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Bazak International Corp. v. Tarrant Apparel Group

378 F.Supp.2d 377, 2005 WL 1705095, 58 UCC Rep Serv 2d 612 (S.D.N.Y., July 18, 2005)

Email Can Satisfy Requirements For A Writing Under The Statute Of Frauds

Court holds that an e-mail sent by one merchant to another purporting to confirm an agreement to purchase goods is sufficient to satisfy the requirements for a writing contained in the Statute of Frauds, as set forth in NY UCC § 2-201(2), known as the merchant's exception.  The e-mail in question was sent to defendant by a third party on behalf of plaintiff, and had attached as a pdf file a letter on plaintiff's letterhead which closed with the typed signature of plaintiff's president.  The attached letter recited that the parties had an agreement, and set forth a quantity of items to be purchased, but not the price to be paid therefore.  The court nonetheless held that issues of fact existed as to both the existence of a contract between the parties for the purchase of the goods at issue, and its enforceability under the Statute of Frauds, which precluded the grant of defendant's motion for summary judgment, or dismissal of plaintiff's complaint.

Bazak Confirms Purported Agreement To Purchase Jeans Via Email And Letter

Plaintiff Bazak International Corp. ("Bazak") and defendant Tarrant Apparel Group ("Tarrant") are both merchants.  In September, 2003, Bazak's president met with Tarrant's chief executive officer concerning 1,600,000 pairs of jeans Tarrant had for sale.  According to Bazak, at this meeting, the parties reached an agreement pursuant to which Bazak would purchase all of these jeans at a price between $3 and $3.50 per pair, subject to Bazak's receipt of a written inventory and visual inspection of the goods.

During its inspection, Bazak learned that approximately 700,000 pairs of the jeans it wanted had been sold to a third party, and that the remaining inventory varied from the description previously provided by Tarrant. 

Bazak nonetheless offered to buy the remaining inventory, consisting of 912,714 pairs of jeans, for $2.40 a pair.  According to Bazak, this offer was orally accepted by Tarrant's Chief Executive Officer, Gerrard Guez ("Guez").

According to Bazak, its President, Tuvia Feldman, sent a letter to Tarrant confirming the parties' oral agreement.  The letter, after noting the parties' agreement, stated that Bazak had purchased the 912,714 remaining pairs at a price of $2.40 per jean, for a total of $2,190,513.60.  The letter was signed by Feldman.  Tarrant denied receiving this letter, and disputed its authenticity.

Feldman also caused a third party to send Tarrant an e-mail on his behalf.  Attached to this e-mail was a pdf file which contained a letter that also noted the parties' agreement, and stated that Bazak had bought 687,896 pairs of jeans.  The purchase price was not included in this attachment.   The letter appeared on Bazak's letterhead, and bore the typed signature of Bazak's President, Feldman.  While Tarrant acknowledged receipt of this e-mail, the recipient claimed neither to recall seeing nor opening it or its attachment.

According to Bazak, it did not receive any objection from Tarrant to either its letter or e-mail.

Subsequently, Tarrant sold the jeans at issue to a third party for a higher price.  This lawsuit followed, in which Bazak asserted claims that Tarrant had breached the parties' agreement.

Email Can Satisfy Requirements Of A Writing Under The Statute Of Frauds

Tarrant moved for summary judgment dismissing the complaint on the ground that Bazak's claim was barred by the Statute of Frauds.  Alternatively, Tarrant claimed that Bazak's claims failed because the contract alleged by Bazak lacked essential prerequisites necessary for the formation of an enforceable contract.  The Court denied Tarrant's motion, holding that issues of fact precluded it from determining at this time whether the parties had an enforceable contract.

