Bazak Intern. Corp. v. Mast Industries, Inc.

• Decision Date: 16 February 1989
• Citation: 538 N.Y.S.2d 503,73 N.Y.2d 113,535 N.E.2d 633
• Parties: , 535 N.E.2d 633, 82 A.L.R.4th 689, 57 USLW 2520, 7 UCC Rep.Serv.2d 1380 BAZAK INTERNATIONAL CORP., Appellant, v. MAST INDUSTRIES, INC., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 503

538 N.Y.S.2d 503

73 N.Y.2d 113, 535 N.E.2d 633, 82

A.L.R.4th 689, 57 USLW 2520,

7 UCC Rep.Serv.2d 1380

BAZAK INTERNATIONAL CORP., Appellant, v. MAST INDUSTRIES, INC., Respondent.

Court of Appeals of New York.

Feb. 16, 1989.

Allen Jay Bodner, Richard E. Carmen and Ira Kleiman, New York City, for appellant.

Joseph C. Markowitz, Paul E. Kazanoff, New York City, and Blythe M. Bethel, for respondent.

OPINION OF THE COURT

KAYE, Judge.

This dispute between textile merchants concerning an alleged oral agreement to sell fabric centers on the "merchant's exception" to the Statute of Frauds (UCC 2-201[2] ). We conclude that annotated purchase order forms signed by the buyer, sent to the seller and retained without objection, fall within the merchant's exception, satisfying the statutory requirement of a writing even without the seller's signature. It was therefore error to dismiss the buyer's breach of contract action on Statute of Frauds grounds, and deny it any opportunity to prove that the alleged agreement had indeed been made.

For purposes of this dismissal motion, we accept the facts as stated by plaintiff buyer (Bazak International). On April 22, 1987 Karen Fedorko, marketing director of defendant seller (Mast Industries), met with Tuvia Feldman, plaintiff's president, at Feldman's office. Fedorko offered to sell Feldman certain textiles that Mast was closing out, and the two negotiated all the terms of an oral agreement except price. At a meeting the following day, Fedorko and Feldman agreed on a price of $103,330. Fedorko told Feldman that Bazak would receive written invoices for the goods the next day and that the textiles would be delivered shortly. When no invoices arrived, Feldman contacted Fedorko, who assured him that everything was in order and that the invoices were on the way. However, on April 30, 1987, Fedorko had Feldman come to the New York City offices of Mast's parent company where, following Fedorko's instructions, Feldman sent five purchase orders by telecopier to Mast's Massachusetts office. That same day Feldman received written confirmation of Mast's receipt of the orders. Mast made no objection to the terms set forth in the telecopied purchase orders, but never delivered the textiles despite Bazak's demands.

Bazak then filed a complaint alleging breach of contract and fraud, which Mast moved to dismiss for failure to state a cause of action, based upon the lack of documentary evidence (CPLR 3211[a][7] ). Mast contended that the only writings alleged in the complaint--the purchase orders sent by Bazak to Mast, and Mast's confirmation of receipt of the purchase orders--were insufficient under UCC 2-201 to satisfy the Statute of Frauds. In addition, Mast argued that the complaint did not make out a cause of action for fraud, but merely duplicated the contract allegations.

Supreme Court denied the motion to dismiss, but the Appellate Division reversed, 140 A.D.2d 211, 528 N.Y.S.2d 62, holding that the breach of contract claim was barred by the Statute of Frauds, and that the fraud claim merely disguised a flawed breach of contract claim. The focal issue before us on Bazak's appeal from that order is whether the disputed documents qualified as confirmatory writings within the "merchant's exception" to the Statute of Frauds (UCC 2-201[2] ). We conclude that they did, and therefore reverse the Appellate Division order.

At the heart of the dispute are two issues involving the telecopied purchase orders. First, the parties disagree as to the standard for determining whether the purchase orders are confirmatory documents: Mast asserts that there is a presumption against application of UCC 2-201(2)--if the memorandum on its face is such that a reasonable merchant could reasonably conclude that it was not a confirmation, then the claim is barred as a matter of law by the Statute of Frauds. Bazak, on the other hand, argues for a less restrictive standard--that is, a requirement only that the writings afford a belief that the alleged oral contract rests on a real transaction, a requirement Bazak contends that it has met. Second, the parties disagree as to the application of the governing standard to this complaint. Bazak contends that the purchase orders were sent in confirmation of the agreement already reached, and that there is sufficient support for that interpretation in the documents themselves; Mast argues that on their face, the purchase orders are no more than offers to enter into an agreement, and thus inadequate to satisfy the Statute of Frauds.

