In the recent case of Central Illinois Light Co., v. Consolidated Coal Co., Central Illinois Light Co. (“CILCO”) filed suit against Consolidated Coal Co. (“Consolidated”) alleging Consolidated breached an oral contract to provide a certain amount of coal, at a specific price, over a two-year period.
CILCO asserted John Bach (“Bach”), a Consolidated sales manager, offered to supply CILCO with 1.5 million tons of coal over a period of two years. Two days later, CILCO’s fuel analyst, Sandy Isbell (“Isbell”), sent correspondence to Bach summarizing Consolidated’s proposal and requesting confirmation of the terms for the sale of the coal. During this time, the parties exchanged numerous e-mails and contract drafts, but no written contract was executed.
Despite the absence of an executed contract, Consolidated sold CILCO 361,798 tons of coal for $22.75 per ton, the price which was stated in the draft contracts. Thereafter, however, Consolidated ceased selling coal to CILCO, whereupon CILCO filed suit for breach of contract.
Consolidated argued the Statute of Frauds barred the enforcement of the alleged contract. The Statute of Frauds applies to all contracts for the sale of goods exceeding the price of $500.00. To satisfy the Statute of Frauds, a party must establish the existence of a written agreement for the sale of goods which is signed by the party to be bound and which specifies the quantity of goods. The court noted in order to satisfy the Statute of Frauds all that is required is some written corroboration of an oral agreement and that internal documents, invoices and e-mails meet such a requirement.
CILCO argued that documents created by its coal invoicing system and forwarded to Consolidated satisfied the Statute of Frauds. The court, however, rejected CILCO’s argument noting that nothing on the face of the documents demonstrated that they were signed, initialed or otherwise authenticated by an authorized agent of Consolidated, as required under the Statute of Frauds. The court further held that CILCO was barred from introducing oral evidence to establish the signature requirements of the Statute of Frauds because the court may only look to the writings between the parties to determine the enforceability of an alleged contract.
Finally, the court found that the various e-mails by Bach to Isbell failed to satisfy the Statute of Frauds since none of the e-mails were so connected to demonstrate that they related to the same contract. Further, the e-mails contained terms which conflicted with CILCO’s internal documents.
This case emphasizes the importance of memorializing all terms of an oral agreement in a written contract signed by the parties to be bound. Without such a written contract or any other signed written corroboration of an oral agreement, a court will not enforce such an agreement for the sale of goods exceeding the price of $500.00. If you have any questions regarding the enforceability of an oral agreement or assistance documenting an oral agreement, please contact a member of the firm.