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Equitable Factors Co. v. Chapman-Harkey Co.

Filed: October 2, 1979.

EQUITABLE FACTORS COMPANY, PLAINTIFF
v.
CHAPMAN-HARKEY COMPANY, DEFENDANT



Appeal by defendant from Johnson, Judge. Judgment entered 21 September 1978 in Superior Court, Mecklenburg County. Heard in the Court of Appeals 28 August 1979.

Webb, Judge. Judges Martin (Robert M.) and Clark concur.

Webb

We hold that the papers relied on by the parties in this case show that there is a genuine issue of a material fact. The pleadings of defendant raise two defenses to the claim of plaintiff. They are (1) the goods were sold on a "guaranteed sales basis" and (2) certain advertising bills were to be paid from the proceeds of the sale.

We discuss first the "guaranteed sale basis." Under the Uniform Commercial Code there is a statute of frauds, G.S. 25-2-201, and a parol evidence rule, G.S. 25-2-202, which are made applicable to the case sub judice by G.S. 25-2-326(4) which provides:

Any "or return" term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this article (§ 25-2-201) and as contradicting the sale aspect of the contract within the provisions of this article on parol or extrinsic evidence (§ 25-2-202).

It seems clear that the letter from Gene Miller to defendant in which Mr. Miller identified his company as the agent of A.G. Bond Company and stated that at the time of the sale it was agreed by A.G. Bond Company that the "hang-ups" were sold on a "guaranteed sales basis" is enough to comply with the statute of frauds and to make evidence of the guaranteed sales agreement admissible under the parol evidence rule.

The question then becomes whether defendant is barred from offering evidence as to the "guaranteed sales basis" by G.S. 25-9-318 which provides:

(1) Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in G.S. 25-9-206 the rights of an assignee are subject to

(a) all the terms of the contract between the account debtor and assignor and any defense or claim arising therefrom; and

(b) any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives notification of the assignment.

The question is whether, under G.S. 25-9-318, the defendant may use the "guaranteed sales basis" term as a defense when the defense did not become available until after notification that the account had been assigned. This is a case of first impression. We hold that the purchase order constitutes part of the terms of the contract and the letter of Gene Miller contains the rest. The defense of a "guaranteed sale" arises from the part of the contract represented by the letter. It may be used as a defense under G.S. 25-9-318(1)(a) although defendant was notified of the assignment before it received the letter from Gene Miller. See 4 Anderson, Uniform Commercial Code 2d, § 9-318.1 (1971). It is true that G.S. 25-2-326 states an "or return" term is to be treated as a separate contract of sale under the statute of frauds section, G.S. 25-2-201. It could be argued that since the "guaranteed sales basis" is considered a separate contract, it cannot be one of the terms of the contract under G.S. 25-9-318(1)(a). It is one thing to be considered a separate contract for purposes of the statute of frauds and yet another to be considered a separate contract for

other purposes -- including those enumerated in G.S. 25-9-318. To meet the requirements of the statute of frauds, and thus to satisfy G.S. 25-2-326, the "or return" provision must be in writing to be enforceable. The letter from Gene Miller satisfies these provisions. G.S. 25-9-318 does not require that the letter of Gene Miller be treated as a separate contract. For purposes of a ...


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