As to both issues, we are essentially in agreement with Bazak, and therefore reverse the order dismissing its complaint.

Before turning to the two substantive questions, there is a preliminary matter of what evidence should be considered in answering them. Although a court ordinarily might take plaintiff's affidavits into account on a dismissal motion (see, e.g., Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635-636, 389 N.Y.S.2d 314, 357 N.E.2d 970), different considerations apply where the basis for the dismissal motion is a Statute of Frauds defense. Parol evidence, even in affidavit form, is immaterial to the threshold issue whether the documents are sufficient on their face to satisfy the Statute of Frauds. Consideration of parol evidence in assessing the adequacy of a writing for Statute of Frauds purposes would otherwise undermine the very reason for a Statute of Frauds in the first instance. That issue must be determined from the documents themselves, as a matter of law (see, Scheck v. Francis, 26 N.Y.2d 466, 472, 311 N.Y.S.2d 841, 260 N.E.2d 493). Accordingly, the trial court erred in ruling that the Statute of Frauds issue should be determined as a matter of fact at trial, and to the extent that plaintiff's arguments are based on parol evidence set forth in Bazak's affidavits, we disregard them.

As a further threshold matter, it bears note that this dismissal motion does not resolve the parties' underlying dispute. Assuming that the writings are sufficient on their face to surmount the Statute of Frauds defense, plaintiff still has the burden of proving the alleged agreement for the sale of the textiles (2 Hawkland, Uniform Commercial Code Series § 2-201:05, at 26; 1 White & Summers, Uniform Commercial Code § 2-3, at 78 [3d ed-Practitioner's] ). The present motion settles only the question whether the action can go forward at all; if successful now, plaintiff has yet to establish the allegations of its complaint in order for there to be any recovery against defendant.

Description of the Writings

A total of five printed purchase order forms, all of them on Bazak's letterhead, were telecopies by Feldman to Mast from the offices of Mast's parent company. The first four are individual orders for various quantities of different types of fabric, while the fifth summarizes the orders and states the total price. All are dated April 23, 1987--the date of the alleged oral contract. On each form, are the handwritten words "As prisented [sic ] by Karen Fedorko." At the bottom of each form are several lines of small type reading: "All claims must be made within 5 days after receipt of goods. No allowances or returns after goods are cut. This is only an offer and not a contract unless accepted in writing by the seller, and subject to prior sale." Each form concludes with two signature lines, one for "BAZAK INTERNATIONAL CORP." and one for "CUSTOMERS ACCEPTANCE." Each form is signed by Bazak, but the space for "CUSTOMERS ACCEPTANCE" remains blank.

An interoffice memorandum confirms that the purchase orders were telecopied to Mast's Massachusetts office from the premises of Mast's parent company on April 30, 1987.

The Writings as Confirmations of a Contract

The Statute of Frauds remains a vital part of the law of this State. A contract for the sale of goods for the price of $500 or more is not enforceable "unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker." (UCC 2-201[1].) That section further provides that the only indispensable term in such a writing is quantity.

Undisputedly, the alleged oral contract in this case was for the sale of more than $500 worth of goods, and the only writings were not signed by Mast, against whom enforcement is sought. Bazak claims, however, that the orders fall under the merchant's exception to the signature requirement contained in UCC 2-201(2): "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received." Bazak contends that the purcha orders are writings in confirmation of the oral agreement reached between Fedorko and Feldman, and that having failed to object to their contents Mast cannot now assert the Statute of Frauds defense.

At the outset, we are called upon to define the standard to be applied in determining whether a document can be construed as a confirmatory writing under UCC 2-201(2): are explicit words of confirmation necessary? Should there be a presumption against application of the section? Relying on a New Jersey case, Trilco Term. v. Prebilt Corp., 167 N.J.Super. 449, 400 A.2d 1237, affd. without opn. 174 N.J.Super. 24, 415 A.2d 356, and a subsequent Federal case applying (Trilco, Norminjil Sportswear Corp. v. TG & Y Stores Co., 644 F.Supp. 1 [S.D.N.Y.] ), Mast argues that confirmatory language is necessary, and that an exacting standard should be imposed.

The cases cited by Mast do stand for the proposition that a writing offered as confirmatory in satisfaction of UCC 2-201(2) is insufficient unless it explicitly alerts the...