St. Ansgar Mills, Inc. v. Streit
613 N.W.2d 289 (2000)
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Rule of Law:
Under the Uniform Commercial Code's merchant's exception, the determination of what constitutes a 'reasonable time' for sending a written confirmation of an oral contract is ordinarily a question of fact for the jury. This determination requires consideration of all relevant circumstances, including the parties' prior course of dealing and trade customs, not just market volatility.
Facts:
- Duane Streit, a hog farmer, and St. Ansgar Mills, Inc., a grain dealer, had a long-standing business relationship involving numerous contracts for large quantities of grain.
- Their established practice involved Streit placing orders over the telephone, creating an oral contract.
- St. Ansgar Mills would then prepare a written confirmation, which was often not signed or returned by Streit for a long period of time; sometimes his father, John, would sign it weeks later.
- Despite these delays in written confirmation, Streit had never previously refused delivery of grain he purchased orally.
- On July 1, 1996, John Streit, on behalf of Duane, orally ordered 60,000 bushels of corn for future delivery at a set price.
- St. Ansgar Mills prepared the written confirmation but held it, expecting John to sign it during his customary monthly visit, which did not occur in July.
- On August 10, 1996, approximately 40 days after the oral order, St. Ansgar Mills delivered the written confirmation to John.
- During the intervening period, the market price of corn had plummeted, and Duane Streit subsequently refused to accept delivery of the corn.
Procedural Posture:
- St. Ansgar Mills, Inc. filed a breach of contract action against Duane Streit in the Iowa District Court for Mitchell County (trial court).
- Streit filed a motion for summary judgment, arguing the oral contract was unenforceable under the statute of frauds because the written confirmation was not received within a reasonable time.
- The district court granted Streit's motion for summary judgment, finding that the delay was unreasonable as a matter of law.
- St. Ansgar Mills, Inc., as appellant, appealed the summary judgment ruling to the Supreme Court of Iowa.
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Issue:
Under the Uniform Commercial Code's 'merchant's exception' to the statute of frauds, is a 40-day delay in delivering a written confirmation of an oral contract for the sale of grain unreasonable as a matter of law, where the parties had a long-standing business relationship and a custom of delayed signings?
Opinions:
Majority - Cady, Justice
No. The 40-day delay in delivering the written confirmation was not unreasonable as a matter of law. The reasonableness of the time between an oral contract and a subsequent written confirmation under the UCC's merchant's exception is ordinarily a question of fact for the jury. The Uniform Commercial Code requires that a 'reasonable time' be determined by considering the nature, purpose, and circumstances of the action, which explicitly includes the parties' course of dealings and any usage of trade. Although a volatile market and a large sale would normally shorten the window for a reasonable time, they are not the only factors. In this case, the parties' long-standing amicable business relationship and their established custom of delaying the signing of written confirmations created a genuine issue of material fact as to the reasonableness of the delay. Therefore, it was improper for the trial court to decide this issue by summary judgment; it must be resolved by a jury.
Analysis:
This decision reinforces the Uniform Commercial Code's emphasis on commercial practices and the importance of context in contract disputes. It cautions lower courts against making determinations of 'reasonableness' as a matter of law when there is evidence of an established course of dealing between the parties that might justify conduct that would otherwise seem unreasonable. The ruling prevents parties from using the statute of frauds as a technical escape hatch to void a contract due to market fluctuations, especially when their own past behavior has created a pattern of relaxed procedural compliance. This strengthens the principle that the fact-finder, typically a jury, is the proper body to weigh competing circumstances like market volatility against the parties' unique relationship history.
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