Court Opinion

ID: 9743019
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:24:09.583934+00
Date Added: 2024-06-11T07:24:38.559582
License: Public Domain

DAVID T. PROSSER, J.
¶ 71. 0dissenting). Chapter 402 of the Wisconsin Statutes creates a regulatory framework for commercial sales transactions in Wisconsin. The chapter is Wisconsin's codification of Article 2 of the Uniform Commercial Code (UCC).
¶ 72. Section 402.201(1) embodies Article 2's statute of frauds. It reads in part: "[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." Wis. Stat. § 402.201(1).
¶ 73. Section 402.209 addresses "Modification, rescission and waiver." Subsection (2) reinforces § 402.201(1): "A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded." Wis. Stat. § 402.209(2). Subsection (3) adds: "The requirements of § 402.201 must be satisfied if the contract as modified is within its provisions." Wis. Stat. § 402.209(3).
¶ 74. These provisions establish the basic "rule" about written sales contracts. As indicated, parties are entitled to supplement the basic rule with specific contractual language prohibiting modifications that are not in writing. Wis. Stat. § 402.209(2).
*296¶ 75. ' The "PREPAY SALES AGREEMENT" for nitrogen fertilizer between Royster-Clark and Olsen's Mill states that "this contract shall be governed by and interpreted pursuant to the provisions of the Uniform Commercial Code." The contract also provides that "[n]o additional or different terms shall be binding on seller unless specifically accepted by seller in writing."
¶ 76. Royster-Clark maintains that both Chapter 402 and the contract itself require that any modifications to the nitrogen contract be in writing before they are binding upon Royster-Clark.
¶ 77. Olsen's Mill acknowledges the applicability of the UCC to the contractual agreement. However, it emphasizes that there are recognized exceptions to the UCC's statute of frauds and to contractual no oral modification clauses.
¶ 78. In particular, subsection (4) of § 402.209 creates a waiver exception: "Although an attempt at modification or rescission does not satisfy the requirements of sub. (2) or (3) it can operate as a waiver." Wis. Stat. § 402.209(4).
¶ 79. Subsection (5) then provides: "A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver." Wis. Stat. § 402.209(5).
¶ 80. The meaning of the waiver language in Wis. Stat. § 402.209 was carefully considered in Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280 (7th Cir. 1986) (rehearing and rehearing en banc denied Feb. 19, 1986). The majority opinion, written by Judge Richard Posner, held that an attempted oral modifica*297tion of a written contract that precludes modifications except in writing operates as a waiver only if there is reliance on the attempted modification. Judge Posner's discussion is exceptionally helpful in putting the provisions of § 402.209 in context. Wis. Knife Works, 781 F.2d at 1286-87.
¶ 81. Judge Posner acknowledged that not all decisions and commentators insist that reliance is a necessary condition of an unwritten waiver. For instance, he quoted Hawkland, "if clear factual evidence other than mere parol points to that conclusion [that an oral agreement was made altering a term of the contract], a waiver may be found. In the normal case, however, courts should be careful not to allow the protective features of sections 2-209(2) and (3) to be nullified by contested parol evidence." Id. at 1287 (quoting 2 Hawkland, Uniform Commercial Code Series § 2-209:05 at 138 (1985)).
¶ 82. Judge Frank Easterbrook dissented. He explained: " 'Waiver' is not a term the UCC defines. At common law waiver means an intentional relinquishment of a known right. A person may relinquish a right by engaging in conduct inconsistent with the right or by a verbal or written declaration." Id. at 1290 (Easter-brook, J., dissenting).
¶ 83. The legal issue presented in this case is whether the acts of Royster-Clark in the circumstances before us constitute a valid waiver under § 402.209(4). Regardless of how this court might choose to interpret § 402.209(4), we must do our best to maintain the integrity and uniformity of the UCC in applying the law.
¶ 84. In essence, Olsen's Mill contends that Royster-Clark waived two critical provisions of the nitrogen fertilizer contract. First, it allegedly waived *298the "no modification except in writing" provision. Second, it allegedly waived the price provision, so as to allow Olsen's Mill a rebate or a credit on future purchases.
¶ 85. To recap: The parties entered into a written contract for the sale to Olsen's Mill of 2000 tons of nitrogen fertilizer. The price agreed upon was $384,000. Olsen's Mill paid the $384,000 to Royster-Clark before obtaining a single pound of fertilizer under the contract.
¶ 86. Paul Olsen testified that Olsen's Mill had been doing business with Royster-Clark since the early 1960s and that he had worked with Roger Ralston in different capacities for 18 years. During most of this relationship between Royster-Clark and Olsen's Mill, their agreements had been "verbal." This practice continued with an oral agreement in mid-May 2001 to purchase an additional batch (about 300 tons) of "Super Rainbow" fertilizer.
