Novelly Oil Co. v. Mathy Const. Co.

• Decision Date: 17 November 1988
• Docket Number: No. 87-2192,87-2192
• Citation: 147 Wis.2d 613,433 N.W.2d 628
• Parties: , 8 UCC Rep.Serv.2d 636 NOVELLY OIL COMPANY, and Goldstein Oil Company, d/b/a Apex Oil Company, Plaintiffs-Appellants, v. MATHY CONSTRUCTION COMPANY, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

Page 628

433 N.W.2d 628

147 Wis.2d 613, 8 UCC Rep.Serv.2d 636

NOVELLY OIL COMPANY, and Goldstein Oil Company, d/b/a Apex Oil Company, Plaintiffs-Appellants, v. MATHY CONSTRUCTION COMPANY, Defendant-Respondent.

No. 87-2192.

Court of Appeals of Wisconsin.

Submitted on Briefs Oct. 10, 1988.

Opinion Released Nov. 17, 1988.

Opinion Filed Nov. 17, 1988.

Michael W. Gill and Hale, Skemp, Hanson & Skemp, La Crosse, on briefs, for plaintiffs-appellants.

L.E. Sheehan and Moen, Sheehan, Meyer & Henke, Ltd., La Crosse, on brief, for defendant-respondent.

Before DYKMAN, EICH and SUNDBY, JJ.

EICH, Judge.

Novelly Oil Company and Goldstein Oil Company, d/b/a Apex Oil Company, appeal from a judgment dismissing their complaint against Mathy Construction Company. Apex sued Mathy for amounts due on an alleged oral contract for the purchase of asphalt. The trial court dismissed the action, ruling that no contract was ever formed because the parties' minds had never met on the essential elements of their agreement. We agree with that conclusion and affirm the judgment.

Apex is a manufacturer and seller of petroleum products, including asphalt used in road construction and paving. Its main plant is located in Wood River, Illinois. Mathy is a road builder in La Crosse County, Wisconsin. On July 16, 1986, James Lager, a purchaser for Mathy, and Kenneth Fenton, one of Apex's marketers, discussed the possibility of Mathy purchasing a quantity of asphalt in early August. Apex maintains that this conversation resulted in an oral contract whereby Mathy agreed to purchase approximately 30,000 barrels of asphalt, to be picked up at Apex's Illinois plant for shipment up the Mississippi River to La Crosse. Mathy acknowledges that Lager and Fenton agreed on the price and certain other details of the transaction, but contends that no agreement was ever reached as to the type and grade of the asphalt and, further, that any agreement was contingent upon the availability of barge transportation to move the goods from Wood River to La Crosse.

Lager never secured a barge and Mathy never picked up the asphalt. Apex sued to recover the contract price, and the trial court dismissed the action, holding that because Lager's and Fenton's minds had never met on the essential terms of the agreement, there was no contract. Other facts will be discussed below.

Apex correctly points out that the case is governed by the Uniform Commercial Code, placing principal reliance on sec. 402.204(3), Stats., which states that a contract does not fail for indefiniteness "[e]ven though one or more terms are left open" as long as there is "a reasonably certain basis for giving an appropriate remedy." Citing that section, Apex argues that even though Lager's and Fenton's July 16 communications left several terms open for future resolution, a binding sales contract for 30,000 barrels of asphalt was nonetheless formed on that date.

Apex also refers us to a law review article on the subject in which the author states that the "strict common law view" requiring inclusion of "all material terms" in the contract has been eased by the code to the extent that "the fact that one or more essential terms is missing or is to be agreed upon in the future will not inevitably signify lack of intent." Edwards, "Contract Formulation Under Article 2 of the Uniform Commercial Code," 61 Marq.L.Rev. 215, 219-20 (1977). Even that commentator recognizes, however, that the question still remains in each case "whether a proposal which does not include all material terms nevertheless manifests intent to be bound," id. at 220, and we agree with that proposition.

The so-called "liberality" of sec. 402.204(3), Stats., "does not eliminate the basic requirement of contract law that the parties in fact reach an agreement." 2 Anderson, Uniform Commercial Code sec. 2-204:18, at 206 (1982) (footnote omitted).

[I]t is still essential that there be an agreement of the parties. While the Code does not require agreement as to all material terms in order to constitute a contract, it is essential that there be agreement that there be a contract in spite of such open areas. Although [sec. 402.204(3) ] "broadens the range of factors available for the court's consideration in determining whether there has been an offer and seasonable acceptance ... these factors are available only as evidence to assist the court in determining if the parties actually reached an agreement. They cannot cause a contract to be formed where there has in fact been no [agreement] between the parties." Id. sec. 2-204:21, [147 Wis.2d 617] at 207-08 [footnotes omitted, ellipses and bracketing in original].

