The basic rule for the enforceability of a sales contract under Article 2 of the Uniform Commercial Code is stated under Section 2-201(1):
Except as otherwise provided in this section, a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker…..
This is clear and unambiguous. If the contract has a value of over $500.00 and it is not ‘signed by the party against whom enforcement is sought’, a lawsuit against that individual is not enforceable and will be dismissed.
This basic rule is subject to a major exception which can wreak havoc on the business which does not know of its existence or fails to comply with the guidelines of the exception. Conversely, the rule protects a party who confirms a contract that is later disputed. The exception noted is found in Section 2-201(2):
Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know of its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received.
Simply stated, if a ‘merchant’ receives a written ‘confirmation’ of a purported contract which may or may not exist in reality, the merchant must send a ‘written notice of objection’ or he will have waived the protection provided by Section 2-201(1). While this waiver does not result in an affirmation of the purported contract, it does mean that the party asserting the contract will not be barred by the Statute of Frauds.
Bazak Intern. Corp v. Tarrant Apparel Group, 378 F. Supp. 2d 377 (S.D.N.Y. 2005) 58 UCC Rep Service 2d 612, clearly illustrates the impact of Section 2-201(2). In that case, plaintiff Bazak contended that it had an agreement to purchase in excess of $1,000,000 worth of jeans from defendant Tarrant. There was no written contract, although there was evidence of dealings between the parties, including a visit to Tarrants’ facilities by Bezak to inspect the jeans.
Defendant Tarrant moved for summary judgment on the basis that there was no written contract. Plaintiff countered by introducing an e-mail which it alleged was a ‘confirmatory writing’ under the merchant exception to the Statute of Frauds. The e-mail read in part as follows:
As per our agreement with Mr. Gerard Guez, we would like to inform you that Bazak International has bought the total inventory of 747,096 pcs per your Sep. 30, 2003 inventory report less the following:…The total inventory purchased is 687,896 pcs. Please send us a proforma invoice in order for us to proceed in preparing our L/C. Please ship all samples per your conversation with Mr. Jacobi to Bazak International at the Address listed above
Tarrant did not object to the contents of the e-mail.
Tarrant contended that the e-mail did not satisfy the writing requirement of the Statute of Frauds, since e-mails were not specifically mentioned as a recognized form of writing under the Code. The court however, agreed with the Plaintiff, stating that:
‘…[T]he October 3 e-mail does, as a matter of law, satisfy this element.’ (Bazak), p. 383
Summary judgment was denied, and plaintiff was cleared to prove its case.
Parties who believe a contract for the sale of goods has been made should be advised to confirm those contracts per Section 2-201(2). It is further advised that the language of the statute should be tracked in making this confirmation. Conversely, if a writing ‘confirming’ a contract is received, and the party receiving it disputes the formation of the contract, that party must object within ten days, or it will lose the defense of the Statute of Frauds. Obviously, this requires diligent review of all correspondence to the business, and as seen in the Bazak case, emails have been held to be an acceptable form of communication and confirmation within Section 2-201(2).
Robert LeVine, Author of the book The Uniform Commercial Code Made Easy
learntheucc 
learntheucc
/ January 20, 2013Rob – great article and application to the legal case.