## Facts

- Mid-South Packers, Inc., a meat supplier, negotiated in spring 1982 to sell pork products to Shoney’s, Inc., a restaurant chain.
- At an April 17, 1982 meeting, Mid-South provided a letter titled “Proposal” listing prices and stating Shoney’s would receive 45 days’ notice before any price adjustment.
- The proposal letter contained no quantity term and no duration term, and Shoney’s did not expressly accept or reject it.
- Beginning in July 1982, Shoney’s placed orders by purchase orders or telephone; Mid-South shipped product and then sent invoices.
- Mid-South’s invoices contained additional terms: 15% annual interest on accounts not paid within seven days and reasonable collection costs, including attorney’s fees.
- Shoney’s continued ordering and paying without objecting to the invoice terms.
- On August 12, 1982, Mid-South notified Shoney’s that future bacon orders would be priced $0.10/lb higher due to a prior pricing error; Shoney’s objected, citing the 45-day notice language.
- Mid-South later reduced the proposed increase to $0.07/lb, but the revised figure was not put in a signed writing.
- Shoney’s submitted subsequent purchase orders listing the old price, but after Mid-South advised it would charge the higher price, Shoney’s requested shipment and indicated the price dispute would be addressed later.
- Shoney’s received invoices reflecting the higher price and paid them for multiple shipments.
- On the final order, Shoney’s deducted $26,208 from the invoice total as a setoff for the aggregate difference between the old and increased prices paid on prior orders.
- Mid-South sued in federal court on diversity jurisdiction for the offset amount and sought interest and collection costs under the invoice terms; the district court granted summary judgment for Mid-South.

## Issues

1. Whether the April 17 “Proposal” and subsequent dealings formed a requirements or other long-term contract restricting Mid-South’s ability to raise prices absent 45 days’ notice.
2. Whether the invoice provisions for interest and collection costs (including attorney’s fees) became part of the parties’ contracts under U.C.C. § 2-207.
3. Whether Shoney’s could retroactively recoup alleged overcharges by unilaterally offsetting $26,208 on a later invoice after ordering, receiving, and paying for goods at the increased price.

## Decision

- The Fifth Circuit affirmed summary judgment for Mid-South.
- The court held the April 17 proposal did not create a requirements contract or other enforceable long-term agreement; at most it operated as a U.C.C. § 2-205 firm offer that expired after three months.
- The court agreed that each purchase order constituted a separate contract formed at the price Mid-South charged and invoiced, which Shoney’s accepted by requesting shipment and paying.
- The court held the invoice terms for 15% interest and reasonable collection costs, including attorney’s fees, became part of the contracts between merchants because Shoney’s did not object and continued performance.
- The court held Shoney’s could not offset prior price differences after its conduct manifested acceptance of the increased price for the completed transactions.

## Legal Principles

- A pricing letter lacking quantity and duration terms, and lacking mutual commitment, does not create a U.C.C. § 2-306 requirements contract.
- A merchant’s signed writing offering to hold prices open may operate as a U.C.C. § 2-205 firm offer, but it expires after three months unless a shorter period is stated.
- Where no long-term supply contract is formed, each purchase order and shipment may be treated as a separate sales contract under U.C.C. formation rules.
- Under U.C.C. § 2-207, additional terms in an invoice between merchants may become part of the contract when the receiving merchant does not object and continues ordering and paying.
- A buyer that requests shipment after being informed of a price increase, then accepts goods and pays invoices at the increased price, generally cannot later reverse the pricing of completed transactions by unilateral setoff.

## Conclusion

The Fifth Circuit affirmed that the parties’ relationship consisted of separate sales contracts created order-by-order, not a binding requirements contract based on the earlier proposal letter, and it enforced invoice-based interest and collection-cost terms while rejecting Shoney’s attempt to recoup alleged overcharges through a unilateral offset after repeated acceptance and payment at the higher price.


Mid-South Packers, Inc. v. Shoney's, Inc., 761 F.2d 1117 (5th Cir. 1985)