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EAST EUROPE DOMESTIC INTL. SALES CORP. v. ISLAND C

October 3, 1983

EAST EUROPE DOMESTIC INTERNATIONAL SALES CORP., Plaintiff,
v.
ISLAND CREEK COAL SALES COMPANY, TIGER, INC., EEI ENERGY, INC., and A.L. WATSON & CO., INC., Defendants



The opinion of the court was delivered by: LASKER

LASKER, D.J.

 Island Creek Coal Sales Company ("Island Creek") and A.L. Watson & Company, Inc. ("Watson") move pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment on the grounds that (1) the statute of frauds bars enforcement of the alleged contracts upon which the complaint is based, and (2) recovery for breach of contract is barred because plaintiff, East Europe Domestic International Sales Corp. ("East Europe"), did not provide the letter of credit required under its alleged contracts with Island Creek and Watson. Watson, along with Tiger, Inc. ("Tiger"), also seeks summary judgment on the additional ground that East Europe is without legal capacity to bring the instant lawsuit, because East Europe's certificate of incorporation has been voided by the state of Delaware for non-payment of taxes, and because the corporation has never been authorized to do business in New York State, where it maintains its principal office.

 East Europe is a corporation which, during the late '70's, was active in the export of various commodities, including coal. Its president and sole owner, officer and director is Robert Ross. In May 1979 East Europe entered into a contract with Eregli Iron & Steel Works Company ("Eregli") of Turkey, not a party to this action, which required East Europe to supply Eregli with 380,000 dry metric tons of coal at a price of $52.50 per dry metric ton. The complaint alleges that East Europe entered into contracts with each of the defendants successively during the period between May and December 1979 to purchase coal for resale to Eregli, and that each of the defendants breached its contract with East Europe by failing to supply the coal. The first cause of action alleges that East Europe and Island Creek entered into a contract on or about May 23, 1979 under which Island Creek agreed to supply East Europe with 380,000 dry metric tons of coking coal between June 1979 and May 1980 at a price of $49.40 per dry metric ton. The second cause of action alleges that on or about June 13, 1979 East Europe entered into an identical contract with Tiger. The fourth cause of action *fn1" alleges that in December 1979 East Europe entered into a contract with Watson and EEI Energy Company ("EEI") *fn2" pursuant to which they agreed to supply East Europe 380,000 dry metric tons of coking coal at a price of $50.50 per dry metric ton.

 I. Island Creek

 New York Uniform Commercial Code ("N.Y.U.C.C.") § 2-201(1) provides:

 
"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 upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing."

 East Europe points to two documents which, it claims, adequately reflect a contract with Island Creek for 380,000 dry metric tons of coal. The first of these is the "Purchase Order and Contract" dated May 23, 1979, *fn3" which East Europe sent to Island Creek with a transmittal letter dated May 25, 1979. *fn4" The "Purchase Order and Contract" sent by East Europe followed an exchange of telexes on May 14th and 15th confirming an agreement for shipment of a 40,000 ton test cargo of coal, meeting specifications set forth in the telexes, at $49.40 per metric ton. *fn5" As summarized in the letter of May 25th, the "Purchase Order and Contract" set forth an agreement for 380,000 dry metric tons of coal to be shipped over a 12-month period in 40,000-ton installments, payment to be made by irrevocable confirmed letter of credit to be opened by the end of June 1979. The second document relied on by East Europe as satisfying the statute of frauds is Island Creek's response to East Europe's "Purchase Order and Contract," contained in a telex dated June 4, 1979. *fn6" That telex states, in pertinent part:

 
"We have received your proposed contract form which was in much more detail than was agreed on. In our proposal we made an offer of 40,000 metric tons at a price of $49.40 per metric ton. The $49.40 metric ton price is based on an 8-9 percent moisture content and not on dry metric ton basis content and this was firm for this individual shipment only. We do represent ash, sulfur, volatile matter on dry basis.
 
"In our correspondence, we indicated that after the test shipment is used at the plant and if it is satisfactory, we would then work out details to supply 400,000 metric tons of similar coal. Any future tonnage will be subject to railroad escalation during the term of time period we agreed to. Regarding loading of vessels, we will not accept vessel demurrage and this was not discussed.
 
"Your proposed contract is being reviewed by our legal department. However, there is much on this we did not discuss. If you desire, we will submit an agreement in the form that we understood we agreed to."

 Island Creek argues that East Europe's Purchase Order is clearly insufficient to satisfy the statute of frauds, because the document is not a writing signed by Island Creek. Moreover, according to Island Creek, the June 4th telex, which was signed by Island Creek, is plainly a rejection of the terms set forth in the Purchase Order, and does not reflect an agreement to the terms of the contract alleged in East Europe's complaint. East Europe acknowledges that the May 23rd Purchase Order is not signed by Island Creek, but invokes the provisions of N.Y.U.C.C. § 2-201(2) as obviating the need for Island Creek's written agreement. That section provides:

 
"Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) [of the statute of frauds] against such party unless written notice of objection to its contents is given within ten days after it is received."

 Clearly, Island Creek sent its June 4th telex within ten days of its receipt, on May 29th, of the proposed Purchase Order and Contract. East Europe nevertheless argues that the June 4th telex did not constitute an adequate notice of objection under N.Y.U.C.C. § 2-201(2). Instead, East Europe argues, the June 4th telex concedes the existence of a contract to supply coal, and merely proposes additional terms to be added to the contract.

 East Europe's argument is unpersuasive. East Europe relies primarily upon Leonard Pevar Co. v. Evans Products Co., 524 F. Supp. 546 (D. Del. 1981), and Marlene Industries Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239 (1978), neither of which supports East Europe's position. Both cases involve a "battle of the forms" situation not presented by the facts of the instant case. In both Pevar and Marlene the seller, in response to a written purchase order sent by the buyer, sent the buyer an acknowledgement containing boilerplate language which added additional terms not set forth in the buyer's purchase order. Because the seller's response was in essence an acknowledgement rather than a rejection, the Pevar and Marlene courts held that the writings satisfied the statute of frauds and that the effect of the additional terms contained in the acknowledgement should ...


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