Chapter 19
The Formation of Sales
and Lease
Contracts
Case 19.1
379 Ill.App.3d 381, 883 N.E.2d 711, 318 Ill.Dec. 480, 65 UCC Rep.Serv.2d 116
Appellate Court of Illinois,Fourth District.
Gene JANNUSCH and Martha Jannusch, Plaintiffs-Appellants,
v.
Lindsey NAFFZIGER and Louann Naffziger, Defendants-Appellees.
throughout Illinois and Indiana from late April to late October each year. The assets of the business included a truck
and servicing trailer and equipment such as refrigerators and freezers, roasters, chairs and tables, fountain service
and signs and lighting equipment.
Defendants were interested in purchasing the concession business, met several times with plaintiffs, and observed
the business in operation. Gene testified that on August 13, 2005, plaintiffs entered into an oral agreement to sell Fes-
ants would run Festival Foods as they pursued buying the business. According to Lindsey, Gene suggested the par-
ties sign something and she replied that defendants were “in no position to sign anything” because they had not re-
ceived any loan money from the bank and did not have an attorney. The following week, Lindsey consulted with an
attorney regarding the legal aspects of buying and owning a business. She asked the attorney to prepare a contract
for the purchase. Ultimately, the bank approved defendants for a loan. Lindsey admitted ***483**714 taking posses-
they operated was lower than expected. She stated Gene specifically asked defendants to run certain events for him
and he ran the events where he was present. She testified Gene asked for the trailer back, stating he needed it “so he
could make money on it for the end of the year,” and that Gene stated he did not have money to buy back the inven-
tory.
(2005).
A. Application of UCC
[3][4][5][6] Defendants argue the UCC should not apply because this case involves the sale of a business rather than
(2005). Certainly significant tangible assets were involved in this case.
Cf. Fink v. DeClassis,
745 F.Supp. 509, 516
(N.D.Ill.1990) (intangible assets accounted for $1 million of the total purchase price of $1.2 million). The evi-
2004). However, a contract is enforceable even though it does not meet the requirements of subsection (1) if it is valid
in other respects and “the party against whom enforcement is sought admits in his pleading, testimony[,] or otherwise
in court that a contract for sale was made.” 810 ILCS 5/2-201(3)(b) (West 2004). Also, an oral contract for the sale of
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making
is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties
have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.” 810
ILCS 5/2-204 (West 2004).
[8] Defendants argue that nothing was said in the contract about allocating a price for good will, a covenant not to
compete, allocating a price for the equipment, how to release liens, what would happen if there was no loan approval,
factory,” or other terms.
Cheever,
144 Ill.2d at 29-30, 161 Ill.Dec. 335, 578 N.E.2d at 984. “[I]n fact, all they had really
agreed to was a tentative title (
The Uncollected Stories of John Cheever
).”
Dawson v. General Motors Corp.,
977
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 339
F.2d 369, 373 (7th Cir.1992).
The essential terms were agreed upon in this case. The purchase price was $150,000, and the items to be trans-
the sale of goods do not transfer those goods and allow them to be retained for a substantial period before reaching
agreement. Defendants replaced equipment, reported income, paid taxes, and paid Gene for his time and expenses,
all of which is inconsistent with the idea that defendants were only “pursuing buying the business.” An agreement to
make an agreement is not an agreement, but there was clearly more than that here.
[12][13][14]*387 The trial court believed it was significant that Lindsey told Gene that defendants were “in no position
Case 19.2
Minn.App.,2009.
Glacial Plains Co-op. v. Lindgren
759 N.W.2d 661, 67 UCC Rep.Serv.2d 877
Court of Appeals of Minnesota.
v.
FACTS
On April 20, 2006, appellant, a farmer, agreed by telephone to sell grain to respondent, a grain elevator and marketer. The parties
reached four essential agreements: (1) two agreements for delivery of 9,000 and 10,000 bushels of soybeans in October or No-
vember 2006; (2) one agreement for delivery of 65,000 bushels of corn in October or November 2006; and (3) one hedge-to-arrive
agreement for the sale of 30,000 bushels of corn in the fall of 2007. Respondent immediately sent out four written contracts that
corn contracts, the district court concluded that appellant was a merchant within the meaning of the UCC and that the transactions
fell within the merchant exception to the statute of frauds. The district court further concluded that since the parties are merchants,
the UCC provision under Minn.Stat. § 336.2–207(1) dictated that the additional terms became part of the parties’ contract because
appellant did not object to the terms within a reasonable time and because the terms did not materially alter the contract. The dis-
trict court entered judgment for respondent finding that, even though appellant did not sign the contracts, they are still enforceable
1. Do the admission exception and the merchant exception operate to eliminate the UCC statute of frauds defense to oral agree-
ments for the sale and delivery of grain?
2. Does the UCC statute of frauds provision govern to the exclusion of the general statute of frauds provision pertaining to a con-
tract that cannot be performed within one year?
