## Facts

- A middleman, William Dolin, was indebted to both Oil Supply Company, Inc. (a supplier) and Hires Parts Service, Inc. (an auto parts retailer).
- Oil Supply agreed that Dolin would arrange sales through Oil Supply; profits would be split, and part of Dolin’s share would be credited against his existing debt to Oil Supply.
- Dolin separately owed Hires $28,080 and proposed to satisfy that debt by delivering 720 cases of antifreeze to Hires; Hires agreed to release Dolin’s debt in exchange for the antifreeze.
- Dolin instructed Oil Supply’s general manager to ship 720 cases of antifreeze to Hires; Oil Supply ran a credit check on Hires but did not contact Hires to confirm the order.
- Oil Supply shipped the antifreeze listing itself as the shipper; Hires received the shipment and signed a delivery document identifying Oil Supply as shipper.
- Oil Supply and Hires had no prior dealings and were unaware of each other before the shipment.
- Hires neither paid Oil Supply for the antifreeze nor returned it despite Oil Supply’s demands; Dolin disappeared.

## Issues

1. Whether Oil Supply was bound, or Hires could avoid liability, based on Dolin’s disputed authority as an alleged undisclosed agent in arranging the transaction.
2. Whether ratification principles applied so that a party accepting the benefits of an unauthorized transaction could not deny the corresponding obligation.
3. Whether the value owed to Oil Supply could be reduced by a setoff equal to Dolin’s separate debt to Hires, and whether prejudgment interest was recoverable.

## Decision

- The court held Hires liable to Oil Supply for the full value of the antifreeze and rejected the trial court’s setoff that reduced Oil Supply’s recovery to a net $820.80.
- The court concluded Hires could not retain the goods shipped by Oil Supply while denying an obligation to pay Oil Supply based on Dolin’s lack of authority.
- The court left intact the award of prejudgment interest on Oil Supply’s claim.

## Legal Principles

- A party that knowingly accepts and retains goods shipped by an identified supplier may be liable to that supplier for the contract price, even if a third party arranged the delivery and the third party’s authority is disputed.
- Ratification-like doctrines and equitable principles bar a party from keeping the benefits of a transaction while repudiating the corresponding payment obligation once the party has notice of the material facts (including the supplier’s identity).
- A setoff based on an unrelated debt owed by a third party is not a proper means to reduce the recipient’s direct payment obligation to the supplier that furnished the goods.
- When the amount owed is ascertainable and payment is wrongfully withheld, prejudgment interest may be awarded.

## Conclusion

The court allocated the loss from Dolin’s conduct to Hires because Hires accepted and kept antifreeze shipped by Oil Supply with notice of Oil Supply’s role, and Hires could not both retain the goods and treat Dolin’s separate debt as a defense or setoff against Oil Supply’s right to full payment plus prejudgment interest.


Oil Supply Co. v. Hires Parts Serv., Inc., 726 N.E.2d 246 (Ind. 2000)