## Facts

- Apex LLC (Apex), a commodities merchandiser, and Sharing World, Inc. (Sharing World), a broker/trader, made 12 cottonseed sale agreements over about 11 months (Feb. 2008–Jan. 2009) totaling more than 19,000 tons for delivery from Oct. 2008 to Aug. 2009.
- Sharing World intended to resell the cottonseed to third parties, and Apex knew Sharing World would resell after receipt.
- Apex also knew Sharing World generally would not ship to its third-party customers until those customers provided letters of credit to Sharing World.
- After each oral deal, Apex sent Sharing World a written confirmatory “sales contract” stating key terms (including quantity and price). Sharing World did not sign the confirmations and did not object to them in writing.
- During the contract period, cottonseed prices dropped, and Sharing World’s downstream customers stopped providing letters of credit.
- Sharing World then refused to accept and pay for nearly 15,000 tons covered by the agreements (Apex alleged 14,625 tons were not accepted).
- Apex resold the cottonseed in August 2009 and sued for damages measured by the difference between the contract prices and the resale price.
- After a bench trial, the trial court entered judgment for Sharing World, finding (among other things) no mutual assent due to missing terms, enforcing an oral condition precedent (letters of credit from third parties), finding Apex’s resale not commercially reasonable, and concluding Apex could not recover damages without proving its cost basis in the cottonseed.
- Apex appealed. Sharing World did not file a respondent’s brief on Apex’s appeal, so the Court of Appeal decided that appeal on the record, Apex’s briefing, and Apex’s oral argument.

## Issues

1. Whether enforceable sales contracts existed under the California Uniform Commercial Code (UCC) despite missing terms the trial court believed defeated mutual assent.
2. Whether Apex’s confirmatory writings satisfied the UCC statute of frauds between merchants even though Sharing World did not sign and did not object.
3. Whether Sharing World could enforce an oral condition precedent requiring letters of credit from its downstream buyers when that condition was not included in the written confirmations.
4. Whether Apex’s resale and damages proof satisfied the UCC, including whether Apex had to prove its original cost basis and whether the resale was commercially reasonable.

## Decision

- The Court of Appeal reversed the judgment for Sharing World and remanded for further proceedings consistent with its opinion.
- The court held enforceable contracts existed under the California UCC; the trial court’s “no mutual assent” conclusion applied the wrong legal standard because the UCC supplies default terms when parties intend to contract for the sale of goods.
- The court held Apex’s written sales contracts, sent as confirmations between merchants and not objected to within a reasonable time, satisfied the statute of frauds as to Sharing World even without Sharing World’s signature.
- The court held the alleged oral letters-of-credit condition precedent was unenforceable as a matter of law because it conflicted with the parties’ final written expression on quantity and price and is the type of term that would be expected to appear in the confirmations if agreed.
- The court held Apex’s resale and damages evidence were legally sufficient under the UCC; Apex was not required to prove its cost basis to seek the contract-price-minus-resale-price measure, and the record did not support rejecting Apex’s resale as commercially unreasonable.

## Legal Principles

- A contract for the sale of goods may be formed under the California UCC even though one or more terms are left open, so long as the parties intended to make a contract and there is a reasonably certain basis for granting a remedy; UCC default provisions can supply missing terms.
- Between merchants, a confirmatory memorandum sufficient to bind the sender satisfies the statute of frauds against the recipient merchant if the recipient receives it and does not object in writing within a reasonable time, even if the recipient never signs.
- Parol evidence may not add an alleged oral condition precedent that is inconsistent with the parties’ final written expression of essential terms; a condition that materially qualifies the buyer’s duty to accept and pay is the kind of term that would ordinarily be included in the written confirmation if agreed.
- When a buyer wrongfully refuses to accept goods, the seller may recover UCC damages measured by the difference between the contract price and a proper resale price (plus incidental damages, as allowed), and that measure does not depend on the seller proving its original cost of the goods.
- Commercial reasonableness of a resale is evaluated under the UCC’s resale standards; a resale at prevailing market levels may satisfy those standards even when conducted after the buyer’s breach, depending on the record.

## Conclusion

Apex and Sharing World formed enforceable cottonseed sales contracts under the California UCC, Apex’s unobjected-to confirmatory writings satisfied the statute of frauds between merchants, and Sharing World could not rely on an oral letters-of-credit condition to avoid performance; the Court of Appeal reversed the defense judgment and remanded for damages and related proceedings under the correct UCC rules.


Apex LLC v. Sharing World, Inc., 206 Cal. App. 4Th 999 (2012)