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Law School Case Brief

Brookside Farms v. Mama Rizzo's, Inc. - 873 F. Supp. 1029 (S.D. Tex. 1995)

Rule:

It is a general rule of Texas law that oral agreements that materially modify a written agreement within the Statute of Frauds are not enforceable. However, not all modifications are prohibited. If the oral changes do not materially alter the underlying obligations, for example, they are not barred. Second, the Texas Supreme Court has adopted the doctrine of promissory estoppel in some cases to forbid reliance on the Statute of Frauds as a defense to the validity of oral agreements. In specific, the Court has held that where one party reasonably relies on the oral promise of another to reduce an oral agreement to writing, the failure to create such a writing will not prevent the relying party from taking the modification out of the Statute of Frauds.

Facts:

In 1993, Brookside Farms (“Brookside”) and Mama Rizzo’s Inc. (“MRI”) entered into a requirements contract for the sale of fresh basil leaves from Brookside to MRI. Under the contract, MRI agreed to buy a minimum of 91,000 pounds of fresh basil leaves for a one-year term. MRI agreed to pay for the basil it accepted within 15 days of delivery date. The price for the basil leaves under the contract was seasonally based, with one price applicable during the domestic growing season (i.e., $3.80 per pound), and a higher price applicable during the non-growing season (i.e., $5.00 per pound). Under the terms of the contract, no oral modification can be effected. However, when the vice-president of MRI requested for additional services not originally contemplated by the agreement, Brookside increased the price. The vice-president of the company agreed to make a notation of the price change on MRI’s copy of the original contract. The prices of the basil were again modified when Brookside was forced to pay higher prices for its supply of Mexican basil leaves; the price modifications were consented to, and paid for by MRI through issuance of a check. The check, however, was dishonored by MRI’s bank for insufficient funds. Brookside has brought the present suit on the claims that MRI has breached the executory portion of the contract by refusing to accept the minimum amount of basil it agreed to. As a defense, MRI contended that no payment was due because Brookside itself breached the contract by raising prices in violation of the contract's express language that no modification would be binding unless it was reduced to written form. Brookside filed a motion for partial summary judgment, and MRI filed a motion for summary judgment.

Issue:

In the case at bar, was there a valid oral modification of the contract, and therefore, Brookside cannot be said to have breached the contract? 

Answer:

Yes.

Conclusion:

The federal District Court found that a valid oral modification of the contract occurred on both estoppel and statutory grounds and that the parties' behavior clearly brought them within the estoppel theory adopted by the Texas Supreme Court. Further, MRI’s promised notation constituted a valid written modification of the contract's terms because a valid writing under the Statute of Frauds required only "some writing" signed by the party against whom it was to be enforced. The Court found that the parties entered into an effective agreement for those items Brookside shipped and MRI received and accepted. With this, the Court concluded that Brookside did not breach its contractual obligations and that MRI was liable for a material breach of its obligation to purchase a total of 91,000 pounds of basil.

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