Harlow & Jones, Inc. v. Advance Steel Co.

• Decision Date: 30 November 1976
• Docket Number: Civ. A. No. 5-70979.
• Citation: Harlow & Jones, Inc. v. Advance Steel Co., 424 F. Supp. 770 (W.D. Mich. 1976)
• Parties: HARLOW & JONES, INC., a New York Corporation, Plaintiff, v. ADVANCE STEEL COMPANY, a Michigan Corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

424 F. Supp. 770

HARLOW & JONES, INC., a New York Corporation, Plaintiff, v. ADVANCE STEEL COMPANY, a Michigan Corporation, Defendant.

Civ. A. No. 5-70979.

United States District Court, E. D. Michigan, S. D.

November 30, 1976.

James K. Robinson, Honigman, Miller, Schwartz & Cohn, Detroit, Mich., for plaintiff; Franz S. Leichter, Wachtell, Manheim & Grouf, New York City, of counsel.

Allen Zemmol, Dingell, Hylton & Zemmol, Detroit, Mich., for defendant.

MEMORANDUM OPINION

FEIKENS, District Judge.

This is an action in contract, brought by the seller, Harlow and Jones, Inc. (hereinafter "Harlow"), against the buyer, Advance Steel Co. (hereinafter "Advance"), to recover damages and costs for an alleged breach of an agreement to purchase 1000 tons of imported European steel. Defendant denies liability, claiming that the shipment of steel was late and was therefore properly rejected under the contract. The parties agree that their respective rights and liabilities in this action are governed by the Uniform Commercial Code.¹ The pertinent facts, as established by the testimony and exhibits presented at trial, are summarized:

In late June, 1974, Robert Stewart, president of Advance, had several telephone conversations with a William VanAs, an independent steel broker who is authorized to solicit orders on a commission basis from customers in the Great Lakes area on behalf of Harlow. During these conversations, VanAs informed Stewart of the availability of some 5000 metric tons of cold-rolled steel which Harlow could import from a West German mill for shipment during September-October, 1974. On July 2, 1974, Stewart advised VanAs that he was interested in purchasing 1000 tons of this shipment. The terms of the transaction were recorded by VanAs on his worksheet of July 2, 1974, and later that same day were relayed by VanAs to Carl Greve, president of Harlow.

On July 9, 1974, Greve mailed to Stewart a sales form, S-2373, confirming a sale of 1000 metric tons of cold-rolled steel, with shipment from a European port during September-October, 1974. That same day, Greve placed an order with Centro Stahl-handel GMBH for the 1000 tons and included a copy of its sales form to Advance. Stewart received Harlow's confirmation form but never signed or returned the enclosed copy as requested. On July 19, 1974, Stewart prepared a worksheet for the transaction in question, and on the basis of this worksheet prepared and mailed Advance's purchase order, B-04276, containing the same quantities, specifications (with minor revisions), and shipping dates as Harlow's confirmation form. Advance's purchase order was received by Harlow on July 25, 1974, but was never signed or returned.

The steel was shipped from Europe on three separate vessels. Approximately 214 tons were shipped on the M.S. Federal Lakes in September, 1974, and arrived in Detroit in October, 1974. Another 195 metric tons were shipped on the M.S. Ermis in October, 1974, and arrived in Detroit in early November, 1974. These two shipments were accepted and paid for by Advance. The balance of the steel was shipped from Antwerp on November 14, 1974, and arrived in Detroit on November 27, 1974. In a letter to Harlow dated October 29, 1974, Advance rejected this third shipment because of "late delivery." In a letter dated November 7, 1974, Harlow rejected Advance's cancellation and denied that a delay had yet developed which would justify Advance's action.

Further exchanges of correspondence ensued, with each party reaffirming its position that the other had breached its responsibilities under the contract. After arrival, the steel was warehoused in Detroit for a time and eventually sold at a loss by Harlow to other buyers, including Advance.

