Data

Date:: 08-08-2000
Country:: USA
Number:: 98 civ 7728 (NRB)
Court:: United States District Court, S.D. New York
Parties:: Fercus s.r.l. v. Mario Palazzo Company, Shonac Corporation and DSW Shoe Warehouse Inc.

Keywords

SALES CONTRACT GOVERNED BY CISG - STATUTE OF FRAUDS NOT APPLICABLE – PAROL EVIDENCE ADMISSIBLE TO PROVE EXISTENCE OF CONTRACT (ART. 11 CISG)

Abstract

An Italian manufacturer (Plaintiff) concluded an exclusive distributorship agreement with a U.S. company (Defendant) for the sale and distribution of shoes in United States and Canada. After a third company placed an order for the shoes with the distributor, the manufacturer shipped the shoes to the distributor and sent an invoice directly to the third company buyer to obtain payment. The buyer executed a written purchase order with the distributor, to which the manufacturer was allegedly not a party. Upon delivery of the shoes to the buyer’s warehouse, the manufacturer sent the distributor instructions regarding where to pay the price. The distributor, however, did not transmit the instructions to the buyer but instructed the latter to make payment directly to the its own bank account. The buyer then paid the distributor for the goods. The manufacturer allegedly never received payment from either party. The manufacturer brought an action against both the distributor and the buyer claiming, inter alia, the purchase price for the shoes. The buyer claimed that it fulfilled its obligations by paying in accordance with the distributor's directives. The buyer never communicated directly with the manufacturer regarding the invoice or the order.

Citing U.S. case law, the Court found there was no contract between the buyer and the manufacturer under the U.C.C. Statute of Frauds, since the invoice sent to the buyer did not amount to a final expression of their intent to conclude a contract. Rather, the only binding contract was the one reached between the distributor and the buyer through the written order signed by both the parties.

The Court held that CISG was not applicable to the transaction because no contract had been concluded as required by Art. 1(1). The Court reached its conclusion through the application of Art. 11, allowing the admission of parol evidence for the purpose of finding a contract. Although parol evidence is admissible under CISG, the Court noted, the undisputed facts were insufficient for the finding of a contract in this instance.

The Court also pointed out that, even if the evidence were sufficient to support the conclusion of a contract between the manufacturer and the buyer, such a finding would require that the agent was acting with the authority of the manufacturer in the negotiation. If this were the case, the agent's instructions for a different method of payment would constitute a valid modification of the contract. The buyer performed its obligations under this scenario by making the payment. Therefore, the Court held that there was no breach of contract by the buyer.

Fulltext

United States District Court, S.D. New York.
FERCUS, S.R.L., Plaintiff,
v.
Mario PALAZZO, MP Shoes Corporation, USA National Shoe Corp., Marty Shoes, Inc., Shonac Corporation and DSW Shoe Warehouse, Inc., Defendants. No. 98 CIV. 7728(NRB).
Aug. 8, 2000

OPINION AND ORDER

BUCHWALD, District J.
Fercus, S.R.L. ("Fercus" or "plaintiff') brings this action alleging: (1) breach of contract; (2) goods sold and delivered; (3) unjust enrichment; (4) quantum meruit, and (5) account stated. The dispute arises out of a shipment of shoes manufactured and sent by Fercus to defendant USA National Shoe Corp, ("USA Shoes") and ultimately sold to defendant Shonac Corporation ("Shonac"). Shonac and its affiliate, DSW Shoe . Warehouse, Inc. ("DSW"), now move this Court for summary judgment on the grounds that: (1) there was no contract between Fercus and Shonac; (2) Fercus has no claim for goods sold and delivered or account stated; (3) Shonac was not unjustly enriched; and (4) Shonac never made a promise to Fercus which would give rise to a quantum meruit claim. For the reasons stated herein, the motion is granted.

BACKGROUND

In 1997, Fercus, an Italian shoe manufacturer, established an agency agreement with defendant Mario Palazzo’s ("Palazzo") company, MP Shoes Corporation ("MP Shoes"), whereby MP Shoes became the exclusive agent for Fercus in the United States and Canada. In addition to this agreement, Fercus made an oral agreement with Palazzo to have another one of his companies, USA Shoes, buy Fercus’s shoes directly and resell them to retailers in the United States starting in 1998.

