American Web Press, Inc. v. Harris Corp.

• Decision Date: 03 November 1983
• Docket Number: Civ. A. No. 82-A-1684.
• Citation: 596 F. Supp. 1089
• Parties: AMERICAN WEB PRESS, INC., Plaintiff, v. HARRIS CORPORATION, Defendant.
• Court: U.S. District Court — District of Colorado

596 F. Supp. 1089

AMERICAN WEB PRESS, INC., Plaintiff, v. HARRIS CORPORATION, Defendant.

Civ. A. No. 82-A-1684.

United States District Court, D. Colorado.

November 3, 1983.

Richard W. Breithaupt, Wegher & Fulton, P.C., Denver, Colo., for plaintiff.

David Swinton, W. David Pantle, Sherman & Howard, Denver, Colo., for defendant.

MEMORANDUM OPINION AND ORDER

ARRAJ, Judge.

American Web Press, Inc. brought this diversity action against Harris Corporation for breach of a purported contract to sell a used M-1000 printing press to plaintiff. 28 U.S.C. § 1332(a)(1). American Web now seeks damages for the alleged breach.

The issues of liability and damages were bifurcated and a non-jury trial on the question of liability was held October 12 and 13, 1983. The following will constitute my findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52(a).

I

American Web is a Colorado corporation engaged in the business of commercial and publication printing. During the summer of 1982, it was considering expanding its operation and was in the market for a second used printing press.

Defendant Harris, a Delaware corporation, manufactures and sells printing equipment to the graphic arts industry. It is a large, national business with several major regional divisions. Two divisions, the Texas office—Commercial Press and the Rhode Island office — Publication Press, are important in the case at bar because they were involved in an inter-division competition to sell the press in issue.

In August 1982 a salesman from the Commercial Press Division of Harris, Claude Chinn, contacted American Web about a used M-1000 press it had for sale. After some discussion, American Web agreed to see the press (at Harris' expense) at Pisani Carlisle Graphics in San Francisco, California, where it was still located and operated. On September 10, 1982, representatives of American Web¹ and Harris² went to Pisani Carlisle Graphics and observed the press in operation. After this inspection, American Web's chief representative, Gary Hansen, indicated that his company was very interested in the machine. But Hansen was neither prepared nor willing to commit American Web to a binding agreement that day. He had not pre-arranged financing for its purchase, and he had failed to consult in advance with his attorney. Consequently, when Harris representatives exhorted Hansen to sign a standard Harris order form, he refused.

Hansen, however, did ask Chinn on September 10, 1982, to prepare a list of proposed contract terms which Hansen could then take back to Denver and present to his attorney and banker. Chinn prepared this memorandum on a piece of roll-stock paper, and Hansen then added two provisions and several asterisks. Chinn signed the document, but Hansen refused even to initial it. At the close of the discussion, the parties agreed to meet early the following week to negotiate further the sale of the M-1000 press.

Because Hansen was unable to arrange immediately his press business affairs, Harris and American Web did not meet again until Wednesday, September 15, 1982. At the commencement of this meeting, convened in the Denver office of Robert Loeb of Weigher & Fulton, attorney for plaintiff, Harris representatives announced that the press had already been sold to Perry Printing Company. The Publication Press Division of Harris had given Perry a right of first refusal on this M-1000 in late August, 1982. After flying to San Francisco and examining the press, Perry signed the Harris sales agreement form on September 14, 1982. This purchase contract was accepted by defendant on September 15, and the formal order was then signed by Harris on September 21, 1982. As a result of this sequence of events, the Commercial Press Division was unable to sell the used press to American Web on September 15, 1982.

Nonetheless, two backup contract proposals were discussed at this meeting in case the Perry deal disintegrated. One contract was prepared by Chinn and Melvin. The other contract proposal, which was drafted by Mr. Loeb, incorporated some provisions from the list prepared by Chinn and included other significant changes; it was accompanied by an American Web check for $20,000. These contracts, however, were never accepted by Harris and Web, and the check was returned to Hansen on September 24, 1982.

American Web commenced this suit on September 23, 1982, in state court in Denver against Harris Corporation and Perry Printing. The defendants removed the action to federal court. Plaintiff agreed to withdraw its early request for a temporary restraining order against moving the press from Pisani Carlisle Graphics and to dismiss Perry as a defendant. The only matter remaining is American Web's breach of contract claim against Harris.