Harlow has taken the position throughout these proceedings that its sales confirmation form S-2373 of July 9, 1974 was an offer which defendant accepted by mailing back Advance purchase order form B-04276 on July 19, 1974. Harlow construes Advance's purchase order as a "definite and seasonable expression of acceptance," within the meaning of U.C.C. § 2-207, which provides that such a response to an offer

which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

U.C.C. § 2-207(1). Under this construction of the evidence, the terms of Harlow's S-2373 form would control. Specifically, there are a host of fine print terms on the back of this document which state that all delivery dates are approximate, contingent upon timely delivery by Harlow suppliers, and qualified by disclaimers of liability for "force majeure," acts of God, labor strikes, etc.²

Though no delivery date in fact appears on Harlow's S-2373, the form does specify a shipment date of "September-October, 1974." Harlow produced testimony from VanAs, Greve, and two disinterested local steel importers who all agreed that, according to an accepted steel importing trade usage, shipment in September-October means delivery in October-November. Since delivery here of the final shipment occurred before the end of November, Harlow contends that its shipping obligations were met and that Advance improperly and prematurely rejected this shipment on October 29. Harlow also sought to establish that the delay in shipment past the end of October was caused by bad weather, a Canadian pilot strike, and an accident in the Welland Canal—all contingencies which Harlow claims were unanticipated and beyond its control.

Advance takes the position that Harlow's sales form S-2373 was an offer which Advance rejected shortly after its receipt through a series of oral communications with VanAs. Stewart testified that he telephoned VanAs some time between July 9 and July 22 and informed him that he could not accept the boilerplate disclaimers regarding delivery on the back of Harlow's sales form and that VanAs had told him to just circle the objectionable terms and return the form. Stewart also testified to a second conversation with VanAs during this period in Stewart's office during which Stewart circled certain terms on the back of Harlow's S-2373 form and wrote on the front "delivery no later than October 31"; VanAs was reported to have said, "fine, no problem."

Advance contends that it had good reason to be concerned about the shipping dates. According to the testimony of Stewart and others, the market for steel was high and unstable during the summer and fall of 1974, and in any purchase of imported European steel, time was therefore of the essence. Having rejected the shipping terms contained in Harlow's sales form S-2373 for this reason, Advance argues that its purchase order B-04276, sent on July 22, 1974, was a counter-offer which Harlow accepted by making two partial shipments in October. Under this analysis, the terms of Advance's purchase order B-04276 would control. B-04276 contains a shipment date of "Sept-Oct 74," and further specifies that a failure to ship within this time allows Advance to cancel the order without notice.³ Since these terms of shipment were bargained for and crucial, in Advance's view, and since the balance of the steel was not in fact shipped until November 14, Advance argues that its rejection of this last shipment was fully justified under the contract.⁴

Each party has sought to establish that the terms of this agreement are governed by the provisions of its own contract form. This is certainly understandable, since both S-2373 and B-04276 provide ample disclaimers of liability for late shipment and delivery. But in taking these respective positions, both Harlow and Advance have misread the evidence. The court finds that an oral contract for the purchase of steel was formed before either party began sending or receiving written contract forms.

The court finds that an agreement to purchase the 1000 tons of European steel was made through the several telephone conversations between Stewart and VanAs during the week of July 2, 1974. Greve testified that much of the steel importing business is conducted by phone and that oral contracts are often made in this way and then later confirmed in writing. This method of contract formation is also recognized by the Uniform Commercial Code, § 2-204(1):

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.

The conduct of the parties here indicates a common understanding that the sale had been arranged as of July 9, 1974. Harlow apparently assumed such an understanding, since on July 9, 1974, it mailed an order to its German supplier for the 1000 tons and included the size and grade specifications which Advance had given to VanAs. Harlow's S-2373 form sent that same day could hardly be an offer to Advance then, especially since Harlow styled it as a sales confirmation form and never followed up on Advance's failure to sign and return it as requested.

Advance's conduct also corroborates the existence of an oral contract as of July 9. Advance has always taken the position that VanAs had at least apparent authority to negotiate contracts on behalf of Harlow, and this was apparently Stewart's understanding at the time of his telephone conversations with VanAs in early July, 1974. Stewart having indicated to VanAs during these conversations not only Advance's interest in purchasing 1000 tons of steel but also the various size and grade specifications and shipping dates which Advance wanted, it becomes difficult to accept his testimony that Advance had made no firm commitment to purchase at this point.

Advance's conduct upon receiving Harlow's confirmation form does not undercut the court's conclusion that an oral contract had already been negotiated at this point. Even if believed, Stewart's testimony indicates...