In May or June of 1998, Palazzo informed Fercus that he was negotiating with Shonac for the purchase of Fercus' shoes. Palazzo told Fercus that he had actually received an order from Shonac and subsequently, Fercus manufactured the shoes and shipped them to Palazzo’s company, USA Shoes. On July 31, Fercus sent "an invoice directly to Shonac stating the amount and cost of the shoes and payment instructions. However, the only written agreement concerning the shoes was not concluded until August 28, when USA Shoes executed a written purchase order for the shoes with Shonac. When the shoes arrived in the United States, Palazzo's USA Shoes paid far the custom duties, inspection fees, and delivery costs.
The shoes were stored in USA Shoes' warehouse far nearly a month until Shonac finally had the shoes delivered to its warehouse in Columbus, Ohio on September 24.
Also on September 24, Fercus faxed instructions to Palazzo regarding where to send the payment for the Shonac order. Then on the following day, Fercus again faxed Palazzo with changes to the payment instructions, but did not send either of the instructions directly to Shonac. Subsequently, Palazzo forwarded entirely different instructions to Shonac which called for Shonac to pay Palazzo's factor, MTB Bank ("MTB"), for the shoes. Pursuant to the instructions given by Palazzo, Shonac sent its full payment for the shoes to MTB on October 9.

DISCUSSION

[...]

B. Contract Claim

Shonac argues, in the first instance, that there was never a contract between Fercus and Shonac upon which Fercus can base its breach of contract claim. Fercus alleges that Shonac placed an oral order through Palazzo, Fercus' agent, on July 14 which was accepted by Fercus and that, as a result, Shonac was bound to perform under the contract as directed by Fercus, not Palazzo. Based on the order placed by Palazzo, Fercus shipped the goods and sent an invoice directly to Shonac.

1. Statute of Frauds

New York, like virtually all states, applies the Statute of Frauds to any contract for the sale of goods valued at $500 or more. Under U.C.C. § 2-201(1): a contract for the sale of goods for the price of $500 or more is not enforceable by way of action' or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.
In making a determination about whether a particular writing overcomes a Statute of Frauds problem, the court must decide whether the writings reflect a real transaction between the parties. See Arrow Trading Co. Inc. v. Suarez Corp., Nos. 89 Civ. 8496, 91 Civ. 6684, 1993 WL 338000 (S.D.N.Y. Aug. 31. 1993); Bazak Int'l Corpo v.. Mast Indlls.. Inc.. 73 N.Y.2d 113.-123 (1989). An unsigned invoice or purchase order has only been held to constitute a binding contract when it contains terms which provide evidence that it is intended to be the final express agreement between the parties. See Claudia v. Olivieri FootwearLtd., No. 96 Civ 8052, 1998 WL 164824. at 5 (S.D.N.Y. AQri17. 1998) (citing Polygram. S.A.. v, Enterurises Inc. 697 F.SuQQ. 132. 135 (E.D.N. Y .1988) (holding that an invoice was a contract and could not be modified by evidence of a prior oral agreement); Bazak. 73 N. Y.2d at 122 {holding that unsigned purchase order is not a binding contract unless it provides sufficient basis for determining that a prior agreement had been reached between the parties).

In this case, the only writing present in the record that could satisfy the Statute of Frauds is the purchase order signed by Shonac and Palazzo on August 28, 1998. This is the only writing that contains the fundamental terms of a contract for the sale of goods, price and quantity, which is signed by both the buyer and the purported seller of the shoes at issue. The enforceability of this contract is also corroborated by the signatories' subsequent actions. Palazzo paid the custom duties, inspections fees and delivery costs and had the shoes stored in USA Shoes' warehouse until September 24, when they were delivered to Shonac's warehouse in Ohio.

