## Facts

- Vanguard Energy Services, L.L.C. supplied natural gas to Ibrahim M. Shihadeh, who operated a kitchen-and-bath business and used the gas to heat his building.
- The parties had a business relationship since 2009, involving purchases at spot-market prices and fixed-price arrangements.
- Vanguard alleged an oral fixed-price agreement reached in February 2014 for 25% of Shihadeh’s anticipated winter gas needs for the 2014–15 and 2015–16 periods.
- Vanguard later sent June 2014 emails confirming the February 2014 agreement and alleged Shihadeh received them without written objection.
- Vanguard also alleged a second oral fixed-price agreement on June 27, 2014 for an additional 50% of anticipated needs for the same periods, without alleging a written confirmation signed by Shihadeh.
- Shihadeh sent a letter terminating Vanguard’s services effective April 30, 2015.
- Vanguard claimed it unwound its fixed-price market positions after termination and suffered damages.
- Vanguard sued for breach of the February and June oral agreements (Counts I and II).
- Shihadeh moved to dismiss Counts I and II under 735 ILCS 5/2-619(a)(7), asserting the UCC statute of frauds barred enforcement.
- Vanguard conceded natural gas is “goods” and the alleged contracts exceeded $500, but argued two UCC § 2-201 exceptions applied: (1) the merchant-confirmation rule and (2) the specially manufactured goods exception.

## Issues

1. Whether Shihadeh qualified as a “merchant” under UCC § 2-104 such that Vanguard’s email confirmations could satisfy UCC § 2-201(2) for the February 2014 oral agreement.
2. Whether Vanguard’s natural-gas commitments fell within UCC § 2-201(3)(a) as “specially manufactured goods” not suitable for sale to others.

## Decision

- The appellate court affirmed dismissal of Counts I and II as barred by the UCC statute of frauds.
- Shihadeh was not a “merchant” for purposes of UCC § 2-201(2), so Vanguard’s confirmation emails could not bind him without a writing signed by him.
- Natural gas was not “specially manufactured goods” under UCC § 2-201(3)(a) because it is a fungible commodity suitable for sale to others; Vanguard’s alleged loss reflected market risk, not unsuitability for resale.
- Because no UCC § 2-201 exception applied, the alleged oral fixed-price agreements were unenforceable.

## Legal Principles

- For a sale of goods contract priced at $500 or more, UCC § 2-201(1) generally requires a writing signed by the party against whom enforcement is sought.
- The UCC § 2-201(2) merchant-confirmation rule applies only “between merchants”; a buyer is not a “merchant” merely because it is a business purchasing goods for its own use, absent dealing in goods of that kind or holding itself out as having specialized knowledge or skill related to the transaction.
- UCC § 2-201(3)(a) applies to goods specially manufactured for the buyer and not suitable for sale to others in the ordinary course; unfavorable resale pricing or hedging losses do not convert fungible commodities into “specially manufactured” goods.
- A statute-of-frauds defense may support dismissal under 735 ILCS 5/2-619(a)(7) when the pleaded facts show the contract is unenforceable and no statutory exception applies.

## Conclusion

The court held that the UCC statute of frauds barred enforcement of the alleged oral fixed-price natural-gas contracts because the buyer was an ultimate consumer rather than a UCC “merchant,” and the gas was a fungible commodity not within the specially manufactured goods exception.


Vanguard Energy Servs., L.L.C. v. Shihadeh, 2017 IL App (2d) 160909, 82 N.E.3d 1284 (Ill. App. Ct. 2017)