## Facts

- Wisconsin Knife Works (buyer) and National Metal Crafters (seller) entered a long-term supply arrangement for spade-bit blanks through six purchase orders.
- The purchase orders contained a clause requiring any modification (and referenced waiver) to be in a writing signed by an authorized representative of Wisconsin Knife Works.
- National Metal Crafters acknowledged two purchase orders in writing with delivery dates; delivery dates for the remaining orders were conveyed orally.
- National Metal Crafters fell substantially behind scheduled deliveries, but Wisconsin Knife Works continued dealing with National Metal Crafters during 1981–1982 without immediately treating late deliveries as a breach.
- In January 1983, Wisconsin Knife Works terminated the relationship for non-delivery and sued for breach of contract.
- National Metal Crafters counterclaimed, asserting Wisconsin Knife Works orally extended delivery deadlines and seeking damages tied to keeping its production line operating in reliance on that understanding.
- A jury found an oral modification, found no breach as modified, and awarded on the counterclaim; the district court entered judgment accordingly.

## Issues

1. Whether a contract clause requiring signed written modifications bars enforcement of an alleged oral extension of delivery dates as a “modification” under U.C.C. § 2-209(2).
2. Whether an attempted oral modification may nevertheless be effective as a waiver under U.C.C. § 2-209(4)–(5), and what limits (including reliance or comparable conduct) must be found.
3. Whether the jury instructions improperly allowed enforcement of an oral “modification” without differentiating modification from waiver and without requiring findings necessary to support waiver.

## Decision

- The Seventh Circuit reversed and remanded for a new trial.
- The court held the no-oral-modification clause was valid and enforceable under U.C.C. § 2-209(2); the alleged oral extension could not be enforced as a contract modification.
- The court held that, despite such a clause, an attempted oral modification can operate as a waiver under U.C.C. § 2-209(4)–(5).
- The district court’s instructions were erroneous because they permitted the jury to treat the oral agreement as an enforceable modification without properly instructing on waiver and its limits, including the need for reliance-like conduct making it inequitable to insist on strict performance.
- The court noted a pleading defect concerning diversity citizenship allegations but treated it as curable and reached the merits.

## Legal Principles

- Under U.C.C. § 2-209(2), a signed agreement excluding modification except by signed writing is enforceable; oral modifications are ineffective when such a clause governs.
- Under U.C.C. § 2-209(4), an ineffective attempted modification may still operate as a waiver of contractual rights.
- Under U.C.C. § 2-209(5), a waiver may be retracted with reasonable notice unless retraction would be unjust because of a material change of position.
- When a no-oral-modification clause exists, a factfinder must distinguish “modification” from “waiver”; waiver requires conduct (often including detrimental reliance or equivalent circumstances) that supports the waiver’s credibility and makes strict enforcement inequitable.
- Jury instructions must require findings on waiver (and, where relevant, material change of position) rather than allowing an end-run around a written-modification clause by labeling the change a “modification.”

## Conclusion

The Seventh Circuit required enforcement of the parties’ signed-writing requirement for contract modifications, while recognizing that conduct may still waive strict delivery terms under U.C.C. § 2-209; because the jury was not properly instructed to decide waiver and reliance-related limits, the judgment was reversed and the case remanded for a new trial.


Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280 (7th Cir. 1986)