendant-Appellant.

Appeal from the United States District Court

for the Eastern District of Texas

February 26, 1996

Before HIGGINBOTHAM, EM ILIO M. GARZA, and BENAVIDES, Circuit

Judges.

HIGGINBOTHAM, Circuit Judge:

This diversity case concerns a dispute between a subcontractor

and a supplier. The supplier appeals, on the grounds of

s ufficiency of the evidence, a jury verdict awarding the

subcontractor damages for breach of contract. We have jurisdiction

under 28 U.S.C. § 1291, and we affirm.

I

In 1989, two brothers, John and Joseph Brower, formed a

company called Crest Ridge Construction Group, Inc. and sought to

enter the construction business. Previously, the Browers had2

brokered construction deals through a compa ny called J.B. &

Associates.

In early 1990, Taylor Woodrow Const ruction Co., a general

contractor, awarded a subcontract to Crest Ridge for certain

portions of the construction of the Liberty Science Cente r in

Jersey City, New Jersey. One portion of the subcontract required

Crest Ridge to supply architectural wall paneling for the Center.

The Browers began discussions with Newcourt, Inc., a former client

of J.B & Associates that supplied relativ ely low-cost foam

paneling. The Browers succeeded in gaining Taylor Woodrow's

approval for the use of Newcourt's foa m paneling in the

construction of the Cente r, and the parties began to exchange

information detailing the requirements for the paneling job.

In late October, 1990, Newcourt issued a pric e quotation to

J.B. & Associates of $758,000 to supply the necessary paneling.

The price quotation was made "subject to cred it department

approval." Four days later, John Brower wrote to Newcourt

requesting that Newcourt issue a quotation to the name of Crest

Ridge and that Newcourt make further clarifications regarding the

details of the job. The record contains no subsequent price

quotation in the name of Crest Ridge. It does, however, contain

two " add-ons," modifications to the price quotation reflecting

changes in Newcourt's understanding of the job specifications,

issue d from Newcourt to Crest Ridge. These add-ons increased

Newcourt's price quote to $760,000.3

On November 7, 1990, Crest Ridge sent Newcourt a completed

credit application form reciting that Crest Ridge had been

established in 1985 a nd listing one banking and four trade

references. That same day, Newcourt contacted Crest Ridge's

banking reference and dis covered that Crest Ridge had opened an

account early in 1990 bearing a n average balance of $5000.

Newcourt also contacted Crest Ridge's trade references. One wrote

back on November 20, stating, "No knowledge of this account-perhaps

we dealt with them under a different name." On December 3, a

second responded, "No a/c. Please supply a/c #." Newcourt did not

hear from the other references.

Newcourt began investigating other methods of guaranteeing

payment. The record includes contradictory information regarding

the results of this investigation. In January, 1991, Newcourt

contacted an attorney in New Jersey about the possibi lity of

placing a lien on the Liberty Science Center property. Calvin

Court, president of Newcourt, testified that in January or

Fe bruary, 1991, he knew that Newcourt could place a lien on the

property. In contrast, a letter from Newcourt to Crest Ridge dated

February 8, 1 991 stated that the property search "raised

questions." This letter reiterated a request made on January 25

for either a copy of a payment bond protecting Newcourt or

sufficient information allowing Newcourt to secure a copy of such

a bond on its own. One month later, Crest Ridge faxed Newcourt the

name and address of Crest Ridge's bonding company. Newcourt did

not contact the bonding company. John Brower testified that Crest4

Ridge sent Newcourt a copy of a bond guaranteeing Taylor Woodrow's

payment to Cr est Ridge late in 1990, but Crest Ridge did not

introduce a copy of this correspondence or the bond into evidence.

In early March, Newcourt contacte d American Credit Indemnity

Company a nd was unable to purchase accounts receivable insurance

from that company. The record includes no information about the

specifics of this communication between American and Newcourt.

Meanwhile, the parties continued to exchange information. On

January 4, 1991, Crest Ridge issued a purchase order to Newcourt

quoting a price of $7 60,000 and referencing Newcourt's original

price quotation and its two add-ons. The record includes a flurry

of letters from October, 1990 to March, 1991 between Crest Ridge

and Newcourt concerning the details of the project. Newcourt

supplied samples of its wall paneling material, job specifications

and calculations, three revisions of shop drawings, and final

drawings showing where each panel would be placed at the Center.

