Allied Grape Growers v. Bronco Wine Co.
6 U.C.C. Rep. Serv. 2d (West) 1059, 249 Cal. Rptr. 872, 203 Cal. App. 3d 432 (1988)
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Rule of Law:
The doctrine of promissory estoppel is an exception to the Uniform Commercial Code's statute of frauds, and an oral contract for the sale of goods may be enforced where one party is induced by another to seriously change position in reliance on the agreement and would suffer an unconscionable injury if enforcement were denied.
Facts:
- Allied Grape Growers, a cooperative, and Bronco Wine Company, a winery, entered into an oral contract for Bronco to purchase 850 tons of Carnelian grapes from Allied.
- Allied had a pre-existing contract to sell these same Carnelian grapes to another party, United Vintners.
- In reliance on the oral agreement with Bronco, Allied obtained a release from its contract with United Vintners.
- Bronco accepted and paid for one truckload of the Carnelian grapes from Allied.
- Bronco then refused to accept any further deliveries of the Carnelian grapes.
- After Bronco's refusal, heavy rains damaged the perishable grapes, and a glut on the market made it impossible for Allied to resell them to another buyer.
Procedural Posture:
- Allied Grape Growers sued Bronco Wine Company in trial court for breach of contract and other claims.
- A jury returned a verdict in favor of Allied on its breach of contract claims, awarding damages that included compensation for the repudiated oral contract for Carnelian grapes.
- The trial court denied Bronco's post-trial motions for judgment notwithstanding the verdict and for a new trial.
- Bronco Wine Company, as appellant, appealed the judgment to the intermediate court of appeal.
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Issue:
Does the equitable doctrine of promissory estoppel operate as an exception to the California Uniform Commercial Code's statute of frauds for an oral contract for the sale of goods?
Opinions:
Majority - Ballantyne, J.
Yes, the doctrine of promissory estoppel can be applied to overcome the Uniform Commercial Code's statute of frauds. While California Uniform Commercial Code § 2201 generally requires contracts for the sale of goods over $500 to be in writing, § 1103 preserves principles of equity, including estoppel. The court adopts the majority rule from other jurisdictions, holding that promissory estoppel is an additional exception to the statute of frauds. To invoke this exception, a party must prove it suffered an unconscionable injury by being induced to seriously change its position in reliance on the oral agreement. Here, Allied demonstrated unconscionable injury by giving up its contract with United Vintners in reliance on Bronco's promise and was subsequently left with rotting, unsaleable grapes when Bronco breached the oral agreement.
Analysis:
This decision aligns California with the majority of jurisdictions by explicitly recognizing promissory estoppel as an equitable exception to the UCC's statute of frauds. It clarifies that the statute of frauds is not an absolute bar and cannot be used to perpetrate an injustice against a party that has detrimentally relied on an oral promise. The case establishes that courts will look beyond the written requirements of UCC § 2201 to prevent 'unconscionable injury,' providing a crucial remedy in commercial transactions involving oral agreements and significant reliance.
