Brookside Farms v. Mama Rizzo's, Inc.

United States District Court · Contracts

Contractsrequirements contractsale of goodsfresh basilno-oral-modification clauseno-waiver clausestatute of fraudsUCC 2-201

Facts

Brookside and MRI entered into a one-year requirements contract under which MRI agreed to buy a minimum of 91,000 pounds of fresh basil, with seasonal pricing. After MRI requested additional stem removal not required by the original contract, the parties orally agreed to increase the price, and later agreed to further price increases for imported basil; MRI issued purchase orders at the new prices, Brookside shipped the basil, and MRI paid numerous invoices without protest. MRI ultimately accepted 3,041 pounds of basil priced at $6.75 per pound but its check for payment was dishonored for insufficient funds. MRI then argued that Brookside's price increases were invalid because the contract required modifications to be in a signed writing.

Issue

Whether oral price modifications to a written goods contract containing a signed-writing-only modification clause were enforceable where MRI promised to note the changes on its copy of the contract, repeatedly ordered, received, and paid for basil at the modified prices, and later refused to pay for accepted goods and refused further performance. Also, whether MRI remained liable for breaching the executory portion of the requirements contract.

Rule

Under Texas law, oral modifications to a contract within the statute of frauds are generally unenforceable if they materially modify the agreement, but enforcement may still be permitted where promissory estoppel applies because one party reasonably relied on the other's promise to reduce the modification to writing, and under Tex. Bus. & Comm. Code § 2.201(c)(3) with respect to goods that have been received and accepted or paid for and accepted. A contractual no-oral-modification clause and no-waiver clause do not bar enforcement of such modifications as to accepted goods under these circumstances.

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Cascade Valley Produce in Austin signed a one-year contract to supply Green Fork Kitchens in Dallas with specialty herbs for more than $500. The contract said any modification had to be in a signed writing. After Green Fork asked for extra trimming not required by the contract, its operations manager orally agreed to a higher per-pound price and told Cascade Valley, "I'll initial the change on our signed copy tonight." Cascade Valley then made the extra preparation and shipped several orders at the new price.

If Green Fork later refuses to pay for an accepted shipment by arguing the price increase was oral and barred by the statute of frauds, which is the strongest argument for Cascade Valley?

Explanation. The majority held that a material oral modification to a goods contract within the statute of frauds is generally unenforceable, but promissory estoppel applies where one party reasonably relies on the other's promise to reduce the oral modification to writing. Here, Green Fork's promise to initial or note the change on its signed copy induced Cascade Valley's performance, so Green Fork cannot use the statute of frauds as a defense. (Derived from Brookside Farms v. Mama Rizzo's, Inc. (n.d.).)