No. 12826 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

CARGILL INCORPORATED, 

a corporation, 

Plaintiff and Respondent, 

-vs - 

KENNETH L. WILSON, 

Defendant and Appellant. 

Appeal from: District Court of the Twelfth Judicial District, 

Honorable Bernard W. Thomas, Judge presiding. 

Counsel of Record: 

For Appellant: 

Tipp and Hoven, Missoula, Montana 

Vernon Hoven argued, Missoula , Montana 

For Respondent : 

Jardine, Stephenson, Blewett & Weaver, Great Falls, 

Montana 

L. Morris Ormseth argued, Great Falls, Montana 

- - 

Submitted : January 15, 1975 

Decided : MAR 1 1 1975 

Filed : WAR 1 1 1975 

Clerk 
Mr. Justice John Conway Harrison delivered the Opinion of the 

Court . 

This is an appeal from a judgment entered in the district 

court, Hill County, in a breach of contract action initiated by 

Zargill Incorporated against Kenneth Wilson, a Hill County wheat 

farmer. The jury held in favor of Cargill and damages were assessed 

at $21,011.50, including interest and costs. 

Defendant Kenneth Wilson, hereinafter referred to as Wilson, 

is a Havre resident who operates a farm consisting of four sections 

of land near Rudyard, Montana. Plaintiff Cargill Incorporated, 

hereinafter referred to as Cargill, is a large, national grain 

company which maintains a grain elevator in Hingham, Montana. The 

Hingham elevator is managed by one Marcus "Ole" Warren. Warren 

purchased wheat from Wilson during the ten or twelve years prior to 

this lawsuit. 

The events which gave rise to the instant litigation are: 

On the morning of August 24, 1972, Wilson telephoned Warren at the 

Hingham grain elevator to inquire about the current price of wheat. 

Warren quoted a price of $1.50 a bushel. Wilson declined to sell 

his wheat at that time. 

However, during the afternoon of the same day Wilson again 

telephoned Warren and was informed the price of winter wheat had 

dropped four cents a bushel to $1.46. At this point there is a 

conflict in the testimony. Warren testified he and Wilson then 

entered into an oral contract over the telephone whereby Wilson was 

to sell 28,000 bushels of ordinary winter wheat at $1.48 a bushel and 

6,000 bushels of higher protein wheat at $1.63 a bushel. On the 

other hand, Wilson admitted he had entered into an oral agreement 

but testified he had agreed to sell only 11,000 bushels of ordinary 

winter wheat at $1.48 a bushel. 

Following the telephone call, Warren contacted Cargill's head 

office in Great Falls and notified it of the purchase. He also 

completed two standard grain purchase contracts, one numbered 86027 

for the ordinary winter wheat; the other numbered 86028 for the 
higher protein winter wheat. The contracts reflected the terms 

of the agreement as testified to by Warren. Warren signed the 

contracts as agent of Cargill and signed Wilson's name in the 

seller's signature block. 

A few days later Warren delivered a copy of each contract to 

Wilson who noted the terms of the contracts and made no objection 

to them. He also made no objection to the fact that his name had 

been signed to the contracts by Warren. 

On August 30, 1972, Wilson received an interest free advance 

of $10,000 from Cargill. Such an advance is a loan from a grain 

company secured by existing future delivery contracts for grain. 

This loan was interest free by custom but as an advance on the 

contract. Had it not been an advance it would not have been interest 

free. The advance was made by check connected to a detachable part 

of a standard form which identified the transaction and the purpose 

of the payment. The form identified the transaction as "Advance on 

80027 and 86028''. Wilson accepted the check with the form attached 

and made no objection that the form referred to the contracts as 

testified to by Warren. 

During the months of September and October 1972, Wilson began 

hauling his wheat to the grain elevator; 11,000 bushels of ordinary 

winter wheat at the agreed price of $1.48 and 6,000 bushels at a 

higher current market price. However, in December, Warren discovered 

that Wilson did not intend to abide by the terms of the grain purchase 

contracts and deliver the balance of the wheat. A breach of contract 

action was initiated. A Hill County jury found Wilson liable under 

the oral agreement as testified to by Warren. Wilson asserted the 

defense of the statute of frauds at all times during this action. 

Appellant Wilson presents several issues for review on appeal 

but we find the controlling issue is: Whether the oral agreement 

for the sale of the wheat, plus the exchange of several documents, 

was sufficient to remove the oral agreement from the statute of 

frauds? 

We find in the affirmative. 
~ontana's statute of frauds, set forth in the Uniform Commercial Code, section 878-2-201(1), R.C.M.1947, provides: 

11 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. A writing is not insufficient because it omits or incorrectly states a term agreed upon 

but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such 

writing. 1 

The official comment to this section in the Uniform Commercial Code 

states this rule: 

"Only three definite and invariable requirements as 

to the memorandum are made by this subsection. 

First, it must evidence a contract for the sale of 

1 goods; second, it must be signedf, a word which includes any authentication which identifies the party 

to be charged; and third, it must specify a quantity. I1 

Section 87A-2-201(2), R.C.M. 1947, sets forth this principle: 

I1 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 contents is given within ten days 

after it is received." 

