Schmieder v. Standard Oil Co. of Indiana
69 Wis. 2d 419, 230 N.W.2d 732, 17 U.C.C. Rep. Serv. (West) 360 (1975)
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Rule of Law:
When a contract for the sale of goods under the Uniform Commercial Code leaves the price to be mutually agreed upon, but the parties fail to agree, the buyer's acceptance of the goods does not obligate them to pay the seller's unilaterally demanded price; instead, a reasonable price will be determined by the court.
Facts:
- Schmieder and Standard Oil Co. had an employment contract that included a clause giving Standard Oil an option to purchase Schmieder’s equipment.
- The option clause stipulated that the purchase price for the equipment would be Schmieder’s cost less such depreciation as might be mutually agreed upon by both parties.
- Standard Oil exercised its option to purchase Schmieder’s equipment.
- Schmieder submitted a list of his equipment to Standard Oil with an "invoice price" of $5,103.50.
- Standard Oil did not reject the equipment until September 1968.
- Schmieder and Standard Oil Co. never mutually agreed upon the depreciation amount for the equipment.
- Schmieder did not provide Standard Oil with his claimed depreciation until many months after the termination of the contract.
Procedural Posture:
- A trial court (court of first instance) determined a reasonable depreciation rate of 33 1/3 percent for Schmieder's equipment and entered a judgment establishing the amount Standard Oil Co. owed Schmieder.
- Schmieder (appellant) appealed the trial court's judgment to the Supreme Court of Wisconsin.
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Issue:
Does a buyer's acceptance of goods, where the contract stipulates the price is to be Schmieder's cost less such depreciation as may be mutually agreed upon but the parties fail to reach that agreement, obligate the buyer to pay the seller's unilaterally declared "invoice price" under the Uniform Commercial Code?
Opinions:
Majority - Hanley, J.
No, a buyer's acceptance of goods when the contract for sale contains an open price term to be mutually agreed upon, and the parties fail to reach that agreement, does not obligate the buyer to pay the seller's unilaterally declared invoice price. The court reasoned that Article 2 of the Uniform Commercial Code (Sec. 402.305, Stats.) allows parties to conclude a contract for the sale of goods even if the price is not settled, in which case the price is a "reasonable price at the time for delivery." While Standard Oil accepted the equipment, becoming obligated to pay for it, the specific price was subject to mutual agreement on depreciation, which never occurred. The court found that cases cited by Schmieder, which deal with a buyer's obligation to pay for goods not rejected within a reasonable time, were inapplicable because here the dispute was over the price, not the acceptance or nonconformity of the goods. Since the contract provided no method for determining depreciation in the absence of mutual agreement, the trial court was correct in determining a reasonable depreciation (33 1/3 percent) and thus a reasonable price under Sec. 402.305(4), Stats. The court concluded that Schmieder failed to prove his claimed cost or depreciation, and therefore, the trial court’s judgment determining a reasonable price was affirmed.
Analysis:
This case clarifies the application of UCC § 2-305 (Open Price Term) when a contract specifies a price determination method (like mutual agreement on depreciation) that ultimately fails. It distinguishes between a buyer's acceptance of the goods, which creates an obligation to pay, and the acceptance of a unilaterally declared price when the contract itself provides for a different, unfulfilled pricing mechanism. The ruling reinforces that a "reasonable price" will be imposed by the court when parties fail to agree on a contractually stipulated open price term, preventing a seller from unilaterally imposing their desired price simply because the buyer accepted the goods. This can prevent undue burden on buyers and ensure fairness in transactions where pricing is complex or deferred, promoting the UCC's goal of facilitating commerce while maintaining equitable outcomes.
