Facts

Union Equity Co-Operative Exchange is the plaintiff, and Carroll Nelson is the defendant.

August 1, 1973, Nelson called Union Equity and made an oral contract that he would deliver 5,000 bushels of wheat for $3.65 per bushel. He was to deliver this on August 31, 1973. Union Equity mailed a written confirmation to the merchant. Nelson received the confirmation. 

Nelson sold his 1973 crop of 5,000 bushels to a milling company in Denton, Texas for $5.25 per bushel instead of Union Equity.

Union equity is suing Nelson for the damages arising from the breach, which is $6,500. 

Nelson claims that he was not a merchant, due to the affirmative defense of Statue of Frauds.

Issue

Did Nelson breach his contract that he made with Union Equity stating he would sell them 5,000 bushels of his wheat in 1973?

Rule

Nelson denies that his is a merchant due to the affirmative defense of the Statue of Frauds, which states "contract for the sale of good with a purchase of $500 or more may not be enforced unless the contract is in writing and signed by the person being charged". Nelson does not feel that he breached the oral contract with Union Equity.

Holding

Yes, this is a breached contract because Nelson is considered merchant. Under Texas U.C.C section 2.104(a) that one who "deal in goods of his kind" that they are a merchant. Nelson is an expert in wheat. Nelson must pay $6,5000 to Union Equity for the damages arising from the breach of their oral contract.

Reasoning

Under the Texas U.C.C section 2.104(a), Nelson is considered a merchant due to the fact that he deals in good of the kind. Nelson is an expert in wheat, for he was farming for 20 years, and previously selling his yearly crop to a milling company in Denton, Texas for multiple years. Making him an expert. While even though he is a small farmer, he did make an oral contract with Union Equity. Union Equity did all the steps in assuring that this contract was valid.

• They verbally made an oral contract over the phone August 1, 1973, agreeing to sell 5,000 bushels for $3.56.
• Union Equity sent Nelson a written confirmation of their oral contract. 
• Nelson received that written confirmation. 

• In the previous year made a future contract with Union Equity, but yet it was rescinded because he broke his shoulder.
• Nelson is considered a merchant.

Policy reasons behind the decision: The law wants to enforce contracts. It is important that if a merchant agrees to sell to a business then they must follow through, if a business does not receive the product is can lead to loss on their end, which could put them out of business.

It is unfortunate that a small farmer had to pay a $6,500 to a bigger cooperation, but it is his punishment for breaching that oral contract. If Nelson did not intent to sell to Union Equity then he should not have made a future contract in the first place, or even a contract at all. If Nelson was looking into the best price obtainable for his crops then he should have waited on the market, but that can be a risky game.