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Illinois Appellate Court - 601 N.E.2d 956, 235 Ill. App. 3d 224
Tags: Contracts, Indefiniteness
tl;dr:
A party to a contract for sale argued that the contract was unenforceable because it lacked an express price term. The court held that the contract may still be enforceable if the parties intended to enter an agreement without settling on a price.Video Summary
Case Summary
In Wagner Excello Foods, Inc. v. Fearn International, Inc. (1992), a food manufacturer sued a corporation for not fulfilling their agreement's minimum purchase requirements.
Wagner and Fearn entered into a five-year contract on February 1, 1985, whereby Wagner agreed to manufacture and package fruit drink concentrates for Fearn. The agreement did not establish a price term, but specified that the parties would review the prices of each product every four months. 30 days before the end of each four-month period, Wagner was required to notify Fearn of any proposed price changes for the next period. If Fearn didn’t object, then the new price would go into effect. If Fearn objected, then the parties would negotiate, and if they were unable to agree, the contract would be terminated 20 days after the end of the four-month period.
Wagner brought suit to recover more than $3 million in allegedly lost profits resulting from Fearn’s failure to meet the minimum purchase guarantee. Fearn filed a motion to dismiss, arguing that there was no contract because there was no fixed price term. The trial court granted Fearn’s motion. Wagner appealed.
On appeal, the court stated that all of the essential elements of an agreement are present except for the price. The Uniform Commercial Code (UCC), as adopted in Illinois, expressly allows parties to conclude a contract for sale even though the price is not settled if they so intend. Therefore, the complaint should not have been dismissed and a conclusion on the intent of the parties should be reached by a fact finder. The trial court’s order was reversed.
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The plaintiff, Wagner Excello Foods, Inc., invested over $900,000 in equipment and employees in anticipation of a continuing business relationship with the defendant, Fearn International, Inc. However, the defendant failed to purchase the required amount of concentrate from the plaintiff, resulting in no purchases for the fifth year of the initial agreement. The plaintiff filed a complaint containing two counts against the defendant, seeking over $3 million for lost profits and damages for the plaintiff's reliance on the defendant's promises. The court dismissed both counts, finding that the minimum quantity guarantees had been waived through a revised agreement. The plaintiff appealed, but the court found that the plaintiff waived their right to minimum quantity requirements through their conduct and a revised agreement, and dismissed both counts of the plaintiff's claim. The court also noted that promissory estoppel is not available when parties have entered into a binding contract under contract law.
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