As a defense, Albert asserted the UCC statute of frauds. If it is determined that Albert is not a merchant, the elevator might be able to recover if it can establish that it changed its position in reliance on Albert's conduct, that Albert knew or reasonably should have known the elevator would sell the forward contract, or can demonstrate that nonperformance by Albert was based on Albert's desire to benefit from a higher market price. As this example illustrates, determining whether a particular farmer or rancher is a merchant is significant. Courts are divided on the issue of whether a farmer or rancher is a merchant, with the outcome depending on the jurisdiction and the facts of the particular case. Unfortunately, in many instances farmers and ranchers cannot know with certainty whether they are merchants without becoming involved in legal action.
Courts consider several factors in determining whether a particular farmer is a merchant.
In one of the better known cases, the Texas Supreme Court ruled that a farmer who sold cotton and wheat produced on a 1,200-acre farm was a merchant. The farmer sold all of the production for each of the previous 5 years and daily kept abreast of current market prices and conditions by talking to grain dealers and listening to the radio. The Wisconsin Court of Appeals has held that a person who did not own a farm and who had sold grain in small quantities on only three previous occasions was not a merchant. Similarly, the Alabama Supreme Court has held that a farmer who made only occasional sales of corn and did not perform additional marketing activities was not a merchant. If a contract fails to state a time for the delivery of goods, a reasonable time is assumed.