## Facts

- Riegel Fiber Corporation, a textile company, entered written forward contracts with two Alabama cotton ginners to buy cotton at 32 cents per pound.
- Each contract called for delivery of “all the acceptable cotton produced during the crop year” from a specified number of acres and listed an expected yield of 500 pounds per acre.
- After contracting, cotton prices rose sharply to about 81 cents per pound, creating incentives for nonperformance.
- Riegel filed suit seeking declaratory relief and specific performance to compel delivery under the forward contracts.
- The district court issued a preliminary injunction requiring delivery during litigation; the ginners delivered cotton at the contract price under that order.
- After trial, the district court held the contracts unenforceable under the U.C.C. statute of frauds, reasoning the quantity term was too indefinite, dissolved the injunction, and denied relief.
- The district court also rejected Riegel’s alternative theory that it could enforce farmer-ginner agreements as a third-party beneficiary.
- Riegel appealed.

## Issues

1. Whether a writing obligating delivery of “all the acceptable cotton produced” from specified acreage, with an expected yield estimate, states a sufficient quantity term to satisfy U.C.C. § 2-201.
2. Whether Riegel could enforce farmer-ginner agreements as an intended third-party beneficiary.

## Decision

- The Fifth Circuit reversed the district court’s statute-of-frauds ruling, holding the forward contracts satisfied U.C.C. § 2-201’s quantity requirement.
- The court treated the acreage-based “all production” commitment as an output-type quantity term and found the expected yield figure consistent with the U.C.C.’s use of estimates in such contracts.
- The Fifth Circuit affirmed rejection of the third-party-beneficiary theory because any benefit to Riegel from farmer-ginner arrangements was incidental rather than intended.
- The case was remanded for further proceedings consistent with the enforceability of the Riegel–ginner contracts.

## Legal Principles

- Under U.C.C. § 2-201, a contract for sale of goods over $500 is unenforceable unless there is a signed writing sufficient to indicate a contract for sale and stating a quantity term.
- A quantity term need not be a fixed numerical amount; output- or requirements-type terms can satisfy § 2-201 when the writing ties quantity to a defined source or need (e.g., all production from specified acreage).
- Stated estimates in output/requirements contracts function as guides rather than guarantees; performance is bounded by good faith and limits on unreasonably disproportionate variation from any stated estimate.
- A party may enforce a contract as a third-party beneficiary only when the contracting parties intended to confer enforceable rights on that party; incidental beneficiaries lack enforcement rights.

## Conclusion

The Fifth Circuit held that forward cotton contracts promising delivery of all acceptable cotton produced from specified acreage—supported by an expected-yield estimate—satisfied the U.C.C. statute of frauds and were enforceable, while also holding that the buyer could not enforce separate farmer-ginner agreements as a third-party beneficiary.


Riegel Fiber Corp. v. Anderson Gin Co., 512 F.2d 784 (5th Cir. 1975)