Decatur Cooperative Association v. Urban
219 Kan. 171, 547 P.2d 323, 18 U.C.C. Rep. Serv. (West) 1160 (1976)
Rule of Law:
A farmer is not considered a "merchant" under the Uniform Commercial Code merely by raising and selling their own crops; however, the doctrine of promissory estoppel may be invoked to enforce an oral contract normally barred by the Statute of Frauds if the promisee reasonably relied on the promise to their detriment.
Facts:
- Franklin Urban was a wheat farmer with 20 years of experience who was a member of the Decatur Cooperative Association.
- The Cooperative had a policy of never speculating on grain prices, meaning they immediately resold any grain they purchased from farmers.
- On July 26, 1973, Urban called the Cooperative and allegedly entered into an oral agreement to sell 10,000 bushels of wheat at $2.86 per bushel.
- Relying on this oral conversation, the Cooperative immediately resold the wheat to a terminal elevator for a higher price.
- The Cooperative sent a written confirmation of the sale to Urban, who received it and did not object to its contents within ten days.
- Following the phone call, the market price of wheat rose substantially.
- On August 13, 1973, Urban notified the Cooperative that he would not deliver the wheat, repudiating the alleged agreement.
- The Cooperative faced financial loss because they had already committed to sell the wheat they thought they had purchased.
Procedural Posture:
- Decatur Cooperative Association sued Franklin Urban in the district court (trial court) for possession of wheat or damages.
- Urban filed a motion for summary judgment, arguing the oral contract was unenforceable under the Statute of Frauds.
- The trial court found that Urban was not a "merchant" under the UCC.
- The trial court granted Urban's motion for summary judgment.
- Decatur Cooperative Association appealed the summary judgment ruling to the Supreme Court of Kansas.
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Issue:
Is a wheat farmer who sells his own crops considered a "merchant" under the Uniform Commercial Code such that his failure to object to a written confirmation binds him to an oral contract, and if not, is he equitably estopped from asserting the Statute of Frauds as a defense?
Opinions:
Majority - Commissioner Harman
No, regarding the merchant status, but Yes, regarding the potential for equitable estoppel. The Court reasoned that under the Uniform Commercial Code (UCC), a "merchant" is defined as one who deals in goods of the kind or holds themselves out as having specific professional knowledge or skill regarding the practices involved. While a farmer has professional skill in growing crops, they do not necessarily hold themselves out as professionals in the business of buying and selling (marketing) those goods. Therefore, the UCC provision that allows a written confirmation to satisfy the Statute of Frauds between merchants did not apply to Urban. However, the Court further reasoned that the UCC preserves principles of equity, including estoppel. Since the Cooperative changed its position by reselling the wheat in reliance on Urban's oral promise, and Urban knew or should have known this would happen, preventing the Cooperative from enforcing the contract via the Statute of Frauds could amount to sanctioning a fraud or injustice. Thus, the doctrine of promissory estoppel could override the Statute of Frauds defense.
Analysis:
This case is significant because it highlights the judiciary's struggle to adapt commercial codes to the agricultural sector. By ruling that a farmer is not a "merchant," the court protects farmers from being inadvertently bound by business paperwork they might not understand or prioritize. However, by simultaneously allowing "promissory estoppel," the court prevents this protection from being used as a sword to commit fraud against grain elevators that rely on oral agreements to function. This creates a balanced, albeit complex, standard where facts must be weighed to determine if reliance was reasonable and if injustice occurred.