While the code empowers courts to declare that a contract has been formed even if certain material terms are left open, we "must still make the threshold factual finding that an intent to contract existed." Ginsu Products, Inc. v. Dart Industries, Inc., 786 F.2d 260, 265 (7th Cir.1986) (applying Wisconsin law). Thus, even though the parties' disagreement as to a material term may not necessarily prevent the formation of a valid contract, " 'when a dispute over material terms manifests a lack of intention to contract, no contract results,' and when it is clear that [the parties] disagree as to material terms there is no sale or contract to sell." 2 Anderson sec. 2-204:22, at 208 (footnote omitted). Whether the parties intended a binding agreement is determined under the common law of contracts. Id. sec. 2-204:18, at 206.

Wisconsin law has long recognized that "[t]he essence of a contract is that the minds of the parties thereto must meet on the same thing." Zuelke v. Gergo, 258 Wis. 267, 271, 45 N.W.2d 690, 692 (1951). And "[t]here is no meeting of the minds where the parties do not intend to contract"; that is, where they fail to "agree on the essential terms and conditions of the contract." Household Utilities, Inc. v. Andrews Co., 71 Wis.2d 17, 29, 236 N.W.2d 663, 669 (1976). The question of the parties' intent is one of fact. Peninsular Carpets, Inc. v. Bradley Homes, Inc., 58 Wis.2d 405, 413-14, 206 N.W.2d 408, 412 (1973); Ginsu Products, 786 F.2d at 262. In reviewing factual questions, we apply the "clearly erroneous" rule: we will uphold the trial court's findings unless they are clearly erroneous. Noll v. Dimiceli's, Inc., 115 Wis.2d 641, 643, 340 N.W.2d 575, 577 (Ct.App.1983).

Lager and Fenton were the primary witnesses at trial. Fenton testified that he had sold a quantity of 120-150 pen grade asphalt to Lager in June, 1986, ^* and that Lager contacted him again in mid-July about possible additional purchases. According to Fenton, Lager asked whether Apex could provide 30,000 barrels (approximately 5,300 tons) of asphalt, at a price of $75 per ton, to be picked up by barge at Wood River sometime between July 30 and August 4, 1986.

Fenton verified the price and availability of the asphalt with his superiors and called Lager back. Fenton testified that he could not remember any of the specifics of the conversation. As much as he could say was that Lager told him something to the effect that "if I [Fenton] could do it, you know we would do it." He stated that "[t]he substance of that conversation was ... to purchase some 120-150 pen grade asphalt with the possibility of changing to 85-100 pen grade as long as he gave me certain days notice" and that Lager "seemed appreciative of the deal." Fenton was also questioned about testimony in a pretrial deposition in which he stated that he recalled Lager saying "it sounds good" toward the end of their conversation.

Finally, Fenton testified that Lager never expressly told him that the sale was "contingent" on the availability of a barge to pick up the asphalt at Apex's Illinois plant, although he conceded that if no barge was available, it would be impossible to deliver any asphalt to Mathy. He also acknowledged that when their conversation ended, Lager still had not decided on the grade of asphalt he wanted to order.

Fenton then prepared a "confirmation letter," which he sent to Lager through the facsimile or "Fax" immediate transmission process. The letter begins by stating that its purpose was "to confirm our July 16, 1986 sales agreement...." It outlines the price, quantity and grade (120-150 pen) of the asphalt, states that delivery was to be f.o.b. Wood River, and concludes: "Buyer to give Apex 7 days notice if pen grade is changed [to] 85-100 pen." Lager acknowledged receiving the letter but, believing it to be no more than a summary of their discussions to date, "confirming price and availability of [asphalt] within the confines of [what] we were looking for," he did not "attach[ ] any significance to it." A day or so later, Fenton sent Lager a written "Sales Agreement" for the asphalt, asking him to sign and return it. Lager did neither.

Fenton testified that he telephoned Lager on July 20 or 21 to see when Mathy would be picking up the asphalt and that Lager "indicated ... it would be around August 1st...." Apex did not stock 120-150 pen grade asphalt and, between July 24 and 30, manufactured 30,000 barrels of the product for eventual sale to Mathy.

Fenton testified that he called Lager several more times between July 25 and August 7 to inquire about the delivery date, and that Lager advised him he was having difficulty locating a barge. According to Fenton, Lager eventually told him he could not take delivery of the asphalt because he had been unable to secure a barge. Fenton also said that Lager told him he did not believe there was any binding contract for the asphalt. Delivery was never accomplished and Apex subsequently mixed the asphalt with other products and sold it at a loss.

Lager acknowledged that in their July 16 telephone conversations, he and Fenton settled on a price and a "span of time" for delivery of the asphalt, and that while Mathy "could probably use 120-150 pen grade asphalt, [it] would like to reserve the right to change that to...