Palazzo then issued express instructions to Shonac concerning the method of payment for the shoes. Accordingly, Shonac paid Palazzo's factor on October 9, thus completing its obligation under the contract. Any claim that Fercus was the real party to the contract is unavailing. Fercus admits, that it never had any communication with Shonac regarding the purchase of the shoes, and there is no signature on the invoice sent by Fercus to Shonac to signify Shonac's acceptance of the terms on the invoice. Fercus fails to provide any evidence to establish that the invoice was a final expression of the parties' intent which is necessary to find that it created a binding contract between Fercus and Shonac. In addition, Fercus' s actions provide evidence to support its belief that Shonac was to buy the shoes directly from Palazzo’s USA Shoes. As noted above, Fercus sent the disputed shipment of goods to USA Shoes and had USA Shoes pay far the custom duties, inspections fees and delivery costs. Shonac Stmt.; Fercus Stmt. Then, on September 24 and 25, Fercus faxed payment instructions for the order to Palmo, even though it had previously sent the invoice to Shonac and could have sent these new instructions directly to Shonac, as well.

It bears further repetition that Shonac made the full payment far the shoes, as directed by Palazzo, to MTB. If we were to adopt Fercus position, Shonac would be liable to pay both Fercus and its agent, Palazzo, for the shoes. Such a result is inherently illogical. As a result, Fercus fails to raise a sufficient dispute of material fact which would enable a rational jury to find that Shonac breached any contract between itself and Fercus.

2. Oral Agreement Not Withstanding the Statute of Frauds

Fercus argues that the Statute of Frauds is no obstacle to a jury's finding of a contract between itself and Shonac because any contract between Shonac and Fercus would be covered by the United Nations Convention on Contracts for the International Sale of Goods ("C.I.S.G.").

The C.I.S.G. applies to any sale of goods when: (l) the contracting parties have places of business in different nations; (2) the nations are signatories to the Convention; and (3) the contract between the parties does not have a choice of law provision. C.I.S.G. Art. l(l){a); nelchi Carrier. SpA v. Rotorex Corp., 71 F.3d 1024. 1028. n. l (2d Cir.1995). Unlike the U.C.C., the Statute of Frauds does not apply to the C.I.S.G. and parol evidence is permitted to prove that a contract has been agreed to by the parties. " C.I.S.G. Art. Il. See also, Claudia. 1998 WL 164824. at 5 (finding in a C.I.S.G. case, that parol evidence was admissible to determine the parties' final agreement where the only written document was a unilaterally prepared invoice signed only by the seller). The only scenario in which the C.I.S.G. would apply here is if a binding contract was created between Shonac and Fercus. Under the C.I.S.G., evidence of the oral conversations between Palazzo and Fercus relating to the terms of the purchase by Shonac, could be admitted to establish that an agreement had been reached between Fercus and Shonac and that a contract was established when Fercus shipped the goods and sent the July 31 invoice directly to Shonac. However, since Fercus admits that it did not have any communication with Shonac pertaining to this order, then Palazzo must have been acting as Fercus agent when he negotiated this order with Shonac. On the one hand, if Palazzo was Fercus agent, then he had the actual or apparent authority to instruct Shonac as to the method of payment. Even if the invoice had created a binding contract under the C.I.S.G., Palazzo, using his actual or apparent authority, modified the original agreement between Fercus and Shonac when he executed the binding purchase agreement with Shonac on August 28. The purchase order called for Shonac to pay Palazzo directly for the shoes and when Shonac paid : MTB for the shoes on October 9, Shonac satisfied the terms of the modified contract.

If, on the other hand, Palazzo was not acting as Fercus' agent, and he did not have the actual or apparent authority to negotiate an order for Fercus, then the only contract was that between Shonac and Palazzo himself, which would be governed by the U.C.C. Under either scenario, it is clear that Shonac fulfilled its obligation under any contract by paying for the shoes. Therefore, summary judgment is granted and these claims are dismissed.

[…]

IT IS SO ORDERED.}}

Source

Published in English (excerpt):
University of Pace Website (http://cisgw3.law.pace.edu)

Commented on by:
M.- F. Papandreou- Deterville, Observations, in Recueil Le Dalloz 2002, p.398-99.}}