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Monetti, S.P.A., and Melform U.S.A., Inc. v. Anchor Hocking Corporation

United States Court of Appeals, Seventh Circuit
931 F.2d 1178 (1991)
ELI5:

Rule of Law:

A writing created before an oral contract is finalized can satisfy the Uniform Commercial Code's statute of frauds if it provides solid evidence of the contract's existence, particularly when corroborated by significant partial performance that is not easily remedied by restitution.


Facts:

  • Monetti, an Italian manufacturer, began negotiations in 1984 with the Schneiders, whose firm was later acquired by Anchor Hocking, to grant them exclusive U.S. distribution rights for its products.
  • In the fall of 1984, Steve Schneider, negotiating for Anchor Hocking, sent a telex to Monetti requesting the preparation of a formal exclusive distribution agreement.
  • In response, Monetti terminated all its existing U.S. distributors and informed its customers that Anchor Hocking would be the exclusive distributor as of December 31, 1984.
  • At a December 18, 1984 meeting, an internal Anchor Hocking memo dictated by Schneider noted "Agree" next to the principal terms of a draft contract, including a ten-year duration and $27 million in minimum purchases, while also adding a note, "We want Canada."
  • Shortly after the meeting, Monetti transferred its entire U.S. business operation—including inventory, records, trade secrets, and know-how—to Anchor Hocking.
  • Several months later, in May 1985, Anchor Hocking fired the Schneiders.
  • In June 1985, a new Anchor Hocking marketing director, Raymond Davis, sent a memo to the company's law department referencing the agreement, attaching a summary of it, and stating both parties wanted a written and signed agreement.

Procedural Posture:

  • Monetti, S.P.A. and Melform U.S.A. (plaintiffs) filed a diversity suit for breach of contract against Anchor Hocking Corp. (defendant) in federal district court.
  • The defendant, Anchor Hocking, filed a motion for summary judgment, arguing the suit was barred by the statute of frauds.
  • The plaintiffs, Monetti, sought to amend their complaint to add a claim of promissory estoppel.
  • The district judge granted the defendant's motion for summary judgment and denied the plaintiffs' request to amend the complaint.
  • The plaintiffs (appellants) appealed both of the district court's rulings to the U.S. Court of Appeals for the Seventh Circuit.

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Issue:

Does a combination of a pre-contractual memorandum indicating agreement to essential terms and substantial partial performance by one party satisfy the statute of frauds, making an alleged oral contract for a mixed sale of goods and business assets enforceable?


Opinions:

Majority - Posner, Circuit Judge.

Yes, the combination of writings and partial performance satisfies the statute of frauds. A pre-contractual writing can satisfy the UCC's statute of frauds if it provides solid evidence of a contract's existence; the statute's use of the past tense ("has been made") should not be interpreted as a strict temporal requirement. Here, the Schneider memo indicated Anchor Hocking's acceptance of the essential terms. This writing, combined with Monetti's subsequent partial performance, provides powerful evidence of a contract. Monetti's performance—turning over its entire business, not just delivering a portion of goods—is a significant act of reliance that cannot be easily undone and strongly implies a binding agreement existed. This type of performance satisfies the traditional partial performance exception to the general statute of frauds. Furthermore, even if the UCC's more restrictive partial performance rule applies, the subsequent Davis memo independently satisfies the UCC's requirement for a signed writing sufficient to indicate a contract was made.



Analysis:

This decision demonstrates a flexible, pragmatic approach to the statute of frauds, particularly in the context of complex, mixed contracts for goods and services. By allowing a pre-contractual memorandum combined with substantial partial performance to satisfy the statute, the court prevents the statute from being used to perpetrate fraud rather than prevent it. This ruling broadens the types of evidence courts can consider, moving away from a rigid requirement for a single, post-formation signed contract. It establishes that for mixed contracts, a court may apply the more lenient partial performance exception from the general statute of frauds, even if the contract is predominantly for the sale of goods under the UCC.

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