Thomson Printing Machinery Co. v. B. F. Goodrich Co.
714 F.2d 744 (1983)
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Rule of Law:
Under the UCC § 2-201(2) 'merchants' exception' to the Statute of Frauds, a confirmatory writing is deemed received by an organization when delivered to its place of business, and notice is effective when it would have been brought to the attention of the proper individual if the organization had exercised due diligence in its internal communication routines.
Facts:
- James Thomson, president of Thomson Printing Company, visited B.F. Goodrich Company's surplus machinery department to inspect used printing equipment for sale.
- Thomson discussed the sale terms, including a price of $9,000, for specific machinery with Ingram Meyers, Goodrich's surplus equipment manager.
- Four days after the discussion, Thomson sent a purchase order for the equipment and a check for $1,000 as partial payment to Goodrich's main office in Akron.
- The purchase order and check did not specifically name Ingram Meyers or the surplus equipment department as the intended recipients.
- Goodrich received the documents but its mailroom personnel were unable to determine the appropriate department or individual to forward them to.
- Ingram Meyers was never made aware of the purchase order or check.
- Goodrich subsequently sold the same printing machinery to a different buyer.
Procedural Posture:
- Thomson Printing Company sued B.F. Goodrich Company for breach of contract in federal district court.
- A jury returned a verdict in favor of Thomson Printing.
- The district court granted judgment for Goodrich notwithstanding the verdict, ruling as a matter of law that the Statute of Frauds barred the contract's enforcement.
- Thomson Printing Company, as the appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does a confirmatory writing sent to a merchant's general office, rather than to the specific agent who negotiated the oral contract, satisfy the 'receipt' requirement of the UCC § 2-201(2) merchants' exception to the Statute of Frauds?
Opinions:
Majority - Cudahy, Circuit Judge.
Yes. A confirmatory writing satisfies the receipt requirement of the merchants' exception even if it is not delivered to the specific negotiating agent, provided the receiving organization failed to exercise 'due diligence' in routing the communication internally. The literal text of UCC § 2-201(2) only requires that the writing 'is received' by the party, which Goodrich undisputedly did. Even applying the UCC's more specific notice provision, § 1-201(27), notice to an organization is effective from the time it 'would have been brought to [the correct individual's attention] if the organization had executed due diligence.' Goodrich's mailroom procedures were not reasonable as a matter of law because the purchase order's contents and Thomson's phone number should have enabled personnel to identify the correct department. An organization's failure to maintain and comply with reasonable routines for communication should not allow it to escape liability by pleading non-receipt by the proper individual.
Analysis:
This decision clarifies the 'receipt of notice' standard under the UCC for large organizations, preventing them from using internal communication failures as a defense under the Statute of Frauds. It establishes that the burden of due diligence lies with the recipient organization to implement and follow reasonable routines for routing incoming communications. The ruling protects smaller merchants dealing with corporate giants by ensuring that a properly sent confirmation is effective once the recipient organization should have, in the reasonable course of business, processed it. This interpretation reinforces the UCC's goal of facilitating commercial transactions and holding businesses accountable for their internal operating procedures.
