## Facts

- United Drug Service (UDS) was a Washington, D.C.–based wholesaler that sold tobacco goods; Segal Wholesale, Inc. (Segal) was a tobacco wholesaler that supplied and operated retail outlets in northern Virginia.
- In June 2000, UDS and Segal began a commercial relationship for UDS to sell goods to Segal’s stores after an initial meeting between their representatives.
- The parties agreed that some price arrangement existed, but they disputed its meaning:
  - Segal claimed UDS promised prices “two cents below the competition’s best price” for the relationship.
  - UDS contended that any “two-cents-below” term applied only to the initial shipment.

- For about two years, Segal placed weekly orders; UDS filled and delivered them.
- UDS billed Segal using invoices listing specific prices for the goods. Segal generally paid those invoiced prices during the relationship, even though Segal later claimed the invoiced prices were higher than the oral “two-cents-below” term.
- After Segal received a better offer from another supplier, Segal stopped buying from UDS and did not pay for a final shipment.
- UDS sued Segal for breach of contract based on nonpayment for that final shipment. Segal counterclaimed for breach of contract, alleging UDS had overcharged it for roughly two years in violation of the oral price promise.
- At trial, UDS introduced evidence of delivery and nonpayment for the last shipment and introduced an invoice page reflecting written prices charged to Segal. Segal did not dispute the invoice prices; it relied mainly on testimony about the oral “two-cents-below” agreement to support its overcharge counterclaim.
- The jury found for UDS on its claim and awarded the amount due for the final shipment plus attorney’s fees and interest. The jury deadlocked on Segal’s counterclaim.
- The trial court entered judgment as a matter of law against Segal on the counterclaim, concluding it was barred by the U.C.C. statute of frauds. Segal appealed.

## Issues

1. Whether Segal’s counterclaim enforcing an alleged oral pricing term was barred by the U.C.C. statute of frauds for sales of goods.
2. Whether, even if the statute of frauds did not bar the counterclaim, the parol evidence rule prevented Segal from proving an oral pricing term that conflicted with the prices shown on the invoices.

## Decision

- The District of Columbia Court of Appeals affirmed the judgment as a matter of law against Segal’s counterclaim, but for a different reason than the trial court.
- The court disagreed with the trial court’s statute-of-frauds rationale, concluding the record contained sufficient evidence to avoid a statute-of-frauds bar (including written invoices, admissions that an agreement existed, and the parties’ course of performance involving acceptance and payment).
- The court held, however, that the parol evidence rule defeated Segal’s counterclaim because the invoices were a partially integrated writing as to the price term.
- Because Segal’s alleged “two-cents-below-competition” promise contradicted the invoice prices Segal paid over time, Segal could not use oral evidence to vary the written price term.
- Without admissible proof of the lower-price term, Segal lacked a legally sufficient evidentiary basis to proceed on its overcharge theory, so judgment as a matter of law for UDS on the counterclaim was proper.

## Legal Principles

- Under U.C.C. § 2-201 (statute of frauds), a contract for the sale of goods may be enforceable based on a sufficient writing and may also be supported by the parties’ admissions and their course of performance (including acceptance and payment for goods).
- Under U.C.C. § 2-202 (parol evidence rule), when a writing is final as to the terms it states, prior or contemporaneous oral terms that contradict the writing are not admissible to change those stated terms.
- In a recurring buyer–seller relationship, invoices that set out transaction terms—especially price—may operate as a partially integrated written agreement for the matters they cover.
- A party cannot prove breach of contract by relying solely on an alleged oral term that conflicts with an integrated written price term; if the oral term is excluded, the claim may fail as a matter of law.
- An appellate court may affirm a judgment on an alternative legal ground supported by the record, even if it rejects the trial court’s stated basis.

## Conclusion

The D.C. Court of Appeals affirmed dismissal of Segal’s overcharge counterclaim because the invoices constituted a partially integrated written statement of price, and the parol evidence rule barred Segal’s alleged oral “two-cents-below-competition” pricing promise that contradicted the invoiced prices Segal had paid during the parties’ two-year course of dealing.


Segal Wholesale, Inc. v. United States Drug Service, 933 A.2d 780 (2007)