In Gravelin v. Porier, 77 Mont. 260, 281, 250 P. 823, this 

Court citing Pomeroy on Contracts, Specific Performance, Sec. 74, 

p. 104, said: 

 he controlling motive of the statute is one of 

expediency and convenience, and this motive has always 

been kept in view by the ablest courts in their work of 

interpretation. As the primary object is to prevent 

mistakes, frauds, and perjuries, by substituting written 

for oral evidence in the most important classes of 

contracts, the courts of equity have established the 

principle, which they apply under various circumstances, 

that it shall not be used as an instrument for the accomplishment of fraudulent purposes; designed to prevent 

fraud, it shall not be permitted to work fraud."' 

In the world of business transactions, the injustices resulting 

from a literal, rigid application of the statute of frauds have 

caused courts, legislators and scholars to reshape and define the 

statute. Two of the qualifications developed are applicable to 

the instant case. One was developed by the legal scholars and enacted 
by the legislature; the other was developed by the courts. The 

two qualifications have two things in common: 

1) A recognition that the law should require some writing 

exchanged between the parties which sets forth their agreement; and 

2) A requirement that the relationship and course of dealings 

between the parties justifies one party's belief that the other 

has consented to the written statement of the contract, even 

though he has not signed it. 

When these conditions are found to exist, the contract may be enforced. The beneficial purposes of the statute of frauds are 

preserved---the dangers of mistake or fraud are averted--- and the 

ends of justice are served. 

Under section 87A-2-201, R.C.M. 1947, the question of whether 

or not Wilson is a merchant within the meaning of the statute, 

will not be considered here for it is obvious that other requirements 

of the statute are met. Evidence of confirmation of the two contracts is: 

It 1) They were given Wilson within a reasonable time", a few 

days following the oral agreement and on the next time Wilson visited 

the elevator. 

I I 2) The agreements were sufficient against the sender" in 

that they were complete as to all details and signed by Warren on 

behalf of Cargill. 

3) They were received by one "who had reason to know its 

contents" --- Wilson admitted the prior oral agreement and that 

he had read the contents of the contracts when he received them. 

4) He did not object "within ten days" after receipt of the 

contracts, nor even within four months. 

We find the requirement of a signed writing was met with the 

interchange of the documents between the parties. The general law 

on the subject is set forth in Restatement of Contracts 9 208: 
''9 208. WHEN SEVERAL WRITINGS CONSTITUTE A 

SUFFICIENT MElOP&NDUM. 

1 I The memorandum may consist of several 

writings, * * * 

"(b) though one writing only is signed if 

"(i) the signed writing is physically 

annexed to the other writing by the party to be 

charged, or 

"(ii) the signed writing refers to the 

unsigned writing, or 

11 (iii) it appears from examination of 

all the writings that the signed writing was 

signed with reference to the unsigned writings. I I 

Here, Wilson admits he was handed contracts numbered 86027 and 

86028 and that he did not then nor later object to their contents. 

Within a few days thereafter, he asked for and received an advance 

payment of $10,000. The memorandum given to him, to which the 

$10,000 check was attached, incorporated the earlier contracts by 

referring specifically to their numbers. The numbered contracts 

did contain all of the essential elements of a contract; the later 

memorandum incorporated these documents by specific reference to 

their numbers. Wilson accepted this memorandum, again without 

any objection as to its contents, and he took the further step of 

signing his name to the check which was attached. When he did this, 

he either signed a sufficient memorandum of an earlier oral contract, 

or he accepted an offer which had been made by Cargill when its 

agent handed him the written numbered contracts. 

Research does not disclose any cases similar to the instant 

one, however, we direct attention to Leach v. Crucible Center 

Company, (1st Cir. 1968), 388 F.2d 176, where the circuit court of 

appeals found that a check and a receipt for the check which were 

exhan5ed on August 4, 1965, and each of which described the property 

and the agreed sales price, fixed the date of a binding transaction 

as August 4, even though a detailed sales agreement and a signed 

statement that an offer had been accepted were not submitted to the 

purchaser until a day later. 
Higby v. Hooper, 124 Mont. 331, 221 P.2d 1043, although not 

closely in point, is a case where a party was bound to the terms of 

a previous oral contract for buildinga house by his signature on 

a letter to a lending agency which referred to plans and specifications set forth on other pieces of paper. Johnson v. Elliot, 123 

Mont. 597, 218 P.2d 703; Johnson v. Ogle, 120 Mont. 176, 181 P.2d 

789; Gantt v. Harper, 86 Mont. 69, 281 P. 915. 

The Uniform Commercial Code, sections 87A-2-204, 87A-2-205 

and 87A-2-206, R.C.M. 1947, read: 

"87A-2-204. Formation in general. (1) A contract for sale of 

goods may be made in any manner suEcient to show agreement, 

including conduct by both parties which recognizes the existence of such a contract. 

