Summary of a Recent
Judicial Development in
Commercial Transactions

Admission Exception to UCC Statute of Frauds

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Glacial Plains Cooperative v. Lindgren, 759 N.W.2d 661 (Minn. Ct. App. 2009), the Minnesota Court of Appeals held that oral contracts for the sale of grain were removed from the statute of frauds writing requirement because the defendant had admitted the existence of the contracts.

Background

Defendant orally agreed to deliver corn and soybeans to the plaintiff grain elevator and marketer, including one hedge-to-arrive agreement for the delivery of corn in the following year, but he did not sign the written agreements that the plaintiff sent to him. Id. at 663. The written agreements included the same terms that the parties had orally agreed to, but they also added a provision for attorney's fees and costs. Id. After fully performing two of the contracts and partially performing the other, the defendant decided not to fulfill the agreements and sold his corn to another buyer, which forced the plaintiff to buy its corn from another source for a higher price. Id. The plaintiff sued for breach of contract, and the defendant argued that the claims were barred by state law and the Uniform Commercial Code (UCC) statute of frauds. Id. The district court granted summary judgment for the plaintiff on the grounds that the merchant exception to the statute of frauds applied, and held that the additional terms became part of the parties' contract because the defendant did not object to the terms within a reasonable time and because they did not materially alter the contract. Id. This appeal followed. Id.

Arguments

Defendant argued that the oral agreements were not enforceable because they violated Minnesota's version of the UCC statute of frauds provision, which requires a sale of goods of $500 or more to be evidenced in writing. Id. at 664. He also argued that the hedge-to-arrive agreement was governed by Minnesota's general statute of frauds, which requires a written contract for any agreement that by its terms cannot be performed within one year. Id. at 665-66.

Plaintiff argued that the oral agreements were removed from the statute of frauds by the merchant exception and the admission exception. Id. at 664.

Analysis and Holdings

The admission exception to Minnesota's version of the UCC statute of frauds, Minn. Stat. § 336.2-201(3)(b), provides for an exception "if the party against whom enforcement is sought admits in pleading, testimony or otherwise in court that a contract for sale was made." Id. The court found that the defendant had made such an admission, and thus held that the exception applied. Id. at 664-65. As to the hedging agreement, the court acknowledged that the agreement could not be fulfilled within one year, so if Minnesota's general statute of frauds provision, Minn. Stat § 513.01, applied, the agreement would have been required to be in writing. Id. at 666. Because that statute and the UCC statute overlapped, the court had to determine whether the UCC provision governed exclusively, or whether the general statute of frauds applied. Id. The court explained that when two statutes conflict, Minnesota law directs that the more specific provision controls. Id. The court therefore held that the UCC provision and its exceptions governed, and affirmed the order of summary judgment for the plaintiff. Id.

The case was decided on January 27, 2009.