Opinion ID: 765542
Heading Depth: 2
Heading Rank: 2

Heading: Whether the Contract Renewal Violated the Statute of Frauds

Text: 18 As an alternate ground for dismissal, the district court held that the renewal of the contract between Zemco and Navistar did not comply with the statute of frauds. We now turn to an evaluation of that contention.
19 In 1983, the parties entered into the original written contract for the sale of parts. The contract was to last one year, but it was extended by written agreements until 1987. There has not been a written contract extension since 1987; the parties, however, have agreed orally to extend the contracts. Navistar submits that the oral contract extensions violate the statute of frauds. Zemco counters that simple time extensions or renewals of the contract need not be in writing because they are merely a modification of a non-definite contract term. 20 We begin our analysis of this question with Indiana Code sec. 26-1-2-209(3), which generally applies to contract modifications. 4 It states that [t]he requirements of the statute of frauds (IC 26-1-2-201) must be satisfied if the contract as modified is within its provisions. Ind. Code sec. 26-1-2-209(3). The interpretation of this provision, which is identical to Uniform Commercial Code (UCC) sec. 2-209(3), has generated controversy among courts and commentators. One view is that all contract modifications must be in writing; another view is that only modifications of terms that are required to be in writing under UCC sec. 2-201 must be in writing. Under the second view, the time extension would not need to be in writing because the length of a contract is not a type of term that needs to be in writing. See Ind. Code sec. 26-1-2-201 & UCC cmt. 1. 5 21 Indiana courts have not interpreted the meaning of sec. 26-1-2-209(3). A substantial number of the courts in other jurisdictions that have considered identical UCC provisions have held that every contract modification must be in writing. See Van Den Broeke v. Bellanca Aircraft Corp., 576 F.2d 582, 584 (5th Cir. 1978) (orally modified warranty); Green Constr. Co. v. First Indem. of America Ins. Co., 735 F. Supp. 1254, 1261 (D.N.J. 1990) (orally modified delivery terms); Leasing Serv. Corp. v. Diamond Timber, Inc., 559 F. Supp. 972, 976-77 (S.D.N.Y. 1983) (orally modified lease terms); Cooley v. Big Horn Harvestor Sys., Inc., 767 P.2d 740, 744 (Colo. Ct. App. 1988), rev'd on other grounds, 813 P.2d 736 (Colo. 1991) (orally modified warranty). Although these courts have provided little analysis, they essentially interpret sec. 2- 209(3) to mean that, if the post-modification contract fits within the terms of sec. 2-201 (i.e., it is a sale of goods for more than $500), then any modification of it must be in writing. The Indiana Commentary appears to agree: Indiana cases seem to use a rather mechanical test--if the original contract had to be in writing then the modifying agreement must also. Ind. Code sec. 26-1-2-209 Ind. cmt. 3. 22 At least one court has held that the writing requirement for modifications applies only to either a change in consideration, or a change in a term that the UCC statute of frauds requires to be in writing. See Costco Wholesale Corp. v. World Wide Licensing Corp., 898 P.2d 347, 351 & n.5 (Wash. Ct. App. 1995). This view also appears to be favored among commentators. 6 The general theory behind this approach is that it would be anomalous, if not inconsistent, to require that a modification be in writing if the same term in the original contract could be proven by parol evidence. Moreover, proponents of this view argue, sec. 2-209(3) explicitly invokes only the writing requirements contained in sec. 2-201-- nothing less and nothing more. 23 We need not decide in the abstract the correct interpretation of sec. 2-209(3). Because the jurisdiction of the district court was based on the diversity of citizenship of the parties, it was obligated to apply the law of Indiana. See Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). Although the Indiana courts have not spoken directly on the matter, we believe that the district court was correct in its estimation that Indiana would follow the majority of jurisdictions and hold that the extension of the contract needed to be in writing. Several considerations lead to this conclusion. First, as we pointed out in Northrop Corp. v. Litronic Industries, 29 F.3d 1173, 1178 (7th Cir. 1994), when a state has tended to follow majority rules and because there is an interest in the uniform nationwide application of the Uniform Commercial Code, we start with a presumption that the state would adopt the majority position. We believe that it is appropriate to articulate the methodology that we employed in Northrop in this case as well. Here, the presumption has not been rebutted. There is no suggestion in this record that Indiana would not follow the majority rule or that its courts would not consider important the goal of uniformity in the interpretation of the Commercial Code. Indeed, the Indiana Legislature has affirmatively directed that, in construing the Code, the goal of uniformity ought to be a guidepost of decision. 