Crest Ridge and Newcourt had extended discussions over co ils and

ov er the strength of wall paneling fasteners. Newcourt was to

make the first shipment of wall paneling later in 1991.

T estimony at the trial established certain custom s and

practices in the construction industry. First, the industry

considered a purchase order issued in response to a price quotation

as a binding event. Second, construction companies presumed that

a supply contract without payment terms would proceed according to

a standard schedule. According to this schedule, the supplier

billed the subcontractor by the 25th of the month and could expect1 The parties dispute Newcourt's motivation for taking this

action. Crest Ridge elicited testimony from Newcourt's management

that Newcourt had fallen on hard financial times and had fired much

of its architectural paneling staff. Newcourt argued that it was

unable to verify Crest Ridge's credit-worthiness.

5 payment by the tenth of the second month thereafter. This 45-day

interval allowed a bill to travel from the subcontractor to the

general contractor to the owner, and for payment to return from the

owner to the general contractor to the subcontractor to the

supplier.

On March 25, 1991, Newcourt wrote to Crest Ridge suspending

all further work on the wall paneling project and demanding payment

in full by April 5. The letter did not mention credit problems; it

gave as Newcourt's reasons for demanding full payment "the

encumbering and confusing progress and lack of receiving pertinent

data necessary to satisfy the requirements on the above-referenced

project." 1 In response to the March 25 demand letter, Crest Ridge

attempted several times to contact Newcourt, but Newcourt did not

respond. Crest Ridge then cancelled its order with Newcourt and

covered by obtaining paneling from Alply, Inc. at a higher price.

Newcourt never shipped any paneling to Crest Ridge.

Crest Ridge sued Newcourt for breach of contract in New Jersey

state court. Newcourt removed the action to federal court,

a lleging diversity of citizenship. The New Jersey federal court

transferred the case to the Eastern District of Texas, where it was

tried to a jury. At the close of the plaintiff's case, Newcourt

moved for judgment as a matter of law, citing the "subject to

credit department approval" phrase in its price quotation and6

arg uing that no contract could have existed because Crest Ridge

never obtained the approval of Newcourt's credit department. The

district court denied the motion, which Newcourt did not renew

either at the close of all the evidence or after the jury's

verdict.

The district court instructed the jury re garding the

definition of a contract and the nature of contract formation.

Neither pa rty objected to the charge. In response to the three

interrogatories put to it, the jury found that a contract existed

between Crest Ridge and Newcourt, that Newcourt breached the

contract, and that Crest Ridge's damages totaled $70,214.28.

II

The sole issue on this appeal is whether the evidence was

sufficient to support the jury's verdict that a contract existed

between Newcourt and Crest Ridge and that Newcourt breached the

contract. Newcourt argues that its price quotation was issued

subject to credit department approval. It argues that no contract

existed because Crest Ridge's uncertain financial status prevented

Newcourt's credit department from approving the deal.

Alternatively, Newcourt argues that the phrase "subject to credit

department approval" illustrated that it never agr eed to extend

credit to Crest Ridge and thus that its demand of payment up front

constituted no breach of contract.

Under Boeing Co. v. Shipman

, 411 F.2d 365, 368-70 (5th Cir.

1969) (en banc), we must uphold the jury's verdict against Newcourt

unless the evidence, viewed in the light most favorable to Crest2 The parties have not briefed the question of whether

Newcourt's failure to renew its motion for a judgment as a matter

of law after either the close of all the evidence or the jury's

verdict should make our standard of review more defer ential.

Because the use of a more deferential standard would not affect our

decision in this case, we do not address this issue.

3 The parties agree that Texas substantive law governs this

dispute.

7 Ridge, required a reasonable jury to find either that no contract

existed or that Newcourt committed no breach of contract. S ee

B rock v. Merrell Dow Pharmaceuticals, Inc. , 874 F.2d 307, 308-09

(5th Cir.), modified by 884 F.2d 166 (5th Cir. 1989), cert. denied

,

494 U.S. 1046 (1990). 2

The Uniform Commercial Code governs the substantiv e legal

issues in thi s case. Wall panels are "things . . . which are

movable at the time of identification to the contract for sale" and

are thus considered "goods." Tex. Bus. & Com. Code Ann. § 2.105(a)

(Tex. UC C) (Vernon 1994). 3 Both Crest Ridge and Newcourt are

entities deal in wall paneling or employ agents having specialized

knowledge of wall paneling and are thus "merchants." Tex. Bus. &

Com. Code Ann. § 2.104(a) (Tex. UCC) (Vernon 1994).

