Scoular Co. v. Denney
2006 WL 3094065, 151 P.3d 615 (2006)
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Rule of Law:
Under the Uniform Commercial Code (UCC), an offeree's act of entering into a contract with a third party, which is not communicated to the offeror, does not constitute a valid acceptance because it is not an unambiguous, objective manifestation of intent to be bound to the original offer.
Facts:
- Doug Denney, a grain farmer, had a history of business dealings with Scoular Company, a grain buyer.
- On May 30, 2002, Denney orally offered to sell Scoular 15,000 bushels of millet at a price of $5 per hundredweight.
- Scoular's manager responded that the price was 'not then available' but that he would 'work on it.'
- Four days later, on June 3, 2002, Scoular, relying on Denney's offer, entered into a forward contract to sell millet to a third-party buyer.
- Scoular's manager made several unsuccessful attempts to contact Denney by phone to inform him of the sale.
- On June 27, 2002, Scoular's manager spoke with Denney by phone and subsequently mailed him a signed purchase contract to confirm the agreement.
- Denney did not check his mail, and therefore never signed or returned the purchase contract.
- In the fall of 2002, after the market price for millet had tripled, Denney delivered and sold his millet to a different grain operator.
Procedural Posture:
- Scoular Company sued Doug Denney in a Colorado trial court, alleging breach of contract, promissory estoppel, and unjust enrichment.
- Denney filed a counterclaim for conversion.
- Following a bench trial, the trial court found that an enforceable contract existed, that Denney had breached it, and awarded damages to Scoular.
- The trial court also found for Denney on his counterclaim.
- The court offset the awards and entered a net judgment in favor of Scoular.
- Denney, as the appellant, appealed the trial court's judgment to the Colorado Court of Appeals.
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Issue:
Does an offeree's act of entering into a contract with a third party, in reliance on an oral offer to sell goods, constitute a valid acceptance of that offer under the Uniform Commercial Code?
Opinions:
Majority - Judge Dailey
No, an offeree's uncommunicated act of contracting with a third party does not constitute a valid acceptance. Under UCC § 2-206, acceptance must be made in a manner reasonable under the circumstances, which requires words or conduct that, when viewed objectively, manifest an intent to accept the offer. Scoular's act of selling millet to a third party was not an unambiguous expression of acceptance of Denney's specific offer, as Scoular could have sourced the millet from any number of farmers. This act did not constitute the beginning of performance, because the performance requested by Denney was payment, not the brokering of a sale. Because the trial court erred in finding that a contract was formed on June 3, the case must be remanded to determine whether a contract was instead formed during the June 27 telephone conversation. If a contract was formed then, it would be enforceable under the UCC's merchant exception (§ 4-2-201(2)) to the statute of frauds, as a written confirmation was sent and Denney failed to object within ten days.
Analysis:
This decision clarifies the requirements for acceptance under UCC § 2-206, reinforcing the objective theory of contract formation. It establishes that preparatory or internal actions by an offeree, such as arranging a resale to a third party, are insufficient to constitute acceptance if not communicated to the offeror. The ruling emphasizes that for an act to qualify as acceptance by performance, it must be the performance requested by the offeror. This case serves as a precedent against finding acceptance through ambiguous, uncommunicated conduct, thereby protecting offerors from being bound to contracts they are not aware have been accepted.
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