Am. Iron & Metal Co. v. United States Ferrous Trading Div. - No. 3:06cv01538 (PCD), 2007 U.S. Dist. LEXIS 27847 (D. Conn. Apr. 13, 2007)

Rule:

The merchant exception provides that 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), unless written notice of objection is given within ten days after it is received. The merchant exception simply relaxes the signature requirement for the enforcement of a contract that otherwise satisfies the dictates of section 42a-2-201(1). Specifically, the merchant exception ensures that both the recipient and the sender of a confirmatory writing can invoke the statute of frauds against the other without a signature. While the merchants' exception does not require a confirmatory writing to be signed by the party to be charged, the writing still must satisfy the dictates of Connecticut statute of frauds, that is the contract must be in writing and must specify the quantity of goods to be sold.

Facts:

AIM is a seller of scrap metal, and Tube City is a reseller of the same. On or about June 20, 2006, Tube City contacted AIM in order to purchase approximately 30,000 metric tons of scrap metal to be shipped in August 2006 to Tube City's customer, Beshay Steel ("Beshay"), located in Egypt. AIM responded to Tube City's June 20, 2006 inquiry with an offer to sell 20,000 metric tons of "HMS1" scrap metal for $300 per metric ton and 10,000 metric tons of "P&S" scrap metal for $303 per metric ton. On or about June 23, 2006, Tube City increased the volume it wished to purchase to 35,000 metric tons. That same day, AIM and Tube City agreed that AIM would sell Tube City 30,000 metric tons of "HMS1" scrap metal at $300 per metric ton and 5,000 metric tons of "P&S" scrap metal for $305 per metric ton for a total of 35,000 metric tons of scrap metal for $10,525,000. Tube City verbally accepted AIM's offer. On June 26, 2006, Tube City confirmed its acceptance in an e-mail sent to AIM. AIM and Tube City agreed that AIM would ship the scrap metal directly to Beshay during the month of August. However, in the weeks following the parties' agreement, the price of scrap metal began to decrease, and Tube City informed AIM that Beshay no longer wanted the scrap metal at the agreed upon price. Thereafter, Tube City withdrew from its agreement with AIM. AIM attempted to mitigate its damages by instructing Tube City to sell the scrap metal at the best price it could obtain, but Tube City instead continued to attempt to resurrect its agreement with Beshay. On or about September 8, 2006, AIM sold the scrap metal for $9,800,000-$725,000 less than the contract price to which Tube City had agreed to pay. AIM paid an additional $210,000 to store the scrap metal. Thereafter, on September 29, 2006, AIM brought this action against Tube City seeking compensatory, consequential, and incidental damages for breach of contract. Tube City moved, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss AIM's Complaint on the ground that the alleged contract was never properly memorialized by a writing sufficient to comply with the Connecticut statute of frauds.

Issue:

Should Tube City’s motion to dismiss be granted?

Answer:

No.

Conclusion:

Re: quantity term — In order to comply with the statute of frauds, "[t]he writing must specify the quantity of goods to be sold." The court held that the quantity range stated in the emails sufficiently represented the object of the sale, thereby meeting this requirement.

Re: existence of agreement — As to identities, the e-mails proffered as a writing memorializing an agreement between AIM and Tube City are sent by Detlef Mueller, Tube City's Managing Director, to Herb Black, AIM's CEO. The e-mails also contain statements such as "[t]hanks for your offer per phone earlier today," "[w]e'd expect to pay you out of that L/C," and "we hope acceptable to you." The Court cannot conclude at this time that there is no ambiguity as to the obligations among AIM, Tube City, and "the Egyptians," but AIM need not prove such a holistic understanding of the contract in order to survive a motion to dismiss for failure to satisfy the statute of frauds. As to method and terms of payment, the determination of method and terms of payment are not "critical issues" with respect to the statute of frauds. Rather, "[t]he price, time and place of payment or delivery, the general quality of the goods, or any particular warranties may all be omitted." Thus, continuing negotiations as to the methods and terms of payment do not render the e-mails inadequate under the statute of frauds. Finally, as to Tube’s argument that the emails only show preliminary negotiations, the subject language of the emails may be reasonably construed to refer solely to the letter of credit and other payment provisions regarding Tube City's arrangement with Beshay. Such language could thereby serve as evidence of Tube City's intent to enter a separate contract with Beshay Steel and not as an indication that a further writing was required to form an agreement between Tube City and AIM. Tube City may have believed that AIM would be interested in this information irrespective of whether it implicated their agreement, particularly in light of Tube City's e-mail that provided, "[w]e'd expect to pay you out of that L/C." Therefore, this Court cannot determine as a matter of law that this language precludes the existence of a contract between AIM and Tube City.