Ketlie Daniels
Business Law 1
Case Study
Chapter 25
Newlog, which had developed a new process for making artificial logs, entered into an oral contract with Specialty Manufacturing. The contract provided that Specialty would manufacture a special part that Newlog needed to make its artificial-log machinery. The contract provided that Specialty would make the part to Newlog's specifications. Newlog orally agreed to pay $5,000 for the part. Specialty made the part to Newlog's specifications, by Newlog refused to pay, claiming that the oral contract was unenforceable because of the statute of frauds. Is Newlog correct and why or why not?
Newlog is correct. Although a sales contract can be written or oral, under UCC Code whenever a sales contract for the price of goods is $500.00 or more the sales contract must be in writing to be enforceable. Under the revised Article 2 of the Statue of Frauds
The amount has been increased from $500.00 to $5,000.00. So, Newlog’s contract with Specialty Manufacturing is unenforceable based on this fact. But there are exceptions; the UCC Stature of Frauds also provides exceptions in the absence of a written contract. If the goods are specially manufactured for the buyer and cannot be used by the seller for ordinary resale to others, then the nonresellable goods exception is applied. In this case the seller has substantially begun manufacture of the part before notice of repudiation is received. Specialty Manufacturing did specifically manufacture a special part for Newlog based on his specification, the part is nonresellable to others for ordinary use, so in this instance the contract is enforceable.