Question

2. On Tuesday, a hobby shop owner receives an order for a custom toy train that will need to be specially manufactured. That same day, the hobby shop owner begins building the toy train. On Friday, the buyer calls to cancel the order. During the conversation, the hobby shop owner insists on going through with the deal, and tells the buyer (for the first time) that he has already started making the train. Is the buyer legally bound by a contract to buy the toy train? Use UCC Article 2 sections to support your answer.

Answer 1

Under the Statute Frauds the owner would require a written skeleton contract that was signed by the buyer for a goods sales transaction. The hobby shop owner does not have a contract, as we presume the order took place on the phone or through the computer, and that the toy costs $550. Thus, the hobby shop owner would have to look for an exception from the Statute of Frauds. If an exception can be obtained in any capacity, then owner can introduce evidence of the oral agreement. The shop owner can defer to UCC 2-201(3)(a) which states “if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement.” Taking this this subsection and dissecting it, let see if this situation “answers the mail” as an appropriate exception.

The toy train would be considered a specialty good which was custom made for the buyer. We are aware that the shop owner has partially performed the order, investing fruitful effort to manufacture the train. The toy is unique in the sense that there will never be another one that will be the exact same because it was uniquely created from the seller’s idea, therefore, it would not suitable for sale to others in the ordinary course of business. The shop owner may have other models on hand, he may even routinely create a train or two in the course of his dealings; however, this train was generated/create based on a personal request. Therefore, it would be unrealistic to expect that he could resell this particular train under his routine dealings. Notice of repudiation was not received under circumstances which reasonably indicated the buyer no longer wanted the toy train. Hence, this exception appropriately suits this situation. The shop owner insists on going through the deal…I hope we would! He has presumably spent a lot of time, intellect/thought, and his own money to procure parts to build this train…a train that was not readily available on his shelf that he could simply return back into his stocks.

I would also examine UCC 2-207, Additional Terms in Acceptance or Confirmation. Subsections 1 and 3 apply also answer the mail in terms of determining whether or not an agreement was made. Although there was no written confirmation, there was a definite and seasonable expression or acceptance by the shop owner, but more importantly, there was conduct on behalf of both parties that recognized the existence of a contract, despite not having a written contract in place, hence, acceptance and confirmation. The shop holder received the order; acknowledged and accepted, then began the processes entailed to manufacture the toy. The buy also demonstrated in mutual conduct by initiating contact, engaging in discussion involving the special craftsmanship required to create intricate the intricate details of this toy, making the order (via computer or phone) which ultimately lead to the shop owner being reasonably convinced an oral contract had occurred. Even with the last action mentioned (the buyer calling to cancel), demonstrates his continued conduct in knowing that works were underway as a result of his contract (he could have just as easily decided to not pay/pick up the toy and blocked the shop owner’s phone number.

Lastly, the shop owner should defer to all of UCC 2-204. We have already established that a contract to some degree has been established. If we reference the conduct, that I have written in the last paragraph, we can reiterate that both parties demonstrated sufficient conduct to show that they were in agreement at some point.   We also know that a contract can still be formed and not fail, even if it is missing some non-essential terms (we can call upon the UCC gap fillers, if that becomes necessary). The toy that was going to be a work of art has been reduced to rubbish that contains no value. The buyer is legally bound to buy the train.