Luria Bros. & Co. v. Pielet Bros. Scrap Iron
600 F.2d 103 (1979)
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Rule of Law:
Under UCC § 2-202, where confirmatory memoranda are intended by the parties as a final expression of their agreement, parol evidence of a prior oral condition is inadmissible if it is inconsistent with the written terms. An oral condition is inconsistent if there is an 'absence of reasonable harmony' with the unconditional terms of the writing.
Facts:
- In September 1973, Lawrence Bloom of Pielet Brothers Scrap Iron & Metal, Inc. ('Pielet') and Richard Fechheimer of Luria Brothers & Co., Inc. ('Luria') discussed via telephone the sale of 35,000 net tons of scrap steel from old barges.
- The parties orally agreed on the quantity, price, and a delivery date of on or before December 31, 1973.
- On September 24, 1973, Pielet sent Luria a signed sales confirmation memorializing the agreed-upon terms, which Luria did not sign or return.
- On October 4, 1973, Luria sent its own purchase confirmation to Pielet, which contained the same core terms but erroneously listed the delivery date as October 31, 1973 and left the shipment mode to Luria's discretion.
- Upon receipt of Luria's form, Bloom telephoned Luria's representative, Forlani, who acknowledged that the delivery date and shipment mode on Luria's form were clerical errors.
- Pielet made excuses for non-delivery into February 1974, citing trouble with its supplier, but never delivered any of the scrap steel.
Procedural Posture:
- Luria Brothers & Co., Inc. filed a complaint against Pielet Brothers Scrap Iron & Metal, Inc. in the federal district court for breach of contract.
- The case was tried before a jury.
- The jury found for Luria and returned a verdict awarding $600,000 in damages.
- Pielet, the defendant, appealed the judgment to the United States Court of Appeals for the Seventh Circuit, making it the appellant. Luria is the appellee.
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Issue:
Does the Uniform Commercial Code's parol evidence rule, § 2-202, bar evidence of an alleged prior oral agreement that conditions the seller's performance on obtaining goods from a specific supplier when the parties' subsequent written confirmations call for an unconditional sale?
Opinions:
Majority - Chief Judge Fairchild
Yes. The UCC's parol evidence rule bars evidence of a prior oral agreement that is inconsistent with the terms of the parties' written confirmations. Where writings intended by the parties to be a final expression of their agreement call for an unconditional sale of goods, parol evidence that the seller’s obligations are conditioned upon receiving the goods from a particular supplier is inconsistent and must be excluded. The court determined that a contract existed, either orally or through the conduct of the parties under UCC § 2-207(3). The court then analyzed whether the proffered parol evidence of a condition precedent (that Pielet's performance was contingent on its supplier) was admissible under UCC § 2-202. The court rejected a narrow view of inconsistency that requires direct contradiction and adopted a broader standard: inconsistency is 'the absence of reasonable harmony in terms of the language and respective obligations of the parties.' An unconditional written sale is not in 'reasonable harmony' with an oral condition excusing performance if a specific supplier fails. Furthermore, under Comment 3 to § 2-202, such a significant condition would certainly have been included in the written document if it had truly been agreed upon. Therefore, the district court correctly excluded the evidence. The court also found Pielet's commercial impracticability defense under § 2-615 failed because Pielet did not prove its source had failed or that substitute goods were unavailable.
Analysis:
This case is significant for its adoption of a broader interpretation of 'inconsistent' under UCC § 2-202, which governs parol evidence. By rejecting the narrow 'direct negation' test in favor of an 'absence of reasonable harmony' standard, the court makes it more difficult for parties to introduce evidence of prior oral agreements that would alter the fundamental obligations of a written contract. This decision strengthens the finality of written confirmatory memoranda in commercial transactions, promoting certainty and predictability. It signals to commercial actors that crucial conditions, such as reliance on a single supplier, must be explicitly included in the written agreement to be enforceable.
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