¶ 87. With respect to the nitrogen fertilizer contract, Olsen testified that Olsen's Mill intended to purchase 500 tons on a prepay agreement in January 2001 but Roger Ralston "asked if we would purchase the total lot of 2000 ton from him.... [I]n order to [re]start the plant and get product, he needed to sell the 2000 ton, so we agreed to purchase 2000 ton of product so we had it for sale to our customers."
¶ 88. Robert Rainey acknowledged that "[w]e did have a plant shut down from. .. about the middle of December I think until around the end of January."
¶ 89. Olsen testified in response to questions:
Q: When did yon actually need this [nitrogen] product?
*299A: We needed the product very shortly. Royster-Clark wasn't producing any product and the plant wasn't running at the time of this agreement and we were selling product.
Q: So was the product available in February or March or even April?
A: No. We went out and purchased an additional 1000 ton... off of the Illinois River, and that was trucked up during the months of February-March to fill ours.
Q: So . . . Royster-Clark was not able to fulfill the contract earlier in the year as you requested?
A: Correct. Roger — We knew when Roger came to us, he was getting spread pretty thin and he didn't want us to pull it all at one time. He was trying to spread his inventory production out to take care of as many people as he could.
¶ 90. Ralston testified that Olsen's Mill was "concerned in April; I know that." He confirmed that in April, the demand for the nitrogen product was greater than the supply.
¶ 91. Olsen's Mill made the first pickup of the nitrogen product on May 17,2001. No doubt, some of the delay resulted from a precipitous change in the weather. As Olsen testified, "We had a very good April until the 28th of April when it started to rain for 40 days."
¶ 92. About the middle of June, Olsen talked to Ralston about the situation and told him that a lot of farmers had decided not to plant crops because of the bad weather. By this time, supply of the nitrogen product had gone up, while the price and demand for *300the product had plummeted. Olsen asked Ralston for price concessions, or to allow Olsen's Mill to buy out the contract, or to cancel the contract. Ralston, however, pleaded with Olsen to take the full 2000 tons.
¶ 93. There is no dispute that "concessions on the nitrogen contract were discussed." Majority op., ¶ 6. It is also true that Olsen's Mill did not pursue the option of a buyout. Instead, it accepted delivery of the remaining 1300 tons on the contract, and even more.
¶ 94. It is entirely reasonable to believe that Olsen's Mill expected some significant price concessions on the nitrogen contract because of the longstanding relationship and course of dealing with Royster-Clark; the fact that it ordered more product than originally intended at the request of Royster-Clark; the fact that it prepaid $384,000 for the product; the fact that Royster-Clark failed to timely perform the contract; the fact that Royster-Clark's failure of performance required Olsen's Mill to go out and buy 1000 tons of nitrogen fertilizer from another vendor; the fact that Ralston had negotiated a mutually beneficial oral contract for Super Rainbow less than a month before the talk of concessions; the willingness of Olsen's Mill to make accommodations with Royster-Clark in not demanding nitrogen product in March and April when the supply was short; and the usage of trade in the industry. It is reasonable to believe that Olsen's Mill acted on this expectation.
¶ 95. There is not much evidence, however, that Roger Ralston made a commitment to modify the price on the written contract, or that Ralston would have had authority to do so. Even Olsen's testimony as to a firm "promise" is equivocal.
¶ 96. There is no evidence that Olsen's Mill took an additional 34.6 tons in return for a price concession on the January contract.
*301¶ 97. Olsen's Mill's responsibility to pick up product and bear shipping costs from East Dubuque was anticipated in the contract. Consequently, the timing of the pickups was entirely the responsibility of Olsen's Mill once the nitrogen product became available.
¶ 98. The Super Rainbow contract was negotiated separately about a month before the discussion of concessions, so that it was not a direct factor.
¶ 99. In other words, Olsen's Mill abandoned the option of trying to buy out the contract and accepted the product on a mere promise that Ralston would try to obtain price concessions. These facts do not demonstrate an induced reliance in June 2001 by Olsen's Mill. These facts do not establish an intentional relinquishment of a known right by Royster-Clark. There is no "clear factual evidence" of an attempted modification by the two parties.
¶ 100. Much as I am tempted to rely on historical course of dealing and trade usage, I do not see these factors overcoming the strict terms of the contract. See Wis. Stat. § 402.208(3).
¶ 101. My vote to affirm the court of appeals does not signal my approval of Royster-Clark. On the contrary, in my view, Royster-Clark breached the contract by failing to make the nitrogen product timely available for Olsen's Mill to pick up, thereby causing real hardship to a good and faithful customer. Unfortunately, the question of breach is not the question before us.