II

The pivotal issue raised by the facts in the case at bar is whether there was an enforceable sales contract between Harris and American Web as of September 10, 1982. In the absence of such an agreement, I must conclude that there was no breach of contract and that plaintiff is not entitled to damages. Alternatively, if there was a binding agreement, then I must determine whether enforcement of the contract is barred by the Statute of Frauds. Finally, since this case involves the sale of goods, these issues are governed by the Uniform Commercial Code.³

Plaintiff American Web asserts that it entered into a binding oral contract with Harris Corporation at the close of the inspection tour on September 10, 1982. It argues that both parties intended to be bound as of that date and characterizes all later meetings and discussions as merely efforts to work out fine details. Since this oral agreement predated the Perry Printing contract, American Web maintains that Harris' sale to Perry constituted a breach of plaintiff's contract.

Defendant contends that there was never an enforceable written or oral contract between American Web and Harris to purchase the used M-1000 press. The September 10, 1982, document was never meant to be an offer, as evidenced by its internally inconsistent terms. Nor was there ever an oral agreement based upon the parties' conduct. Finally, Harris suggests that both parties understood that in the event of a sale, a contract would be prepared the following week on a standard Harris order form.

Under the Uniform Commercial Code, "a contract for the 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." U.C.C. § 2-204(1); See Luria Bros. & Co., Inc. v. Pielet Bros. Scrap Iron & Metal, Inc., 600 F.2d 103, 108 (7th Cir.1979). The Code defines "contract" as the "total legal obligation which results from the parties' agreement as affected by the code and any other applicable rules of law." U.C.C. § 1-201(11). And an "agreement" "means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided by the Code." U.C.C. § 1-201(3).

To be sure, Article Two of the U.C.C. expands the traditional concept of a contract and imposes new and wider ranges of obligations. See White and Summers, Handbook of the Law under the Uniform Commercial Code (1980), p. 23. In keeping with this liberal trend, the Official Comment to the Code explains that if the parties intend to enter into a binding agreement and an appropriate remedy may be fashioned, then a contract for sale does not fail for indefiniteness if terms are left open. Official Comment to 2-204; Kleinschmidt Division of SCM Corp. v. Futuronics Corp., 41 N.Y.2d 972, 395 N.Y. S.2d 151, 152, 363 N.E.2d 701, 702 (1977).

The Uniform Commercial Code, however, will not imply a basic agreement if the parties did not reach one. Kleinschmidt, supra at 152, 363 N.E.2d at 702. Section 2-204 still requires an agreement or a meeting of the minds between the negotiating parties. Euclid Engineering Corp. v. Illinois Power Co., 79 Ill.App.2d 145, 223 N.E.2d 409, 413 (1967). But in place of a subjective test of intent, the Code focuses exclusively on "mutuality of assent as manifested by the conduct of the parties." Cargill, Inc. v. Stafford, 553 F.2d 1222, 1225 (10th Cir.1977); Bradford v. Plains Cotton Cooperative Ass'n, 539 F.2d 1249, 1253 (10th Cir.) cert. denied 429 U.S. 1042, 97 S.Ct. 743, 50 L.Ed.2d 754 (1976).

Turning now to the instant case, I find that there was no mutuality of assent between American Web and Harris on September 10, 1982. The evidence presented at trial, including the parties' conduct, surrounding circumstances, later events, and the specific items in the memorandum, establishes that no agreement was reached on that date. Specifically, Gary Hansen's refusal to sign the standard Harris form or the list of proposed contract terms is conduct which is inconsistent with plaintiff's contract theory. In addition, the parties' mutual decision to meet the following week to negotiate further the entire agreement reflects the preliminary character of the September 10 discussions. Finally, the inconsistent terms in the September 10 list lead me to find that this memorandum was only a proposal and not an offer. Whereas Chinn included the phrase "as is, where is" on the document, Hansen insisted on "press ready to print comparable to its condition in S.F." See § 2-316 and Official Comment 7, U.C.C.; O'Neil v. International Harvester Co., 40 Colo.App. 369, 575 P.2d 862, 865 (1978). I recognize that disputes over material terms do not necessarily prevent the formation of a binding contract under § 2-204(3) of the U.C.C. Yet this is not the case when a dispute over a significant term manifests a lack of intention to contract. Kleinschmidt, supra at 152, 363 N.E.2d at 702. Here, the negotiating parties were merely assembling a list of potential provisions to be included in a final, written contract. I therefore hold...