Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

Exercise 2

Amber Chemical, Inc. v. Reilly Industries, Inc.
United States District Court, Eastern District of California, 2007. __ F.Supp.2d __.
OLIVER W. WANGER, United States District Judge.
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Amber [Chemical, Inc.] is a wholesale commodity chemical company that specializes in selling chemical inputs to oil field service companies, but has recently expanded to also distribute chemicals to agricultural businesses.
* * * In the fall of each year, Reilly [Industries, Inc.] would provide Amber with firm prices for potassium chloride for the following year. Amber then agreed to purchase a minimum annual quantity of potassium chloride from Reilly at that agreed upon price * * *. Amber [then] placed periodic orders, depending on its needs during any given time period. Amber submitted purchase orders for the purchase of each shipment of potassium chloride. Once Reilly received a purchase order from Amber, Reilly then processed that order and shipped the product.
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Reilly contends that its relationship with Amber ended in March 2004, when Reilly sold its potassium chloride business to another vendor. Amber maintains that during the fall of 2003, through a series of e-mails between Reilly employee Brett Wilhelm and Amber employee Bob Brister, an agreement was reached whereby Reilly would sell Amber potassium chloride throughout 2004 at a fixed price of $122.50 per ton, so long as the volume of potassium chloride purchased by Amber from Reilly met or exceeded the volume it purchased from Reilly in 2003.* * *
At some point, either during or following this exchange of e-mails, Wilhelm called Brister to confirm the quantity of potassium chloride Amber intended to purchase from Reilly in 2004. Brister orally confirmed that Amber would purchase at least as much or more potassium chloride from Reilly as it had in 2003.* * *
It is undisputed that, throughout the early part of 2004, up until March 15, 2004, the date on which Reilly cut off shipments to Amber, Amber bought all of its requirements for potassium chloride from Reilly, and that these purchases were in excess of the quantities it bought in 2003. [Amber brought this suit against Reilly in federal district court, alleging breach of contract. Reilly filed a motion for summary judgment, claiming that the parties did not have a written contract, as the Statute of Frauds required. Amber responded by asserting the doctrine of promissory estoppel.]
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The statute of frauds covers contracts for the sale of goods over $500.* * * Potassium chloride is * * * a "good" for purposes of the statute of frauds. It is undisputed that [the] alleged contract, if formed, was for more than $500 worth of potassium chloride.* * *
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Here, the statute of frauds is not satisfied because the e-mails do not sufficiently indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party. Generally, an offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.* * * A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. [Emphasis added.]
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[Wilhelm's] e-mail did not constitute an offer because it merely invited the parties to "work out a contract" that would be reduced to writing, and evidenced only a willingness to "discuss this proposal." Wilhelm did not "intend to conclude a bargain until he [had] made a further manifestation of assent." As such, this e-mail it is no more than an invitation to negotiate.
* * * Since Wilhelm's prior e-mail did not constitute an offer, it did not create the power in Brister to accept. Nor does Brister's reply purport to actually be an acceptance. Rather, Brister indicates that Reilly should "work the contract up." This language evidences an understanding that no contract yet existed and that Amber intended that any contract be reduced to writing. No written contract was ever prepared.
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Amber asserts that Reilly should be estopped from disclaiming the existence of a contract because Reilly made an oral promise to Amber upon which Amber relied to its detriment.
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The threshold question is whether any oral agreement was reached between the parties prior to Amber's detrimental reliance. To be binding for purposes of promissory estoppel, the promise must be clear and unambiguous. [Emphasis added.]
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Here, Bob Brister testified that the e-mails exchanged in September 2003 and a contemporaneous phone conversation between Mr. Brister (of Amber) and Mr. Wilhelm (of Reilly) resulted in a two-way promise, pursuant to which Reilly promised to provide Amber a firm price for 2004, in exchange for Amber's commitment not only to purchase its requirements from Reilly but to purchase at least as much potassium chloride as it had in 2003.* * * [This] evidence indicates that an oral requirements contract was formed.
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The second requirement to establish promissory estoppel is that the party asserting estoppel must have suffered unconscionable injury * * *. [Emphasis added.]
The undisputed evidence arguably supports a finding of unconscionable injury. Mr. Wilhelm testified that he knew that Amber intended to, and in fact did, rely on the firm price for product offered by Reilly for 2004 by entering into contracts to supply Amber's own customers. Mr. Wilhelm, of Reilly, also testified that he knew that if Amber was unable to meet its commitments to its customer, both as to supply and price, it would be a "very big problem" for Amber. Finally, it is undisputed that Amber suffered financial damages as a result of the alleged breach, because Amber purchased potassium chloride from other sources at unfavorable prices.
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In sum, viewing the evidence in the light most favorable to Plaintiffs, an oral requirements contract was formed * * * and unconscionable injury occurred. Defendant's motion for summary judgment is DENIED * * *.
1. Under the UCC, a contract for a sale of goods must normally state a quantity so that a court will have a basis for determining a remedy. Here, Amber's alleged oral contract did not include a specific quantity. On what basis, then, could the court in this case determine a remedy
2. Reilly included with each shipment a standard invoice stating that it constituted the parties' entire agreement and that its "Standard Terms" could be modified only in a writing signed by the parties. This, Reilly asserted, made those terms "a complete expression of the parties' agreement." Should the court agree with Reilly and apply the parol evidence rule If so, what would be its effect If not, why not