Under New York's Statute of Frauds, contracts for the sale of goods for a price of $500 or more must, in most circumstances, be evidenced by a writing signed by the party against whom enforcement is sought, or by his authorized agent or broker.  NY UCC § 2-201(1).  An exception to this rule exists if both parties to the transaction are merchants.  In such circumstances, a writing signed by the sender, and sent to, but not signed by, the party against whom enforcement is sought, can be sufficient.  Thus, under the UCC's merchant's exception, UCC § 2-201(2):

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) against such party unless written notice of objection to its contents is given within ten days after it is received.

The court held that an e-mail containing the typed signature of the sender, sent to the party against who enforcement was sought, is a "writing in confirmation of the [parties' contract]" sufficient to satisfy the requirements of the UCC's merchant exception to the Statute of Frauds.  Said the Court:

E-Mails Can Satisfy the "Writing" Requirement

Tarrant contends that Bazak's October 3 e-mail cannot satisfy UCC Section 2-201(2)'s "writing in confirmation" requirement because the statute does not specifically mention e-mail as a recognized form of writing.  However, the October 3 e-mail does, as a matter of law, satisfy this element.  The UCC states that "'written' or 'writing' includes printing, typewriting or any other intentional reduction to tangible form." …  Although e-mails are intangible messages during their transmission, this fact alone does not prove fatal to their qualifying as writings under the UCC.  Aside from posted mail, the forms of communication regularly recognized by the courts as fulfilling the UCC "writing" requirement, such as fax, telex and telegraph, are all intangible forms of communication during portions of their transmission.  Just as messages sent using these accepted methods can be rendered tangible, thereby falling within the UCC definition, so too can e-mails.  Additionally, because "[u]nder any computer storage method, the computer system 'remembers' the message even after being turned off," whether or not the e-mail is eventually printed on paper or saved on the server, it remains an objectively observable and tangible record that such a confirmation exists.  Consequently, there appears to be little distinction between e-mails and other forms of communication regularly recognized under the Statute as adequate "writings."

The Court held that such a result furthers the public policy behind the Statute of Frauds, which "aims to guard against fraud and perjury by requiring some proof of a contract."  An e-mail, noted the Court, "suffices as much as a letter, a telegram or a fax to provide such an objective indication of an existing agreement."

The Court further held that the presence of Feldman's typed signature on the e-mail attachment rendered it "sufficient against the sender" (i.e. signed) for the purposes of Section 2-201(2).

The Court upheld the adequacy of the confirmatory e-mail and its attachment notwithstanding the fact that it only contained an inaccurate statement of the quantity of goods to the purchased, and did not set forth the price to be paid.

Issues Of Fact As To Whether Parties Entered Into An Enforceable Contract Preclude Award Of Summary Judgment

Notwithstanding its determination that the e-mail and its attachment constituted a writing sufficient for the Statute of Frauds, issues of fact existed as to whether the parties had entered into an enforceable contract which precluded a grant of summary judgment.

On this motion, the Court held that issues of fact existed as to the applicability of the merchants exception to the parties' contract, and thus whether the Statute of Frauds rendered the contract unenforceable.  The defendant's claim that the recipient of the e-mail had no recollection of opening it, created issues of fact as to whether Tarrant had "reason to know of its contents," a prerequisite to the applicability of the merchant's exception.  Issues of fact also existed as to whether Tarrant objected to these communications, which also prevented the court from rendering a determination as to UCC 2-201(2)'s applicability on this motion.

The Court further held that issues of fact as to the possibility of performance of the contract (apparently Tarrant sold some of the goods to a third party that Bazak was to buy before Bazak sent its October e-mail), as well as to the existence of mutual assent by the parties to enter into a contract, prevented the Court from rendering a determination as to whether the parties had in fact entered into an enforceable contract.

Finally, the Court held that issues of fact as to the authenticity of the October 3 letter precluded the Court from determining at this time whether it was a writing sufficient to satisfy  the merchant's exception to the Statute of Frauds.

As a result, the Court denied defendant's motion for summary judgment, leaving the ultimate question of the existence of an enforceable contract between them to be resolved at trial.

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