Luria Bros. & Co., Inc. v. Pielet Bros. Scrap Iron & Metal, Inc.

Citation600 F.2d 103
Decision Date18 June 1979
Docket NumberNo. 77-1529,77-1529
Parties26 UCC Rep.Serv. 1081 LURIA BROTHERS & CO., INC., Plaintiff-Appellee, v. PIELET BROTHERS SCRAP IRON & METAL, INC., Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Russel J. Topper, Chicago, Ill., for defendant-appellant.

Patrick W. O'Brien, William Thomas Braithwaite, Mayer, Brown & Platt, Chicago, Ill., for plaintiff-appellee.

Before FAIRCHILD, Chief Judge, BAUER, Circuit Judge, and VAN PELT, Senior District Judge. *

FAIRCHILD, Chief Judge.

This is a diversity action for breach of contract. Most of the events giving rise to this litigation occurred in Illinois and we accept the parties' assumption that Illinois law is applicable. The action below was tried before a jury which returned a verdict in the amount of $600,000, having found that a contract for the purchase of barge scrap steel existed between plaintiff, Luria Brothers & Co., Inc. (hereinafter referred to as "Luria") and defendant, Pielet Brothers Scrap Iron & Metal, Inc. (hereinafter referred to as "Pielet"), and that Luria was damaged as a consequence of Pielet's failure to deliver. Defendant appeals, arguing among other things that no enforceable agreement was ever made, and therefore, plaintiff was not entitled to damages. We affirm.

A consideration of the issues requires a statement of the facts in some detail. Luria, in its capacity as both a broker and a dealer is in the business of buying, selling, and processing scrap metal. Pielet is in the same business. The parties had done business with each other on a number of occasions prior to the transaction giving rise to this litigation. In fact, Lawrence Bloom, who represented Pielet in this matter had formerly been employed by Luria as a scrap trader.

Most of the facts surrounding the subject transaction are not in dispute and were stipulated to at trial. In mid-September, 1973, Bloom, a vice-president of Pielet, telephoned Richard Fechheimer, a vice-president of Luria. Bloom informed Fechheimer that Pielet might offer a substantial quantity of scrap metal for sale. Bloom inquired as to whether Luria would be interested in purchasing the metal and Fechheimer said that it would be. Subsequent telephone conversations took place between Bloom and Fechheimer in which price quotations and other matters were discussed. The quantity was to be 35,000 net tons of scrap steel from old barges cut into sections measuring five feet by five feet by twenty feet. The shipment date was to be on or before December 31, 1973. The price was set at $42 per net ton if Luria took delivery in Houston or $49 if Luria took delivery in Brownsville (Texas). This transaction was unusual in two respects. First, the amount of scrap involved was much larger than that in a typical scrap transaction. Secondly, while the type or grade of scrap was not unusual, the dimensions were. Luria intended to process the scrap for resale as "No. 1 heavy melting" scrap by reducing it to a size that would fit into a steel furnace generally in pieces at least 1/4 inch thick and not more than 5 feet long by 18 inches wide.

Shortly after the foregoing conversations between Bloom and Fechheimer, Fechheimer telephoned Mr. Forlani, an account executive at Luria's Chicago office, to discuss the purchase of scrap from Pielet. Forlani made some handwritten notes on a worksheet which Luria uses in connection with buying and selling scrap. These notes related to the terms of the barge scrap transaction between Pielet and Luria. Subsequently, and sometime before September 24, Forlani made a telephone call to Bloom to discuss this scrap transaction. At some point, but before September 24, Bloom made some handwritten notes on a worksheet Pielet employed in connection with buying and selling scrap.

On September 24, 1973, Bloom caused to be prepared a sales confirmation relating to the scrap transaction between Pielet and Luria. The following information was typed on the confirmation form:

Quantity: Thirty-five thousand (35,000) net tons

Material: Steel barges cut 5' X 5' X 20' free of non metallics

Price: $42.00 per net ton F.O.B. Shipping point barge Houston, Texas or $49.00 per net ton delivered Brownsville, Texas

Shipment: On or before December 31, 1973

Terms: 90% Advance on receipt of surveyor's weights and bill of lading

Bloom signed the sales confirmation and mailed the original and one copy to Forlani. The copy bore the printed words "confirmation copy." The following words are printed at the bottom of both the original and the confirmation copy of Pielet's confirmation form: "PLEASE SIGN AND RETURN THE COPY OF THIS CONFIRMATION FOR OUR FILES. FAILURE TO RETURN COPY DOES NOT VOID CONTRACT." Neither Forlani nor any officer or other employee of Luria ever signed or returned the confirmation copy to Bloom or anyone else at Pielet.