(1976). The
Jurek
court did not address the merchant exception, but simply applied the admission exception.
Id.; see also Tonka
Tours, Inc. v. Chadima,
372 N.W.2d 723, 728 (Minn.1985) (upholding oral modification to purchase agreement under admission
exception to statute of frauds). Applying Minnesota law, the Eighth Circuit Court of Appeals found that a honey producer admitted
that it contracted for 18 loads of honey and that this admission constituted an exception to the statute under Minn.Stat. § 336.2–
1972) (finding defendant’s testimony as adverse witness was admission taking an oral contract for the sale of stored corn out of the
statute of frauds).
Because the admission exception removes the UCC statute of frauds defense under the facts of this case, we decline to address
whether the merchant exception also applies.
See Cargill,
537 S.W.2d at 669 (choosing not to discuss whether a farmer was a
645.26, subd. 1 (2008) (stating “[w]hen a general provision in a law is in conflict with a special provision in … another law, … the
special provision shall prevail and shall be construed as an exception to the general provision”). Section 336.2-201 is a special
legislative attempt to tailor the enforcement and exceptions of the statute of frauds to the unique characteristics of a transaction for
the sale of goods. Conversely, Minn.Stat. § 531.01 is the “general” statute of frauds provision historically encompassing a wide
variety of contractual obligations. Because of Minnesota’s policy of interpreting special statutes as exceptions to more general pro-
Case 19.3
298 N.Y.S.2d 264
59 Misc.2d 189
Clifton JONES and Cora Jones, Plaintiffs,
v.
STAR CREDIT CORP., Defendant.
Supreme Court, Special Term, Nassau County, Part III.
March 18, 1969.
SOL M. WACHTLER, Justice.
On August 31, 1965 the plaintiffs, who are welfare recipients, agreed to purchase a home freezer unit for $900 as the result of a
visit from a salesman representing Your Shop At Home Service, Inc. With the addition of the time credit charges, credit life insur-
ance, credit property insurance, and sales tax, the purchase price totalled $1,234.80. Thus far the plaintiffs have paid $619.88 to-
ward their purchase. The defendant claims that with various added credit charges paid for an extension of time there is a balance
of $819.81 still due from the plaintiffs. The uncontroverted proof at the trial established that the freezer unit, when purchased, had
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 343
a maximum retail value of approximately $300. The question is whether this transaction and the resulting contract could be consid-
ered unconsionable within the meaning of Section 2-302 of the Uniform Commercial Code which provides in part:
(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be
afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making
the determination. L.1962, c. 553, eff. Sept. 27, 1964.
There was a time when the shield of “caveat emptor’ would protect the most unscrupulous in the marketplace-a time when the law,
in granting parties unbridled latitude to make their own contracts, allowed exploitive and callous practices which shocked the con-
10 S.Ct. p. 137) these as “cases in which one party took advantage of the other’s ignorance of arithmetic to impose upon him, and
the fraud was apparent from the face of the contracts.’
The law is beginning to fight back against those who once took advantage of the poor and illiterate without risk of either exposure
or interference. From the common law doctrine of intrinsic fraud we have, over the years, developed common and statutory law
which tells not only the buyer but also the seller to beware. This body of laws recognizes the importance of a free enterprise sys-
Reynoso, 52 Misc.2d 26, 274 N.Y.S.2d 757, revd. 54 Misc.2d 119, 281 N.Y.S.2d 964; American Home Improvement, Inc. v. Mac-
Iver, 105 N.H. 435, 201 A.2d 886, 14 A.L.R.3d 324), the statutory language itself makes it clear that not only a clause of the con-
tract, but the contract in toto, may be found unconscionable as a matter of law. Indeed, no other provision of an agreement more
intimately touches upon the question of unconscionability than does the term regarding price.
Fraud, in the instant case, is not present; nor is it necessary under the statute. The question which presents itself is whether or not,
344 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
There is no question about the necessity and even the desirability of instalment sales and the extension of credit. Indeed, there are
many, including welfare recipients, who would be deprived of even the most basic conveniences without the use of these devices.
Similarly, the retail merchant selling on instalment or extending credit is expected to establish a pricing factor which will afford a
degree of protection commensurate with the risk of selling to those who might be default prone. However, neither of these accept-
and Food A/C #56788′ on the agreement and to a letter signed by the plaintiffs requesting refinance of the same items. The re-
quest for “refinancing’ is typed on the defendant’s letterhead. The quoted refinance statement is typed on a form agreement enti-
tled “Star Credit Corporation-Retail Instalment Contract’. It is signed by the defendant as “seller’ and by the purchasers as “buyer’.
Above the signature of the buyers, they acknowledge “receipt of an executed copy of this RETAIL INSTALMENT CONTRACT’
(capitalization in original). The June 15, 1966 contract by defendant is on exactly the same form as the original contract of August