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Contracts • Defenses to Enforcement and Formation
K#057
Legal Definition
A merchant's confirmatory memo occurs where you have a contract between merchants, and one party sends the other party a written confirmation of the agreement within a reasonable time. This satisfies the Statute of Frauds. It will also create a binding, legal contract if the recipient: (1) has reason to know of the confirmation's contents, and (2) does not object in writing within 10 days of receipt.
Plain English Explanation
When you have a fact pattern that involves an oral agreement between two merchants, and one of those merchants later sends an e-mail or letter that confirms the details of the oral agreement, courts will allow that confirmatory memo to be used as evidence that the sender is bound to the oral agreement, even if it is for goods valued at over $500 (which would generally require the original agreement to have been in writing and not oral).
Additionally, if the recipient of that memo should reasonably have been aware of the memo and its contents, they must object within 10 days of receipt in order to avoid being bound. In other words, if you are a merchant and you receive some random letter from another merchant describing an agreement you have no idea about and have no memory of, the reasonably prudent thing to do would be to, at minimum, respond to the sender and ask "What the hell are you talking about? This isn't what we agreed to." If you simply ignore it, then you may be bound by it.
Additionally, if the recipient of that memo should reasonably have been aware of the memo and its contents, they must object within 10 days of receipt in order to avoid being bound. In other words, if you are a merchant and you receive some random letter from another merchant describing an agreement you have no idea about and have no memory of, the reasonably prudent thing to do would be to, at minimum, respond to the sender and ask "What the hell are you talking about? This isn't what we agreed to." If you simply ignore it, then you may be bound by it.
Hypothetical
Hypo 1: Sam owns a taco cart. Bob owns a tortilla manufacturing plant. One day, Sam and Bob get coffee and discuss business. Bob offers to sell Sam 6 months worth of tortillas for $1,000. Sam agrees. A week later, when Bob fails to send Sam any tortillas, Sam calls Bob to ask what happened. Bob responds, "I have no idea what you're talking about, I don't know who you are." Result: This is a contract for the sale of goods for $500 or more, which requires a signed written contract to satisfy the Statute of Frauds. Since this doesn't exist, the Statute of Frauds is not satisfied.
Hypo 2: Sam owns a taco cart. Bob owns a tortilla manufacturing plant. One day, Sam and Bob get coffee and discuss business. Bob offers to sell Sam 6 months worth of tortillas for $1,000. Sam agrees. Later, Sam sends Bob an email saying, "It was great to chat with you today! I really appreciate you selling me 6 months worth of tortillas for $1,000." Bob receives the e-mail but doesn't respond. After 2 weeks, Sam calls Bob to ask what happened. Bob responds, "I have no idea what you're talking about, I don't know who you are." Result: Because Bob failed to respond to Sam's e-mail within 10 days of receiving it, he is bound by the agreement due to Sam's confirmatory merchant memo. Keep in mind, though, this will require a lot of arguing on an exam. Perhaps Sam's e-mail went into Bob's spam folder and he never saw it. Or maybe Bob doesn't use email often. It's only binding if Bob has reason to know it exists and that it likely includes some sort of confirmation of a previous conversation.
Hypo 2: Sam owns a taco cart. Bob owns a tortilla manufacturing plant. One day, Sam and Bob get coffee and discuss business. Bob offers to sell Sam 6 months worth of tortillas for $1,000. Sam agrees. Later, Sam sends Bob an email saying, "It was great to chat with you today! I really appreciate you selling me 6 months worth of tortillas for $1,000." Bob receives the e-mail but doesn't respond. After 2 weeks, Sam calls Bob to ask what happened. Bob responds, "I have no idea what you're talking about, I don't know who you are." Result: Because Bob failed to respond to Sam's e-mail within 10 days of receiving it, he is bound by the agreement due to Sam's confirmatory merchant memo. Keep in mind, though, this will require a lot of arguing on an exam. Perhaps Sam's e-mail went into Bob's spam folder and he never saw it. Or maybe Bob doesn't use email often. It's only binding if Bob has reason to know it exists and that it likely includes some sort of confirmation of a previous conversation.
Visual Aids
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