Mid-South Packers, Inc. v. Shoney's, Inc.

• Citation: 761 F.2d 1117
• Decision Date: 03 June 1985
• Docket Number: MID-SOUTH,No. 84-4797,84-4797
• Parties: 41 UCC Rep.Serv. 38 PACKERS, INC., Plaintiff-Appellee, v. SHONEY'S, INC., Defendant-Appellant. Summary Calendar.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1117

761 F.2d 1117

41 UCC Rep.Serv. 38

MID-SOUTH PACKERS, INC., Plaintiff-Appellee, v. SHONEY'S, INC., Defendant-Appellant.

No. 84-4797

Summary Calendar.

United States Court of Appeals Fifth Circuit.

June 3, 1985.

Tabue Sturdivant & DeWitt, Gary M. Brown, Nashville, Tenn., for defendant-appellant.

Wildman, Harrold, Allen, Dixon & McDonnell, Jerome Turner, Memphis, Tenn., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Mississippi.

Before WILLIAMS, JOLLY, and HILL, Circuit Judges.

PER CURIAM:

This diversity action on a Mississippi contract is before us following the district court's entry of summary judgment in favor of plaintiff Mid-South Packers, Inc., (Mid-South) and against defendant Shoney's, Inc., (Shoney's). We affirm.

I.

The facts, as viewed in the light most favorable to Shoney's, ¹ are as follows. In the spring of 1982, Mid-South and Shoney's engaged in negotiations for the sale by Mid-South to Shoney's of various pork products including bacon and ham. A business meeting was held between representatives of the two companies on April 17, 1982, at the offices of Mid-South in Tupelo, Mississippi. The discussion concerned prices and terms at which Mid-South could supply bacon and ham to Shoney's. At this meeting, Mid-South submitted a letter styled "Proposal" that set forth prices and terms at which Mid-South would supply Shoney's with various types of meat. The letter also provided that Shoney's would be informed forty-five days prior to any adjustment in price. The letter contained neither quantity nor durational terms. Shoney's expressed neither assent to nor rejection of the prices outlined in the letter. Shoney's estimated its needs from Mid-South at 80,000 pounds of meat per week. The legal effect of the letter proposal is the center of the controversy.

In July 1982, Shoney's began purchasing goods from Mid-South. The transactions were initiated by Shoney's, either through purchase orders or through telephone calls. On the day following each shipment, Mid-South sent invoices to Shoney's containing additional provisions for payment of both fifteen percent per annum interest on accounts not paid within seven days and reasonable collection costs, including attorney's fees. Shoney's bought vast quantities of bacon from Mid-South until August 12, 1982. On that date, Mid-South informed Shoney's at a meeting of their representatives that the price for future orders of bacon would be raised by $0.10 per pound, due to a previous error in computation by Mid-South. Shoney's objected to the price modification, apparently in reliance on the forty-five day notice provision contained in the disputed letter proposal. After negotiations, Mid-South agreed to increase the price by only $0.07 per pound. Shoney's neither agreed nor refused to purchase at the new price. Mid-South's new proposal was never reduced to writing.

On the first Shoney's purchase order sent after the August 12 meeting, Shoney's requested shipment at the old lower price. When Mid-South received the purchase order its representative, Morris Ates, called Shoney's representative, Ray Harmon, and advised Harmon that Mid-South would only deliver at the new higher price. The uncontradicted testimony of Ates is that Harmon told Ates to ship the bacon and to note the higher price on Shoney's purchase order. The bacon was shipped, and an invoice at the new price followed as did Shoney's payment, also at the new price.

From August 18 until October 5, 1982, Shoney's placed numerous orders for goods, including bacon, with Mid-South. Some if not all of these orders involved telephone conversations between representatives of the two companies, at which time Mid-South again quoted its increased selling price. The telephone conversations were followed by written purchase orders from Shoney's which quoted both the new price from Mid-South and a price computed at the original amount of $0.07 less per pound. In all cases, the orders were filled by Mid-South and invoiced at the new price. These invoices also included the additional terms providing for interest on delinquent accounts and reasonable collection costs. Shoney's paid Mid-South's quoted prices in all instances except the final order. On the final order before Shoney's began purchasing from another supplier, Shoney's offset the amount due on the invoice by $26,208, the amount allegedly overcharged on prior orders as a result of the $0.07 price increase.

Mid-South then brought this action to recover the amount offset plus interest and reasonable collection costs, including attorney's fees, as provided in the invoices. Shoney's admits that it owes $8,064.00 of the offset to Mid-South, inasmuch as this amount is attributable to orders placed after the expiration of the forty-five day notice period which, Shoney's contends, commenced on August 12 when Mid-South asked for the price increase.

II.