The jury heard evid ence sufficient to allow it to conclude

that Newcourt and Crest Ridge formed a contract. The UCC provides

that "[a] contract for the sale of goods may be made in any manner

sufficient to show agreement , including conduct by both parties

which recognizes the existenc e of such a contract." Tex. Bus. &

Com. Code Ann. § 2.204(a) (Tex. UCC) (Vernon 1994). Newcourt and

Crest Ridge exchanged a price qu otation and a purchase order,

documents the construction in dustry considered to have binding8

effect. Moreover, the parties' conduct illustrated that they

thought they had a deal. The evidence showed that from October,

1990 to March, 1991, the parties engaged in an extended exchange

designed to clarify the details of the project. Newcourt itself

provided mate rial samples, three revisions of shop drawings,

fastening details, stipulations as to the color of each panel, and

final drawings showing where each panel would go.

Newcourt did state that its price quotation was subject to

credit department approval, but in light of the extensive dealings

and preparations between these two parties, the jury could conclude

this clause at most created a condition precedent on Newcourt's

obligation to perform and did not prevent the formation of a

contract. Similarly, the fact that the parties specified no

payment terms does not require us to reverse the jury's verdict.

See Tex. Bus. & Com. Code Ann. § 2.204© (Tex. UCC ) (Vernon 1994)

(“Even though one or more terms are left open a contract for sale

does not fail for indefiniteness if the parties have intended to

make a contract and there is a reasonable certain basis for giving

an appropriate remedy.”). The jury could find that Crest Ridge and

Newcourt intended to make a deal, and that Crest Ridge's cover with

Alply, Inc. provided a reasonably certain basis for the calculation

of damages.

For two reasons, we find unpersuasive Newcourt's alternative

argument that insufficient evidence supported the jur y's finding

that Newcourt breached its contract with Crest Ridge. First, the

phrase "subject to credit department approval" does not constitute9

a refusal to grant credit. Indeed, the requirement of credit

department approval would be unnecessary unless the parties

contemplated s ome form of credit. Second, because Newcourt and

Crest Ridge left the terms of payment blank in their exchange of

price quotation and purch ase order, payment was due either upon

delivery, see Tex . Bus. & Com. Code Ann. § 2.310(1) (Tex. UCC)

(Vernon 1994), or perhaps according to "general usage," s ee Rusk

County Electric Cooperative, Inc. v. Flanagan

, 538 S.W.2d 498, 499-

500 (Tex. Civ. App.

- Tyl er 1976, writ ref'd n.r.e.). In either

case, Newcourt breached the agreement by demanding full payment in

advance.

We find the evidence sufficient to support the jury's verdict

that a contract existed and that Newcourt breached it. Newcourt

has appealed no other issues, and therefore we affirm the judgment

of the district court.

AFFIRMED.10

BENAVIDES, Circuit Judge, specially concurring:

Because I agree that the evidence is sufficient to support the

jury's verdict that a contract existed and that Newcourt breached

it, I concur in the judgment. I write separately because I reach

the same conclusion as the majority, but by a different path—one I

believe is consistent with the general principles of contract law

and the Uniform Commercial Code.

The majority accurately recaps the factual background of this

dispute. Newcourt initially issued a price quote to J.B. &

Associates. This was followed by an "add-on" price quote to Crest

Ridge. Both of these price quotes explicitly stated the terms were

"subject to credit department approval." On January 4, 1991, Crest

Ridge issued a purchase order for the wall paneling; this purchase

order left the terms of payment blank. A flurry of correspondence

ensued concer ning the details of the project including job

specifications, revisions of shop drawings, final drawings,

samples, and strength of coils and fasteners. On March 25, 1991,

Newcourt issued a demand letter suspending all work on the project

unless there was payment in full by April 5. The subcontractor

Crest Ridge, unable to make full advance payment, was forced to

cover with more expensive paneling purchased under the conventional

industry terms of a 45-day billing cycle. Viewing Newcourt's

payment-in-full demand as a breach of contract, Crest Ridge sued.Following trial, the jury returned a verdict that both a contract

existed between the parties and that Newcourt breached it.

Newcourt appeals arguing that a price quote issued "subject to

credit department approval" that is a ccepted by a purchase order

silent as to credit terms cannot create an enforceable contract

because there was no agreement as to essential terms.

