Opinion ID: 805147
Heading Depth: 1
Heading Rank: 2

Heading: UPC and Westlake’s Contract

Text: “Whether a particular agreement is an enforceable contract is a question of law reviewed de novo.”5 Even though the question whether an agreement is legally binding is a question of law, whether an agreement was reached at all is a question of fact.6 In this case, the jury made a factual determination that the parties intended to bind themselves to a contract. This court is “wary of upsetting jury verdicts,” and, accordingly, “[a] jury verdict must be upheld unless there is no legally sufficient evidentiary basis for a reasonable jury to find as the jury did.”7 Furthermore, “we are bound to consider the evidence and all reasonable inferences therefrom in the light most favorable to the jury verdict.”8 Finally, claims...” FED. R. CIV. P. 54(b). 5 Martin v. Martin, 326 S.W.3d 741, 747 (Tex. App.–Texarkana 2010). Because UPC removed this case to federal court pursuant to diversity jurisdiction, Texas substantive law applies. Erie R.R. v. Tompkins, 304 U.S. 64 (1938). To determine issues of state law, we look to final decisions of the state’s highest court, and when there is no ruling by that court, then we have the duty to determine as best we can what the state’s highest court would decide. Transcon. Gas Pipeline Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992) (citations omitted). 6 Quanta Servs. Inc. v. Am. Admin. Grp. Inc., 384 F. App’x 291, 296, No. 08-20252, 2008 WL 5068804 (5th Cir. Dec. 2, 2008) (unpublished) (citing Komet v. Graves, 40 S.W.3d 596, 601-02 (Tex. App.– San Antonio 2001, no pet.)). 7 Travelers Cas. and Sur. Co. of America v. Ernst & Young LLP, 542 F.3d 475, 481-82 (5th Cir. 2008) (citation and internal quotation marks omitted). 8 Haley v. Pan Am. World Airways, Inc., 746 F.2d 311, 317 (5th Cir. 1984) (citing Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir.1969)). 7 Case: 10-20634 Document: 00511931930 Page: 8 Date Filed: 07/24/2012 No. 10-20634 “[w]e must not substitute for the jury’s reasonable factual inferences other inferences that we may regard as more reasonable.”9 Appellants have presented a number of arguments why a binding contract was not formed between UPC and Westlake. We address each of these below.

