Farm Equipment Store, Inc. v. White Farm Equipment Co.
18 U.C.C. Rep. Serv. 2d (West) 1053, 1992 Ind. App. LEXIS 1139, 596 N.E.2d 274 (1992)
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Rule of Law:
Under the Uniform Commercial Code, a party's course of performance that operates as a waiver of one specific contract provision does not result in a wholesale waiver or modification of other, separate, and fundamentally different provisions in the contract, even if they pertain to a similar subject matter.
Facts:
- Farm Equipment Store, Inc. (Farm Equipment) was a dealer for White Farm Equipment Company (White Farm) before White Farm declared bankruptcy in 1985.
- Allied Products Corporation (Allied) acquired certain assets from White Farm's bankruptcy estate, free of any of White Farm's obligations to its dealers.
- In February 1986, Farm Equipment executed a new dealer agreement with Allied.
- The agreement contained two distinct provisions: an 'Annual Parts Return' program for limited credit during the contract term, and a 'Repurchase on Termination' clause requiring Allied to buy back only parts purchased directly from Allied.
- During the contract term, Allied accepted some parts originally purchased from its predecessor, White Farm, under the limited Annual Parts Return program.
- On June 14, 1988, Allied sent a letter to Farm Equipment terminating the dealer agreement.
- Upon termination, Allied repurchased approximately $40,000 in parts that Farm Equipment had purchased from it, but refused to repurchase approximately $210,000 in parts that Farm Equipment had purchased from Allied's predecessor, White Farm.
- Farm Equipment sought to force Allied to repurchase the predecessor parts, claiming Allied's prior actions had modified the contract.
Procedural Posture:
- Farm Equipment filed suit against Allied in an Indiana state trial court.
- Farm Equipment filed an amended complaint, alleging the dealership agreement had been modified 'through a course of dealing.'
- Allied moved for summary judgment on the modification claim.
- The trial court granted partial summary judgment in favor of Allied, finding no modification of the written agreement as to the repurchase of parts upon termination.
- Farm Equipment, as appellant, appealed the trial court's grant of summary judgment to the Court of Appeals of Indiana.
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Issue:
Does a seller's course of performance in accepting parts purchased from a predecessor under an annual return program modify a separate contract provision that explicitly limits the seller's repurchase obligation upon termination to only those parts purchased directly from the seller, despite a 'no oral modification' clause?
Opinions:
Majority - Hoffman, Judge
No. A seller's course of performance that waives a specific and limited contract provision does not automatically modify a separate and fundamentally different provision. The court reasoned that the 'Annual Parts Return' program and the 'Repurchase on Termination' clause were distinct in purpose, timing, and financial scope. The annual program involved a limited credit (not a cash repurchase), was capped at a small percentage of annual purchases, and was intended to foster goodwill while the contract was active. In contrast, the termination clause involved a large-scale cash repurchase obligation that took effect only after the business relationship ended. Therefore, any waiver by Allied in accepting predecessor parts under the annual program was confined to that specific program and did not constitute a 'wholesale waiver' that would rewrite the clear and separate termination provision.
Analysis:
This decision clarifies the scope of waiver by course of performance under the UCC, establishing that a waiver can be narrowly applied to the specific contract term at issue rather than the entire agreement. It reinforces the strength of 'no oral modification' clauses by preventing a party's minor accommodation in one area of performance from unintentionally rewriting major, distinct obligations elsewhere in the contract. The ruling provides certainty for contracting parties, signaling that courts will distinguish between fundamentally different contract provisions and will not allow a waiver of one to bleed over into another without clear evidence of such intent.