As the majority correctly notes, this transaction for the sale

of paneling between merchants is governed by the Uniform Commercial

Code. S ee Tex. Bus. & Co m. Code Ann. §§ 2.104(a), .105(a) (Tex.

UCC) (West 1994). Unfortunately, the UCC does not answer every

question about business transactions gone awry. As the Code itself

notes, common law principles of law and equity cont inue to

supple ment its provisions. S ee id. § 1.103. One such question

concerning contract formation is presented in this case.

The majority intimates that because "Newcourt and Crest Ridge

exchanged a price quotation and a purchase order, docu ments the

construction industry considered to have binding effect" a contract

was formed. Maj. op. at 7-8. I believe the issue is more complex.

It is hornbook law that contract formation requires of fer and

acceptance. Industry custom can fill in missing terms of a

contract or determine the meaning of an agreement. See Tex. Bus.

& Com. Code Ann. § 2.208 (Tex. UCC) (West 1994). Likewise, the UCC

allows agreement to be expressed by conduct. See id. § 2.204(a).

However, contract formation continues to hinge on the existence of

an acceptable offer. The UCC, however, provides no guidance as to

what an "offer" is.12

Newcourt premises its argument on the belie f that its price

quote was the offer subsequently accepted by Crest Ridge's purchase

order. However, in this case, there are two documents that could

operate as an offer: Newcourt's initial price quote (subject to

credit department approval) or Crest Ridge's purchase order (silent

as to terms). In deciding whether a contract was formed and its

subsequent terms, it is critical to determine which is the "offer"

capable of being accepted.

In general, whoever sends the first form is usually considered

the offeror. 1 James J. White & Robert S. Summers, U nifor m

Commercial Code § 1-3, at 10 n.8 (4th ed. 1995). A price

quotation, if detailed enough, can constitute an offer capable of

acceptance. S ee Axelson, Inc. v. McEvoy-Willis

, 7 F.3d 1230, 1232-

33 (5th Cir. 1993); Gulf States Utils. Co. v. NEI Peebles Elec.

Prods., Inc. , 819 F. Supp. 538, 549 (M.D. La. 1993); Quaker State

Mushroom v. Dominick's Finer Foods , 635 F. Supp. 1281, 1284 (N.D.

Ill. 1986). However, to do so, it must reasonably appear from the

price quote that assent to the quote is all that is needed to ripen

the offer into a contract. G ulf States

, 819 F. Supp. at 549;

Quaker State

, 635 F. Supp. at 1281. A price quote that is subject

to the seller's confirmation is not an offer because the buyer's

assent will not consummate the contract. S ee Axelson , 7 F.3d at

1233 (under Texas law, price quotation requiring seller to accept

order could not be an offer, but only invitation for an offer); see

also Gulf States , 819 F. Supp. at 549; Quaker State , 635 F. Supp.

at 1284. In essence, such qualifying language converts what could4 It is undisputed that Newcourt never supplied a specific price

quote with all material terms to Crest Ridge. However, I assume

for purposes of this discussion that Newcourt's price quote made to

J.B. & Associates plus the add-ons to Crest Ridge constitute a "price quote" to Crest Ridge.

5 I do not contend that all "subject to" conditions prevent

contract fo rmation. However, Newcourt's offer made "subject to

credit department approval" is essentially the same as one made

"subject to Newcourt's approval." Such an offer is insufficiently

firm to support a contract in the context presented herein. This

is especially true where the testimony at trial indicated that the

credit decision was to be made by a triumvirate composed of

Newcourt's president, vice-president, and chief financial

o fficer—the same people who were involved in the negotiations of

the deal.

13 have been an offer into a proposal or preliminary negotiation.

Technographics, Inc. v. Mercer Corp.

, 777 F. Supp. 1214, 1216 (M.D.

Pa. 1991), aff'd , 26 F.3d 123 (3d Cir. 1994).

Newcourt's price quote 4 was made "subject to credit department

approval." The inclusion of this condition precludes the price

quote from operating as an offer because Crest Ridge's assent could

not consummate the deal. 5 S ee Gulf States

, 819 F. Supp. at 549-50

(price quote reserving seller's right to back away from deal not an

offer); Technographics

, 777 F. Supp. at 1216 (i nclusion of home

office acceptance clause invalidates price quote as offer); Quaker

State

, 635 F. Supp. at 1284-85 (price quotation subject to company

confirmation not an offer).