Appellants contend that UPC’s agreement with Westlake lacked consideration and cannot be enforced. Specifically, Appellants assert that there was no mutual obligation between the parties because Westlake retained the unilateral discretion to subject delivery to its approval of UPC’s credit, which it never did. According to Appellants, therefore, Westlake’s promise under the agreement was illusory; and, because Westlake was not truly bound to perform, its agreement is not an enforceable contract under Texas law. “Consideration is a present exchange bargained for in return for a promise.”10 “It consists of either a benefit to the promisor or a detriment to the promisee.”11 “A promise is illusory if it does not bind the promisor, such as when the promisor retains the option to discontinue performance.”12 Such illusory promises, therefore, lack mutuality of obligation and do not constitute a contract.13 9 Rideau v. Parkem Indus. Servs., Inc., 917 F.2d 892, 897 (5th Cir. 1990) (citing Glass v. Petro-Tex Chem. Corp., 757 F.2d 1554, 1559 (5th Cir.1985)). 10 Roark v. Stallworth Oil and Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991) (citing Connell v. Provident Life & Accident Ins. Co., 224 S.W.2d 194, 196 (1949)). 11 Id. (citation omitted). 12 In re 24R, Inc. 324 S.W.3d 564, 567 (Tex. 2010). 13 Id. 8 Case: 10-20634 Document: 00511931930 Page: 9 Date Filed: 07/24/2012 No. 10-20634 In this case, the jury found that Westlake and UPC intended to form a binding contract. Although we note that Appellants refer — out of context — to various statements made by witnesses during the trial that some such deals are “subject to credit approval,” we can find no testimony or other record evidence indicating that Westlake had the unilateral right to rescind the contract without being subject to a breach of contract claim. By contrast, Westlake adduced evidence at trial that a deal such as this becomes binding once the “veil is lifted” and no party rejects the counterparty during a short period of time that follows. Westlake also presented testimony that industry custom permits specific additional terms, such as payment and credit, to be worked out after formation of the buy and sell contract. Van Der Wall gave Brice permission to enter a bid for ethylene on behalf of UPC. Brice matched UPC’s bid with Westlake’s offer. It is undisputed that neither party timely objected after the veil was lifted. Thus, a binding contract was formed. Furthermore, any contention that the deal was subject to a condition precedent of UPC providing credit acceptable to Westlake lacks merit because, as further discussed below, the record makes clear that the condition of obtaining acceptable credit was at most a condition precedent to performance, not to the formation of the contract.14 Having determined that there is a “legally sufficient evidentiary basis” for the jury to have concluded that the parties formed a binding contract, we will not disturb the jury’s verdict on the basis of Appellants’ assertion that the contract lacked consideration.
14 See Crest Ridge Constr. Grp., Inc. v. Newcourt Inc., 78 F.3d 146, 150 (5th Cir. 1996) (upholding jury verdict and noting that, based on dealings between the parties, the jury could have concluded that “subject to credit department approval” language in price quotation was a condition precedent to performance, not to contract formation). 9 Case: 10-20634 Document: 00511931930 Page: 10 Date Filed: 07/24/2012 No. 10-20634 Appellants assert that the agreement fails to satisfy both the Texas and the Uniform Commercial Code’s (“UCC”) statutes of frauds because (1) the written confirmations of the deal failed to contain any agreement on UPC’s credit, an essential element of the agreement, and (2) Brice was not authorized to bind UPC in a contract. We now address each of these points.15
Appellants insist that credit was essential to UPC’s agreement with Westlake, so that the putative contract does not satisfy either the UCC or the Texas statutes of frauds. Under the UCC, the only essential term that must be contained in a written agreement for the sale of goods over $500 is the quantity. Specifically, the UCC statute of frauds’s writing requirement states: 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.16 In addition, a comment to this provision states: The required writing need not contain all the material terms of the contract and such material terms as are stated need not be precisely stated. All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction. It may be written in lead pencil on a scratch pad. It need not indicate which party is the buyer and which the seller. The only term which must appear is the quantity term which need not be accurately stated 15 Westlake asserts that, to the extent that the Texas statute of frauds conflicts with the UCC, the UCC preempts the state statute. Because we find that the agreement meets the requirements of both provisions, we do not address this issue. 16 TEX. BUS. & COM. CODE ANN. § 2.201(a) (Vernon 2003). 10 Case: 10-20634 Document: 00511931930 Page: 11 Date Filed: 07/24/2012 No. 10-20634 but recovery is limited to the amount stated. The price, time and place of payment or delivery, the general quality of the goods, or any particular warranties may all be omitted.17 In this case, the written confirmations sent by Brice to both parties by instant message and email immediately after the deal was “done” meet the requirements of the UCC’s statute of frauds.18 These confirmations included the essential quantity provision (5 million pounds per month), as well as the price ($0.54 per pound), the product (ethylene), and the delivery terms (monthly during the 2009 calendar year, delivered via pipeline to Mont Belvieu-Williams). Regardless of the credit term, the UCC’s statute of frauds writing requirement was met in this case. The agreement between UPC and Westlake also satisfies the Texas statute of frauds. The Texas general statute of frauds requires “[a] promise or agreement... or memorandum...[to be] in writing; and signed by the person to be charged with the promise or...by someone lawfully authorized to sign for him.”19 The writing also must contain “all of the essential elements of the agreement so that the contract can be ascertained from the writing . . .”20 As previously discussed, we are satisfied that UPC did not present any evidence at trial (or pointed to any on appeal) which firmly establishes that credit terms were 17 TEX. BUS. & COM. CODE ANN. § 2.201(a) cmt.1 (Vernon 2003) (emphasis added); see also § 2.204(a) (“A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”) 18 Den Norske Stats Oljeselskap, A.S, v. Hydrocarbon Processing Inc., 992 F. Supp. 913, 914-15 (S.D. Tex. 1998) (holding that the broker’s confirming memoranda “reliably evinces agreement.”), aff’d, 161 F.3d 8, No. 98-20190, 1998 WL 723858 (5th Cir. Oct. 6, 1998) (unpublished). 19 TEX. BUS. & COM. CODE ANN. § 26.01 (Vernon 2005). 20 Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex. 1978) (citation omitted). 11 Case: 10-20634 Document: 00511931930 Page: 12 Date Filed: 07/24/2012 No. 10-20634 “essential” to the contract. In fact, trial evidence indicates that the industry norm is to negotiate payment and credit terms after formation of the contract. Therefore, the writing requirement of the Texas statute of frauds was met in this case.
Appellants also contend that the contract violated the statutes of frauds because Westlake did not obtain a specific jury finding that Brice had authority to bind UPC to a contract. Appellants concede, however, that there is evidence showing that Van Der Wall authorized Brice to agree to price, quantity, delivery, and location terms. We agree with Westlake that the jury properly found that Brice was authorized to bind UPC to a contract. The jury heard Van Der Wall’s testimony that he authorized Brice to bid $0.54 per pound for 5 million pounds of ethylene per month. The jurors also heard Brice testify that he was authorized to do so by Van Der Wall. At the least, this evidence shows that Brice was authorized to enter into a binding contract under both the UCC and Texas state statutes of frauds. Brice was authorized to agree to quantity, the only essential term under the UCC. And, as we have already concluded, credit was not an essential term. Therefore, the agreement meets the requirements of both statutes of frauds.
Lastly, Appellants claim that the only reasonable view of the trial evidence is that Westlake’s approval of credit for UPC was a condition precedent to the formation of a final, binding contract. We disagree. As discussed above, the evidence in the record does not firmly establish that the parties intended the credit issue to be a condition precedent to the contract. Appellants repeatedly point to phrases such as “subject to” approval of credit and “pending credit” contained in Brice’s confirmations in an effort to support their contention that credit was a condition precedent to a binding 12 Case: 10-20634 Document: 00511931930 Page: 13 Date Filed: 07/24/2012 No. 10-20634 contract. At trial, however, Brice testified that such notations were merely reminders that credit would need to be worked out between the parties. He stated that it is industry custom to work out credit details closer to performance, well after a deal is reached. Brice also explained that his reference to credit meant that both parties had the right to reject the counterparty at the moment the “veil was lifted.” Yet, neither party objected after the veil was lifted. After the time for objecting lapsed, a binding contract was established. The credit term simply was not a condition precedent to the formation of a binding contract. More sensibly, the credit issue was related to a pre-condition to Westlake’s performance. “A condition precedent to an obligation to perform [ ] does not prevent contract formation, but does prevent a duty to perform from arising except upon realization of the condition. As such, a condition precedent to an obligation to perform may be one of several terms of an already formed contract.”21 We conclude that Westlake and UPC did indeed form a binding contract when neither objected following the lifting of the veil.