APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.
Forman, Aldisert and Garth, Circuit Judges.
This appeal, a diversity action, calls for an interpretation of the Uniform Commercial Code under Pennsylvania law and requires a decision as to the propriety of the entry of summary judgment in favor of the defendant bank. It presents questions of waiver of the Statute of Frauds, Section 2-209(4); of oral modification of a written agreement, Section 2-209(1); and of reasonable notice that strict performance would be required of a term previously waived, Section 2-209(5).
On March 24, 1971, Girard Bank and appellant entered into a written contract in which the bank agreed to sell and appellant agreed to buy a quantity of knitted shirts and sweaters for the price of $11.75 a dozen. The agreement required appellant to deposit $5,000.00 on account of the purchase price, which deposit was made; and gave the bank an option to terminate the agreement on or before April 1, 1971 by sending appellant written notice.*fn1
On March 31, 1971, the bank's attorney, Bruce D. Schuter, telephoned George Langberg, appellant's attorney, informing him that the bank had received an offer of $14.00 per dozen and inquiring whether appellant would meet the offer. After consulting appellant, Langberg telephoned Schuter advising him that appellant would meet the offer, and according to Langberg's affidavit "inquired of what . . . [defendant] would require to make the agreement binding and unconditional . . . Mr. Schuter . . . informed me that defendant, for its own protection and to insure its obtaining the highest price for the goods, desired sealed bids from plaintiff and the firm who had made the offer of $14.00 per dozen."
The attorneys then agreed to a sealed bid arrangement. In his affidavit Langberg stated that Mr. Schuter agreed to a waiver to the right of cancellation and that he [Langberg] advised Schuter that "our understanding should be reduced to writing by a letter agreement which plaintiff was ready to execute that day."
Schuter directed Langberg to call Spahr, a bank officer, who in a subsequent telephone conversation, agreed with Langberg as follows: (1) there would be sealed bids; and (2) "if the sealed bid of another was higher than that of [the] plaintiff, then [the] defendant was deemed to have exercised option to cancel the agreement dated March 24, 1971." Although Langberg offered to have the plaintiff "attend" the bank's offices on that day (March 31, 1971) with the sealed bid and the letter agreement, Spahr advised "that plaintiff was not required to attend in Philadelphia that day and that if plaintiff's representative would appear at his office on April 1, 1971 with the sealed bid and the letter agreement... he would accept the bid and sign the letter agreement on behalf of the defendant."
Langberg then prepared the letter agreement, read its contents to Spahr, received Spahr's approval over the telephone, was reassured by Spahr that it was not necessary to attend in Philadelphia on March 31, 1971, that it was satisfactory to deliver the sealed bid and new agreement in the forenoon of April 1, 1971: "Mr. Spahr assured me that the understanding as reflected in the letter agreement... read to him would be signed when the sealed bid... was delivered; he further informed me that there would be no cancellation if plaintiff was the highest bidder or if no sealed bid was received by him from the other offeror." Later that day the bank's attorney, Schuter, telephoned Langberg. Langberg then read the letter agreement to Schuter who, in turn, advised Langberg that it was acceptable in all respects.
On the morning of April 1, 1971, plaintiff's representative appeared at Spahr's office to deliver the sealed bid and the letter agreement. Spahr refused to accept them. The refused bid was for the amount of $15.50 per dozen. On the same morning, Schuter telephoned Langberg informing him that the bank had, on the previous evening, sold the goods to a third party, Burnette, for $14.00 per dozen. Schuter related that the bank believed it had entered into a binding arrangement with Burnette when Spahr had taken a check from Burnette and had signed a receipt on the back of a business card.
Whereupon the bank orally purported to terminate the March 24, 1971 agreement, returned the $5,000.00 hand money, and sent plaintiff a letter of the same date expressing in writing what had been communicated orally.*fn2 The plaintiff sued. The bank moved for summary judgment, contending that the bank made a timely termination of the March 24, 1971 written contract. The plaintiff has appealed from the grant of defendant's motion. We reverse.
We are in complete agreement with the following portions of the district court's opinion:*fn3
The Court's jurisdiction in this case is based solely on diversity of citizenship, and so we must look to applicable state law. For purposes of this memorandum, the applicable Pennsylvania law will be referred to.
This case involved a contract for the sale of goods within the meaning of the Uniform Commercial Code -- Sales. 12A P.S. § 2-105, 106.
12A P.S. § 2-201 provides as follows:
" FORMAL REQUIREMENTS; STATUTE OF FRAUDS
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed ...