## Facts

- Hasbro designed and marketed the “Wonder World Aquarium” toy and contracted with Cloud to mix and package powder packets used in the product.
- Hasbro issued periodic purchase orders specifying quantities of small and large packets; Cloud ordered the key ingredient (Laponite HB) in amounts needed to meet those orders under Hasbro-supplied formulas.
- Hasbro changed formulas frequently; a late change reduced Laponite per packet after Cloud had ordered Laponite under earlier formulas, leaving Cloud with excess ingredient.
- Using the excess Laponite, Cloud manufactured additional packets beyond the quantities in Hasbro’s final purchase orders and sent Hasbro an order acknowledgment listing the higher quantities.
- Hasbro received the acknowledgment, did not timely object in writing, and a Hasbro employee communicated with Cloud by email and phone about quantities using numbers consistent with Cloud’s figures; the record included emails and a signed memorandum/notation reflecting the quantities.
- Hasbro later refused to accept or pay for the additional packets, and Cloud sued for the contract price.
- The district court entered judgment for Hasbro on the theory that the quantity term was not validly modified in a writing satisfying Hasbro’s written-modification clause and the UCC statute of frauds.

## Issues

1. Whether the parties’ contract was effectively modified to increase the quantity Hasbro was obligated to purchase despite a purchase-order clause requiring written modifications.
2. Whether emails and related internal writings constituted a sufficient signed writing to satisfy UCC § 2-201 (and any written-modification requirement) for enforcement of the increased quantity.
3. Whether Cloud’s manufacture of customized goods and partial performance supported enforcement notwithstanding Hasbro’s statute of frauds defense.

## Decision

- The Seventh Circuit reversed and remanded with instructions to enter judgment for Cloud.
- The court held the quantity modification was enforceable and Hasbro was obligated to pay for the extra packets.
- Emails and other documentary evidence, including a purchasing notation and a signed memorandum, satisfied the statute of frauds’ writing and signature requirements and met Hasbro’s demand for written consent to changes.
- Hasbro’s receipt of Cloud’s confirmation, lack of timely objection, and communications treating the revised quantities as operative supported finding an accepted modification.
- Cloud’s production of specially manufactured packets and its partial performance further defeated Hasbro’s attempt to avoid liability on formalistic documentation grounds.

## Legal Principles

- Under UCC § 2-201, a contract for sale (and a modification within the statute) is enforceable if evidenced by a writing sufficient to indicate a contract and signed by the party to be charged; multiple documents may be read together.
- Emails can satisfy the UCC “writing” requirement, and typed names or other indicia in email communications may constitute an electronic signature for statute of frauds purposes.
- Between merchants, a written confirmation that states a quantity term, coupled with the recipient’s failure to object within a reasonable time and consistent conduct, can support enforcement of the agreement as confirmed.
- A buyer may not use the statute of frauds opportunistically where the seller has manufactured customized goods and substantially performed in reliance on the buyer’s communications and course of dealing.
- Course of dealing and course of performance inform whether parties assented to modifications notwithstanding purchase-order boilerplate demanding a particular form.

## Conclusion

The court enforced a quantity increase reflected in confirmations and emails, holding that electronic communications and related business records can satisfy the UCC statute of frauds and support contract modifications, especially where the seller has produced specially manufactured goods in reliance on the buyer’s conduct.


Cloud Corp. v. Hasbro, Inc., 314 F.3d 289 (7th Cir. 2002)