7 Moreover, there is some evidence that the Indiana courts would consider that an extension of the contract would need to be in writing. As we have noted earlier, the influential Indiana Commentary on the Indiana Commercial Code suggests strongly that Indiana would require compliance with the statute of frauds in this case. 8
24 Having determined that the requirements of sec. 26-2-1-201 apply to this modification, we must determine whether the requirements are satisfied in this case. Zemco argues that various computer printouts created by Navistar are sufficient to meet the requirements. Those printouts indicate that the contract at issue here had been extended for the year in question, until June 14, 1996. They appear to be forms created by Navistar as a history of the contract and as an update of orders placed by Zemco. 25 Navistar argues that these printouts are an insufficient writing. It notes that Official Comment 3 to Indiana Code sec. 26-2-209(3) states that an authenticated memo modifying an original contract is limited in its effect to the quantity of goods set forth in it. Ind. Code sec. 26-1-2-209(3). Because Navistar paid for all the parts listed in the printouts, it argues that it cannot be held accountable for any more parts. 26 We cannot accept Navistar's argument. A careful reading of comment 3, in conjunction with sec. 2- 201 and sec. 2-306, indicates that this comment is inapplicable to requirements contracts. The comment's suggestion that the effect of a modification memorandum is limited to quantities set forth in the memorandum is a reference to sec. 2-201's requirement that a contract is not enforceable beyond the quantity of goods shown in such writing. Ind. Code sec. 26-1-2-201. However, this quantity limitation does not (indeed, cannot) apply to requirements contracts. See Ind. Code sec. 26-1-2-306 cmt. 1. Therefore, the effect of a modification memorandum is not limited to the quantities listed in it if the contract is a requirements contract. The district court, believing that the contract was not a requirements contract, accepted Navistar's argument. However, because we have held that there is a material issue of fact regarding whether the contract is a requirements contract, we cannot accept Navistar's contention. 27 Navistar also argues that the printouts do not meet the signature requirement of sec. 26-1-2- 201. That section, when read in conjunction with sec. 26-1-2-209(3), requires that a contract modification be signed by the party against whom enforcement is sought. Ind. Code sec. 26-1-2- 201. Indiana's Commercial Code states: 'Signed' includes any symbol executed or adopted by a party with present intention to authenticate a writing. Ind. Code sec. 26-1-1-201(39). The Official Comment to that section states: 28 The inclusion of authentication in the definition of signed is to make clear that as the term is used in this Act a complete signature is not necessary. Authentication may be printed, stamped or written; it may be by initials or by thumbprint. It may be on any part of the document and in appropriate cases may be found in a billhead or letterhead. No catalog of possible authentications can be complete and the court must use common sense and commercial experience in passing upon these matters. The question always is whether the symbol was executed or adopted by the party with present intention to authenticate the writing. 29 Ind. Code sec. 26-1-1-201 cmt. 39. This court, applying Illinois' version of the UCC, has previously held that typed initials or a letterhead could suffice as a signature. See Monetti v. Anchor Hocking Corp., 931 F.2d 1178, 1182, 1185 (7th Cir. 1991); see also Owen v. Kroger Co., 936 F. Supp. 579, 583-85 (S.D. Ind. 1996) (applying Indiana law). 30 We cannot say, on this record, that all of the computer printouts in this case are not adequately signed. The name Navistar is stamped or typed on some of these documents. There is an issue of fact regarding whether these markings were executed with the intention of authenticating the documents. See id. at 585. Summary judgment should therefore not be granted on Count I. 31