I' (2) An agreement sufficient to constitute a contract 

for sale may be found even though the moment of its making 

is unde termined . 11 (3) 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 reasonably 

certain basis for giving an appropriate remedy. ' l 

"87A-2-205. Firm offers. An offer by a merchant to buy 

or sell goods in a signed writing which by its terms gives 

assurance that it will be held open is not revocable, for 

lack of consideration, during the time stated or if no time 

is stated for a reasonable time, but in no event may such 

period of irrevocability exceed three months; but any such 

term of assurance on a form supplied by the offeree must 

be spearately signed by the offeror." 

"87A-2-206. Offer and acceptance in formation of contract. 

(1) Unless otherwise unambiguously indicated by the language 

or circumstances 

"(a) an offer to make a contract shall be 

construed as inviting acceptance in any 

manner and by any medium reasonable in the 

circumstances ;k * *." 

Section 87A-2-204(2) is directed primarily to the situation where 

the interchanged correspondence does not disclose the exact point 

at which the deal was closed, but the actiomof the parties indicate 

that a binding obligation has been undertaken. Under section 

87A-2-205, the signed copy of the contract that Warren gave Wilson 

was at least binding upon Cargill as an offer, and Wilson's subsequent conduct with respect thereto may be found to be an acceptance 

within the meaning of section 87A-2-206, R.C.M. 1947. 
The :problem is thoroughly considered in 3 ~ender's Uniform 

ommercial Code Service, 5 2.04(2), pp. 2-51 through 2-55: 

"A more troublesome problem In ascertaining the form 

required of a writing for it to meet the test of a 

memorandum arises in connection with separate pieces 

of paper, none of which alone is sufficient, but all 

of which, when taken together, would qualify. What 

is required to incorporate past writings? What is 

necessary to permit a reading together of several writings to establish the existence of single memorandum? 

I F This problem was clearly presented in a well-known 

case in which a printed form containing all the essential terms of the bargain had been completed, except 

for the signature of either party. About six months 

later, the defendant-buyer wrote to the seller, asking I I him to please cancel my order, and signed the letter. 

The court stated the rule of incorporation in its 

classic. form: 

"'In order to satisfy the requirements of [the 

statute], the note or memorandum may consist of several 

writings,though the writing containing the requisite 

terms is unsigned, if it appears from an examination of 

all the writings that the writing which is signed by the 

party to be charged was signed with the intention that it 

refer to the unsigned writing, and that the writings are 

so connected by internal reference in the signed memorandum 

to the unsigned one, that they may be said to constitute one 

paper relating to the contract. 1 

"As applied to the case, this statement of the rule was 

not necessarily dispositive of the issue. The later 

writing contained a reference to an order, but the order 

to which it referred was not specifically identified. 

Obviously, an identification, as by number, would make 

application of the rule relatively easy. But the word 

'order' of itself could refer to the prior writing constituting a purchase order, or it could refer to another 

oral communication. It is not essential that the signed 

writing intentionally refer to the prior unsigned writing 

which contains the essential terms of the contract, but 

it is essential that the reference be internal to the 

writing which is signed. The reference must be to the 

writing, and not necessarily to the same transaction. 

In disposing of the case, the court said: 

I1 I If the signed memorandum makes no reference to 

the unsigned memorandum, they may not be read together. 

Parol evidence is inadmissible to connect them * * *. 

Here, we have nothing to indicate that the postal card 

refers to an extrinsic writing. It does not identify 

the unsigned written memorandum 9: * 9: nor does it identify 

any of its terms 9: *. To conclude otherwise would be 

to subvert the spirit of the statute. I 

t I This is the generally accepted view, though admittedly 

it is a fine distinction between a reference which is to the 

same transaction and one which is to another paper. The 

reference to the other paper must be contained in the signed 

writing, whereas that the transaction to which several 

writings refer is the same transaction is a matter which 

may be shown by parol evidence. Though parol evidence is 

not admissible to supply the reference, it is admissible to 
construe words for purposes of establishing the internal 

incorporation by the signed writing. The internal evidence of a common subject matter may be sufficient to 

make the connection. Because of the subjectivity of the 

rules in this area, it is not surprising that the cases 

from jurisdiction to jurisdiction are not in complete 

accord, and the Code makes no attempt to settle the 

uncertainty. In view of the widespread disposition that 

the statute is not always used to prevent fraud, but may 

be an instrument of its perpetration, the admonition of 

Judge Cardozo that the staute should not be pressed to 

the extreme of a literal and rigid logic, should be kept 

in mind. 

"In several of the cases just referred to, the writings 

were negative in character; they were attempted cancellacions, rather than positive memoranda of an existing 

contract. That such documents may satisfy the statute 

is not in question, for it is not the intention of the 

document that is important, but rather its internal 

evidencing of a contract. Thus, a negative writing alone, 

or coupled with a prior unsigned writing, may constitute I I a sufficient memorandum. (Emphasis supplied.) 

The judgment of the district court is affirmed. 

We Concur: 

" .* -d---------'------------r----------,- 

Chief Justice 

....................................... Justices. 

Mr. Justice Frank I. Haswell: 

I concur in the result. 

Justice