In the ordinary course of business when Luria makes a purchase of scrap, information regarding the purchase is typed or written on its own purchase confirmation form. On or about October 4, 1973, Forlani caused to be prepared a purchase confirmation containing the same terms as in Pielet's form, except with respect to the delivery date and mode of shipment. The delivery date typed on the form was by October 31, 1973 and the mode of shipment appeared to be left to the discretion of Luria. On the reverse side of this form are printed standard terms including ones referring to warranties, insurance, and taxes, as well as one stating "This order constitutes the entire contract between the parties." The original and one copy of this form are sent to the seller. These bear in red letters the words "RETURN ACCEPTANCE COPY IMMEDIATELY" in the lower right hand corner. There were no other words on this document to indicate any condition as to the existence of a contract.

Forlani sent the original and a copy of the October 4th purchase confirmation to Bloom. Bloom testified that upon receipt of this document, he immediately or shortly thereafter called Forlani to inform him that the Luria confirmation was erroneous with respect to delivery date and mode of shipment. Forlani agreed that the confirmation was erroneous in these two particulars. Bloom asked Forlani to send him an amendment correcting these errors, but Forlani never did. Neither Bloom nor any other officer or employee of Pielet ever signed or returned the acceptance copy to Luria.

During late October and November, Forlani called Bloom several times to ask why Pielet had not begun to deliver the steel. Although the delivery date stated in Pielet's confirmation form and orally agreed upon was on or before December 31, 1973, it is "common trade practice" to space deliveries out during the contract period, especially where the quantity involved is very large. On December 3, 1973, Forlani wrote a letter to Pielet saying Luria had not receiving notification of shipment and requesting that prompt attention be given. On February 6, 1974 representatives of Luria met with Bloom. Bloom stated he was having trouble with his supplier, and further mentioned that his supplier could not obtain the propane necessary for the torches used to cut the barges. On February 13, a week after the meeting, Luria wrote a letter to Bloom to make it clear that the matter had to be resolved. Luria never received a reply and Pielet never delivered the scrap. Luria filed its complaint in the district court on April 25, 1974.

I.

Appellant first argues on this appeal that the evidence is insufficient to establish the existence of a contract, oral or otherwise. Given the facts of this case, we disagree.

The Uniform Commercial Code, which governs this case, specifically states that "a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." 1 U.C.C. § 2-204(1) (Ill.Rev.Stat. Ch. 26, § 2-204 (1973)). In support of its theory of an oral contract, Luria presented testimony that the common trade practice in the scrap industry is to consummate deals on the telephone. Pielet contends that no trade practice, however well established, governs a contract if it conflicts with the expressed intentions of the parties. Specifically, Pielet relies on the language in the Luria confirmation form (stating that it constitutes the entire contract of the parties) along with Luria's admitted practice of using its own form in scrap transactions to preclude the existence of a contract where both parties have not signed the Luria form. Even if Luria's practice is to treat its own form as stating the terms of the sales contract, it does not automatically follow that Pielet's failure to sign and return the Luria purchase confirmation prevented a valid contract from arising.

While it is true that no oral contract exists if the parties intend not to be bound until a formal document has been executed, an oral agreement is enforceable if writings are intended only to memorialize a bargain already made. Lambert Corporation v. Evans and Haines, 575 F.2d 132, 135 (7th Cir., 1978). Pielet has failed to introduce any direct evidence that the former characterization is applicable to the transaction involved here.

Although Bloom testified that in large scrap transactions (those involving 5,000 tons or more) the industry practice and the practice between the parties was to sign and return acceptance copies, this in itself does not indicate that no contract exists until this event occurs. 2

Next, Pielet contends that any apparent agreement between the parties based on the telephone conversations is illusory in light of the subsequent differences in the writings of the parties. Specifically, Pielet is referring to a delivery date of October 31, 1973 on Luria's purchase confirmation which contradicts the December 31, 1973 delivery date agreed upon when the agreement was made over the telephone. Also, the Luria...

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