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McMahon Food Corp. v. Burger Dairy Co. - 103 F.3d 1307 (7th Cir. 1996)

Rule:

In cases which the Uniform Commercial Code (U.C.C.) governs--though only in U.C.C. cases--Illinois follows the more liberal standard that parol evidence is admissible to determine whether an agreement is completely or partially integrated, and to explain the meaning of even a fully integrated agreement.

Facts:

Appellee Burger Dairy Company (Burger) and Appellant McMahon Food Corporation (MFC) were involved in a contract dispute over milk products that Burger sold to MFC, as well as credits for empty milk cases that MFC returned. MFC brought a declaratory judgment action against Burger, asserting that it effected an accord and satisfaction of its debt by tendering two checks with attached vouchers, each marked paid in full through a certain date. The United States District Court for the Northern District of Illinois, Eastern Division denied MFC relief, ruling that the accord which the first check purported to satisfy was obtained by deceit, while the second check was a unilateral action by MFC, on which the parties reached no accord under 810 Ill. Comp. Stat. 5/3-311. The court awarded Burger the full amount claimed. On appeal, MFC argues that (1) because the language "payment in full thru 6/6/92 . . . Clear statement of account thru 6/6/92 to follow," inscribed on the first voucher, was clear and unambiguous, the district court wrongly admitted parole evidence to elucidate the negotiations leading up to its tender; and (2) under U.C.C. § 3-311, a second accord was reached when Burger objectively agreed to MFC's offer by cashing the second check. 

Issue:

Did the district court err in its findings of fact?

Answer:

No

Conclusion:

The appellate ccourt held the first check marked "paid in full" did not effect a satisfaction because the accord was reached as a result of appellant MFC's bad faith and admission of parol evidence to demonstrate bad faith was proper. The second check failed to make it sufficiently clear that it's negotiation would settle all remaining disputes. The court found that MFC was acting dishonestly and taking advantage of Burger at the time payment was tendered, and therefore MFC failed to meet the good faith requirement of § 3-311(a).  A trial court's conclusion that a party failed to act in good faith is a finding of fact which the appellate court will reverse only for clear error.

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