The fact that Newcourt's price quote could not operate as an

offer does no t, however, preclude contract formation. Since the

Newcourt price quotation was not an offer, Crest Ridge's subsequent

purchase order constituted the first offer, acceptance of which

constitutes a valid contract. A xelson is instructive. In A xelson

,14

we noted that a price quote containing all material terms could be

construed as an offer capable of acceptance by the buyer. 7 F.3d

at 1233. However, we immediately stated that "[t]here is one

problem with this analysis." I d. That problem was language in the

Axelson price quote implying that the supplier had to accept orders

before a contract was concluded. If this type of provision was

present, "the quotation could not be an offer; it would only be an

invitation for an offer." I d. This is precisely what we have

present in this case. Consequently, Crest Ridge's purchase order

becomes the first offer capable of acceptance by Newcourt. S ee

Technographics

, 777 F. Supp. at 1216; Master Palletizer Sys., Inc.

v. T.S. Ragsdale Co.

, 725 F. Supp. 1525, 1531 (D. Colo. 198 9),

aff'd

, 937 F.2d 616 (10th Cir. 1991). Newcourt did not send an

explicit confirming memorandum accepting this purchase order offer.

However, the UCC makes clear that a contract for sale of goods may

be made in any manner sufficient to show agreement, including

conduct by the parties. S ee Tex. Bus. & Com. Code Ann. § 2.204(a)

(Tex. UCC) (West 1994); see also Axelson , 7 F.3d at 1233 (conduct

by parties recognize existence of contract).

The question of whether an agreement was reached is generally

a fact question where, as here, the existence of the agreement is

disputed. Preston Farm & Ranch Supply, Inc. v. Bio-Zyme Enters.

,

625 S.W.2d 295, 298 (Tex. 1981). In this case, the jury was

instructed that agreement could be manifested by conduct. As the

majority reco unts, there is evidence from which a jury could6 The evidence does not support a finding of credit department

approval, nor could industry practice with respect to the unstated

payment terms negate this specific condition contained in

Newcourt's purported offer. However, such approval is irrelevant

to the case at bar. The credit approval condition was part of

Newcourt's preliminary invitation to an offer. As previously

discussed, the offer ca pable of acceptance was Crest Ridge's

purchase order which left the payment term blank. Thus, I would

reject Newcourt's argument that its price quote was either an offer

or that i ts "subject to credit department approval" language was

somehow subsumed into the subsequent contract with Crest Ridge.

Had Newcourt's initial price quote not suffered from the

infirmity previously discussed, in my view a different result would

indeed be required. This is because the "subject to credit

approval" language, if treated as a condition precedent to contract

formation, precludes the formation of a contract exce pt upon

realization of that condition, which indisputably never occurred.

On the other hand, if the "subject to" language is treated as a condition precedent to an obligation to perform, a contract could

be formed, but there could be no finding of breach because the

condition to performance was never met.

15 conclude that Newcourt's conduct reflected an assent to the

purchase order off er

. 6 The extended exchange between the parties

f ollowing the receipt of the purchase order documents Newcourt's

acceptance. Newcourt was intricately involved in the details of

the project providing samples, revisions of shop drawings,

fastening details, color stipulations, and fi nal drawing showing

where each panel will go. In short, I agree with the majority that

a jury could find that Newcourt's conduct illustrate d that it

thought they had a deal.

Furthermore, the open payment term of Crest Ridge's purchase

order offer does not prevent contract formation as a matter of law.

The open term would simply be filled in according to UCC

provisions. S ee Tex. Bus. & Com. Code An n. §§ 2.204(c), .310(1)

(Tex. UCC) (West 1994). Following a finding of contract formation,

a reasonable jury could also conclude that Newcou rt's demand for16

pay ment in advance constituted a breach of contract. Likewise,

Crest Ridge's cover with an alternate supplier provided a

reasonably certain basis for the calculation of damages.

In this proceed ing involving the sale of goods between

merchants, the UCC, complemented by common law contract principles,

dictates the result reached today. Newcourt was indeed the master

of its own offer. However, in choosing to include a requirement of

credit department approval, Newcourt crafted a putative offer that

was insufficiently firm. This transformed Newcourt's price quote

into an invitation to Crest Ridge to make an offer. Because

Newcourt's price quote was not an offer capable of acceptance, I

disavow any language to that effect. However, Crest Ridge's

subsequent purchase order was a valid off er to buy goods which a

reasonable jury could conclude was accepted by Newcourt's conduct

and later breached by Newcourt's demand letter. I therefore concur

in the judgment.