Koenen v. Royal Buick Company

Court of Appeals of Arizona, Division 2, Department A
162 Ariz. 376, 783 P.2d 822 (1989)

ELI5:

Rule of Law:

Under the Uniform Commercial Code (UCC), a purchase order for goods valued over $500 satisfies the Statute of Frauds if it indicates a contract has been made, is signed by the party against whom enforcement is sought, and specifies a quantity. Ambiguous or omitted terms, such as price, do not render the contract unenforceable and can be clarified by parol evidence, including the parties' course of dealing.

Facts:

Thomas Koenen, a car collector and repeat customer of Royal Buick Company, learned of a limited edition Buick Regal Grand National Experimental (GNX).
In November 1986, Koenen met with Royal Buick salesperson William Yalen and sales manager Robert Sagar, and Koenen verbally agreed to pay the manufacturer's window sticker price for a GNX.
On February 16, 1987, Koenen signed a purchase order for one GNX, which was also signed by Yalen and Sagar. The document noted 'Price and Availability To Be Determined?' and Koenen provided a $500 deposit.
Yalen and Sagar told Koenen he was 'number one' to receive the car.
On April 21, 1987, General Motors officially notified Royal Buick it would receive one GNX with a window sticker price of $29,290.
After receiving the allocation, Royal Buick's general manager, Tom Bird, decided the car's market value was $44,900 and attempted to make Koenen bid on the vehicle instead of honoring the sticker price agreement.
On May 8, 1987, Royal Buick sent a letter to Koenen returning his deposit and informing him he would not be able to purchase the GNX.
In April 1988, Royal Buick sold the GNX to an Oklahoma physician for $39,750.

Procedural Posture:

Thomas Koenen filed a complaint for breach of contract against Royal Buick Company in an Arizona trial court.
Koenen's suit was joined with a similar complaint from another prospective buyer, Jeff Buchner.
Following a bench trial, the trial court entered a judgment in favor of Koenen, awarding him $15,610 in damages, which represented the difference between the car's market value and the agreed-upon contract price.
Royal Buick Company, the defendant, appealed the judgment to the Court of Appeals of Arizona, making it the appellant and Koenen the appellee.

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Issue:

Does a signed purchase order for a vehicle that specifies the quantity but notes 'Price and Availability To Be Determined?' constitute an enforceable contract under the UCC, where prior dealings and testimony can clarify the ambiguous terms?

Opinions:

Majority - Roll, J.

Yes. A signed purchase order that specifies the quantity of a vehicle constitutes an enforceable contract under the UCC, even if terms like price and availability are ambiguous. The court reasoned that under the UCC's Statute of Frauds (A.R.S. § 47-2201), the only essential term that must be in writing is the quantity. Because the writing indicated a real transaction and was signed by Royal Buick's sales manager, a contract was formed. The court held that the ambiguous terms 'Price and Availability' did not invalidate the contract; instead, parol evidence was properly admitted to clarify them. The established course of dealing between Koenen and Royal Buick, along with testimony from the salesperson, demonstrated that the agreed-upon price was the manufacturer's sticker price. The 'availability' term was interpreted as a condition precedent that was fulfilled when Royal Buick was allocated a GNX from General Motors.

Analysis:

This case illustrates the UCC's flexible approach to contract formation, prioritizing the parties' intent over strict formalities. The decision affirms that a writing can satisfy the Statute of Frauds even with open or ambiguous terms, provided it specifies a quantity and shows an intent to contract. It significantly reinforces the role of parol evidence, particularly course of dealing, in supplying missing terms like price. This precedent makes it more difficult for a party to a commercial transaction to escape its obligations by citing ambiguities in a written agreement, thereby promoting certainty for buyers who rely on purchase orders.

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