Essco Geometric v. Harvard Industries

Facts

P sells foam used in the chairs manufactured by D. For over thirty years, P supplied a large portion of D's foam needs. D ordinarily issued cancelable purchase orders whenever it needed foam. The purchase orders contained standard terms and conditions, which stipulated that the agreement committed D only to the quantities of foam found in that particular purchase order. D's purchase orders always applied to a limited time period, usually requiring the supplier to deliver within a couple of weeks or months. Best served D's purchasing manager. Best cultivated a close business relationship with Edsel Safron, the president of P, ensuring a continuing business relationship between supplier and manufacturer. In July 1988, Best retired, and Gray, the former purchasing agent, became the new purchasing manager for D. Ceresia became D's new purchasing agent under Gray and became responsible for issuing purchase orders as D's day-to-day needs demanded. Ed Kruske became D's new president. D began to cut costs and improve quality. D offered P a chance to quote new prices for the remainder of D's 1988-1990 GSA contract. Excelsior, with the lowest price, became the primary supplier of D's foam needs for the remainder of that contract. P did not receive another purchase order from D for over a year. Safron claimed he had an oral agreement with Best, guaranteeing P 70% of the foam business. Kruske instituted draconian oversight of his purchasing department. All requisitions of fifty dollars or more must have both the departmental manager's approval and Kruske's approval unless an emergency arose. D never notified anyone outside of the company that it had instituted these internal operating procedures. D began requesting bids for its 1990-1992 GSA chair contract. Ceresia did not send one to P, however. Gray did not know that Ceresia had not sent a request to P. Gray allowed Safron to submit a bid and after the bid, Gray orally agreed to give P all of its foam business for the GSA contract, as well as all of its commercial contracts covering the same two-year period. D's quality department had rejected hundreds of American Excelsior's foam products because of manufacturing defects. P had never presented a 'quality' problem, and its bids for the GSA contract were significantly lower than American Excelsior's. Gray had informed Kruske of P's superiority and believed Kruske would ultimately approve of his decision to make P the primary vendor. Safron wrote and delivered a letter to Gray outlining the oral deal made. Both Safron and Gray signified approval by each signing at the bottom of the letter. Both understood the letter to represent an exclusive multi-million dollar contract between P and D for all of D's foam needs for all of its chairs for a two-year period. Gray issued P several purchase orders covering parts for the GSA contract. P received purchase orders for commercial and GSA contracts, delivered parts, and got paid. Safron had become concerned by the receipt of what he believed was an abnormally low number of purchase orders. Gray explained that Ceresia  had been misdirecting purchase order requests away from P and towards American Excelsior. Gray directed Ceresia to issue all future purchase orders to P. Three weeks later, Kruske decided to make American Excelsior the principal supplier. This lawsuit followed. P sought damages. The district court granted D's motion as to the oral contract, ruling that it was barred by Missouri's statute of frauds, but permitted P's other contract claim to proceed to trial. Both parties appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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