ConAgra, Inc. v. Nierenberg

Supreme Court of Montana
7 P.3d 369 (2000)

ELI5:

Rule of Law:

Under the UCC's merchant's exception to the statute of frauds, a written confirmation of an oral contract received within a reasonable time is sufficient to create an enforceable contract if the recipient does not object in writing within 10 days. A ten-day period for receipt of the confirmation may be considered reasonable, even in a volatile market, especially if any delay resulted from a misunderstanding about the method of delivery.

Facts:

Dennis Nierenberg, acting for his family's farm, had been selling grain crops since 1986 and was familiar with grain market practices.
On April 9, 1996, during a period of rapidly rising wheat prices, Dennis Nierenberg telephoned Marcus Raba of ConAgra to discuss selling wheat.
During the call, the parties discussed a sale of 12,500 bushels of wheat at $5.01 per bushel, and Nierenberg requested that a written contract be prepared.
A dispute arose as to whether Nierenberg said he would pick up the contract or if it should be mailed.
On April 17, 1996, after Nierenberg did not come to the elevator, ConAgra mailed the written confirmation contract to him.
Nierenberg received the contract on April 19, 1996, ten days after the phone call.
Upon receipt, Nierenberg visited ConAgra to discuss lowering the quantity but did not state that a contract had not been formed.
On April 23, 1996, the Nierenbergs sold the 12,500 bushels of wheat to another buyer, Harvest States, for $5.85 per bushel without notifying ConAgra.
In mid-May, when contacted by Raba, Nierenberg was deceptive, stating he would deliver the wheat 'one of these days' rather than revealing he had already sold it.

Procedural Posture:

ConAgra, Inc. sued Ralph and Dennis Nierenberg in the Ninth Judicial District Court, Toole County, for breach of an oral contract.
The Nierenbergs raised the statute of frauds as an affirmative defense.
The trial court granted partial summary judgment for ConAgra, ruling that Dennis Nierenberg was a 'merchant' as a matter of law.
After a non-jury trial, the District Court entered judgment in favor of the Nierenbergs.
The District Court found the oral contract unenforceable because Nierenberg's testimony did not constitute a judicial admission of the contract and ConAgra's written confirmation was not received within a 'reasonable time' given the volatile market.
ConAgra, as appellant, appealed the judgment to the Supreme Court of Montana, with the Nierenbergs as appellees.

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Issue:

Does a ten-day delay in a grain seller's receipt of a written confirmation of an oral contract constitute an unreasonable time under the UCC's merchant's exception (§ 30-2-201(2)), thereby making the oral contract unenforceable, when the market price for the grain is rapidly rising?

Opinions:

Majority - Justice Nelson

No. A ten-day delay for receipt of a written confirmation is not an unreasonable time under the UCC's merchant's exception, even in a volatile market, and therefore the oral contract is enforceable. The court reasoned that the purpose of the merchant's exception is to facilitate business between merchants who commonly make oral agreements. The UCC allows the recipient 10 days to object in writing, so it is illogical to hold that the reasonable time for receiving the confirmation must be shorter than the objection period. The court rejected the trial court's reasoning, based on the Utah case Lish v. Compton, that a volatile market drastically shortens the 'reasonable time' for receipt. Both parties, as merchants, can use the confirmation process to lock in a price and bear the market risk. Here, the minor delay in mailing was due to a reasonable misunderstanding about delivery. Since Nierenberg, a merchant, received the confirmation within a reasonable time and failed to provide written objection within 10 days, the oral contract became enforceable.

Analysis:

This decision clarifies the 'reasonable time' requirement for the UCC merchant's exception in Montana, particularly within volatile commodity markets. It establishes that a rapidly changing market does not automatically shrink the reasonable time for receipt of a confirmation to only a few days, providing more certainty and stability for merchants relying on oral agreements. The ruling reinforces the principle that both parties in a merchant transaction share the ability and risk of locking in a price via written confirmation. By rejecting a hyper-technical interpretation of 'reasonable time,' the court upholds the efficiency and common practices of industries like agriculture, while emphasizing that a merchant's failure to object to a confirmation in writing has binding legal consequences.

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