Shoney's contends that it accepted the proposal of Mid-South to supply it meat by placing orders with Mid-South, thereby forming a binding contract between the parties. Shoney's characterizes the contract as a "requirements contract" and asserts that the quantity term under the contract was that amount it reasonably and in good faith required. Accordingly, Shoney's argues that the notice provision contained in the letter proposal contractually bound Mid-South to notify Shoney's forty-five days before increasing its prices.

Mid-South asserts that the proposal was at most a "firm offer." Mid-South argues that under Miss.Code Ann. Sec. 75-2-205 (1972), Uniform Commercial Code Sec. 2-205, (hereinafter referred to as U.C.C. or the Code), a firm offer is irrevocable despite a lack of consideration "during the time stated or if no time is stated for a reasonable time; but in no event may such period of irrevocability exceed three (3) months." Thus, Mid-South contends that under any construction of the document, the offer must have expired three months after April 17, 1982, the date of the letter proposal, or on approximately July 17, 1982; therefore, it asserts the right on August 12, 1982, to increase the selling price without notice.

The district court, on consideration of cross summary judgment motions, adopted Mid-South's theory, holding that no long-term requirements contract was created and that each purchase order constituted a separate contract for the amount stated at the price required by Mid-South.

Requirements contracts are recognized in Mississippi and are not void for indefiniteness. Miss.Code Ann. Sec. 75-2-306(1). However, an essential element of a requirements contract is the promise of the buyer to purchase exclusively from the seller either the buyer's entire requirements or up to a specified amount. Willard, Sutherland & Co. v. United States, 262 U.S. 489, 493, 43 S.Ct. 592, 594, 67 L.Ed. 1086, 1088 (1923) (common law); Laclede Gas Co. v. Amoco Oil Co., 522 F.2d 33, 37-38 (8th Cir.1975) (Missouri law, U.C.C.); Mason v. United States, 615 F.2d 1343, 1346, 222 Ct.Cl. 436 (1980) (common law); Propane Industrial, Inc. v. General Motors Corp., 429 F.Supp. 214, 219 n. 5 (W.D.Mo.1977) (Kansas law, U.C.C.); Hutchinson Gas & Fuel Co. v. Wichita Natural Gas Co., 267 Fed. 35, 39, 42 (8th Cir.1920) (Kansas common law); 1 S. Williston, Contracts Sec. 104A, at 406-07 (3d ed. 1957); 1A A. Corbin, Contracts Sec. 157, at 48-49 (2d ed 1963 & Supp.1971); Restatement (Second) of Contracts Sec. 77 comment d, illustration 8 (1981). Absent such a commitment, the requirements contract fails for want of consideration. Willard, Sutherland & Co., 262 U.S. at 493, 43 S.Ct. at 594; Laclede Gas Co., 522 F.2d at 37; Propane Industrial, 429 F.Supp. at 219; 1 S. Williston, Contracts Sec. 105A, at 423; 1A A. Corbin, Contracts Sec. 152 at 8-10, Sec. 157 at 40-41; Restatement (Second) of Contracts Secs. 71, 79 comment F.

Ray Harmon, Shoney's agent in the transaction, maintained that Shoney's at all times had the right to purchase goods from suppliers other than Mid-South, that Shoney's continued to purchase from Mid-South because it was satisfied with its service and the quality of its goods, and that the purchase orders sent by Shoney's to Mid-South beginning in July 1982 "would have been the only commitment (Shoney's) would have made." Mid-South agrees that Shoney's had the right to change suppliers. Thus, by Shoney's own admission, no requirements contract could have arisen from the April 17 letter proposal and the meeting at which it was discussed.

Under the Code, the letter proposal and surrounding negotiations constituted, at most, a "firm offer" which was irrevocable, without consideration, only for a period of three months commencing on April 17 and ending on July 17, 1982. Miss.Code Ann. Sec. 75-2-205. ² Thus, Mid-South had the right, after July 17, to raise its offered price as it did and the district court was correct in so holding.

The district court was also correct in holding that each purchase order stood on its own as a contract between Shoney's and Mid-South. More specifically, Mid-South's letter proposal was its offer in the sense that it was a promise to sell at the listed prices, justifying Shoney's in understanding that its assent, i.e., its purchase orders or telephone calls, would close the bargain. Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520 (Mo.App.1981); Propane Industrial, Inc., 429 F.Supp. at 219; 1 A. Corbin, Contracts Sec. 11 at 25 (1963); 1 S. Williston, Contracts Sec. 24A (3d ed. 1957); Restatement (Second) of Contracts Sec. 24 (1981) (offer as promise). Thus, each time Shoney's manifested its assent, in telephone calls or purchase orders to Mid-South, a new and independent contract between the parties was created. See Coastal Chemical Corporation v. Filtrol Corporation, 374 F.2d 108, 109 (5th Cir.1967) (Mississippi law); 1A A. Corbin, Contracts Sec. 157 at 40-46 (where the theory here espoused is discussed at length...