675 F.2d 745 (5th Cir. 1982)
Dura-Wood Treating Company, a division of Roy O. Martin Lumber Co., Inc., and Century Forest Industries, Inc., both engage in treating cross-ties for industrial and commercial use.1
On October 19, 1977, Dura-Wood contracted to supply the William A. Smith Company with cross-ties.2 In early April 1978, Dura-Wood's agent Clyde M. Norton telephoned Century Forest's agent Melvin H. Durham.3
They discussed Dura-Wood's need for additional cross-ties to meet its obligations to the Smith Company.4 They also discussed Century Forest's ability to supply approximately 20,000 cross-ties measuring six by eight by eight feet six inches at a price of $8.60 each.5
Following the conversation, on April 5, 1978, Norton sent a letter to Century Forest stating: "Confirming our conversation, please enter our order of 20,000 6 X 8 — 8'6" No. 3 hardwood ties at $8.60 each. These are to be treated with creosote coal-tar solution. We will advise instructions just as soon as we get some releases on the job."6
Century Forest did not respond in writing.7 Durham indicated that Norton should let him know when the ties were needed.8
On June 30, 1978, the Smith Company informed Dura-Wood that the cross-ties would be needed in the last quarter of 1978 or the first quarter of 1979.9 Dura-Wood then contacted Century Forest and spoke with S. Harry Kerr.10
Kerr stated that due to an increase in the cost of ties he would not be able to ship the order and would have to cancel it.11 Kerr later sent a letter dated August 29, 1978, informing Dura-Wood that all quotations and orders prior to July 31, 1978, could not be accepted or shipped.12
Dura-Wood continued to urge performance.13 On December 19, 1978, Robert L. Flournoy, an attorney for Century Forest, wrote denying the existence of a contract but expressing willingness to discuss resolution.14
Dura-Wood obtained price quotations from other manufacturers but determined it could produce the ties internally at a lower cost.15 Shipping to the Smith Company began in February 1979 and concluded in June 1979.16
Dura-Wood manufactured the replacement ties in April, May, and June 1979.17 The district court found that the parties had entered into a legally binding contract that Century Forest breached and awarded Dura-Wood $100,000 in damages, though it declined to apply the treble damage provisions of the Texas Deceptive Trade Practices — Consumer Protection Act.18
Whether Dura-Wood's April 5, 1978 letter confirmed an oral contract sufficient to satisfy the statute of frauds under Texas Business and Commerce Code section 2.201(b)?19
Section 2.201(b) of the Texas Business and Commerce Code provides that between merchants a confirmatory writing sufficient against the sender, received by the party to be charged who has reason to know its contents, satisfies the statute of frauds unless written notice of objection is given within ten days after receipt.20
Yes. The established facts establish that both Dura-Wood and Century Forest qualify as merchants under the Code.21 After the early April 1978 telephone conversation between agents Norton and Durham, Norton sent the April 5 letter to Century Forest confirming the order for 20,000 cross-ties at $8.60 each to be treated with creosote coal-tar solution.22 Century Forest received the letter yet supplied no written objection within ten days.23
The letter set forth quantity, size, style, price, and treatment terms and thereby afforded a reasonable basis for believing the offered oral evidence rested on a real transaction.24
The April 5, 1978 letter therefore confirmed the oral contract and satisfied the statute of frauds under section 2.201(b).25
Whether the parties formed an underlying oral contract for the sale of approximately 20,000 cross-ties?26
Under Texas Business and Commerce Code section 2.204(c), a contract does not fail for indefiniteness even though one or more terms are left open. This holds if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.27
Yes. The established facts demonstrate that Norton and Durham discussed Dura-Wood's need for cross-ties to fulfill its Smith Company obligation and Century Forest's ability to supply 20,000 ties of specified size at $8.60 each.28 Norton testified that Durham agreed to supply the 20,000 ties, and Durham's testimony confirmed the specific number, quality, size, and treatment details.29 The April 5 letter, sent the same day, expressed the substance of that conversation, and Century Forest prepared an internal phone order form listing the ties as sold to Dura-Wood and promised upon release.30
The parties therefore formed an underlying oral contract for the sale of approximately 20,000 cross-ties.31
Whether a buyer may cover under Texas Business and Commerce Code section 2.712 by manufacturing substitute goods internally rather than purchasing them from another source?32
Texas Business and Commerce Code section 2.712 permits a buyer to cover by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. The Code must be liberally construed to promote its underlying purposes of flexibility and enabling the buyer to obtain needed goods.33
Yes. The established facts show that Dura-Wood obtained price quotations from other manufacturers but determined it could produce the required ties internally at a lower cost.34 Dura-Wood manufactured the replacement ties in April, May, and June 1979 after Century Forest refused to perform.35 This internal production occurred in good faith, without unreasonable delay, and supplied commercially usable substitutes for the ties Century Forest had agreed to supply.36
The method fulfilled the Code's purposes by placing Dura-Wood in the same economic position it would have occupied had Century Forest performed. It also allowed Dura-Wood to acquire the needed goods at a cost approximating or below market price.37
A buyer may therefore cover under section 2.712 by manufacturing substitute goods internally rather than purchasing them from another source.38
Whether a buyer may recover as consequential damages profits lost from using its manufacturing facilities to cover rather than for other potential sales?39
Texas Business and Commerce Code section 2.715(b) authorizes consequential damages for any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know. Such loss must be one which could not reasonably be prevented by cover or otherwise.40
No. The established facts reveal that Dura-Wood chose to cover by using its own facilities to manufacture the substitute ties.41 Although this choice prevented Dura-Wood from using those facilities for new or different contracts, the overall cost of internal production plus the claimed lost profits exceeded the cost of purchasing cover goods from another source.42 Dura-Wood could have avoided the loss of potential profits by electing a different form of cover that would not have tied up its manufacturing capacity.43
A buyer may not recover as consequential damages profits lost from using its manufacturing facilities to cover rather than for other potential sales.44
Whether a buyer may recover lost profits on its contract with a third party as consequential damages when it has already received damages based on the cost of cover?45
Texas Business and Commerce Code section 2.712(b) allows recovery of the difference between the cost of cover and the contract price together with any incidental or consequential damages. The buyer may not obtain a double recovery for the same loss.46
No. The established facts show that the district court awarded Dura-Wood damages measured by the difference between the cost of cover and the contract price with Century Forest.47 Dura-Wood then fulfilled its obligations to the Smith Company and received payment.48 The additional award of $13,000 for lost profits on the Smith Company contract compensated Dura-Wood a second time for the increased cost of obtaining the ties after Century Forest's breach.49
A buyer may not recover lost profits on its contract with a third party as consequential damages when it has already received damages based on the cost of cover.50
Whether a breach of contract, without more, constitutes a deceptive trade practice under the Texas Deceptive Trade Practices-Consumer Protection Act?51
Section 17.46 of the Texas Business and Commerce Code declares false, misleading, or deceptive acts or practices in the conduct of any trade or commerce unlawful. Yet an allegation of breach of contract without more does not constitute a false, misleading, or deceptive act or practice.52
No. The established facts show that Century Forest refused to ship the cross-ties after the price increased and sent a letter canceling all orders prior to July 31, 1978.53 Dura-Wood argued that allowing it to rely on the oral contract confirmed by the letter and then refusing to perform after the price rose amounted to a deceptive trade practice.54 This claim rests solely on the breach itself and supplies no additional conduct that would qualify as false, misleading, or deceptive under the statute.55
A breach of contract, without more, does not constitute a deceptive trade practice under the Texas Deceptive Trade Practices-Consumer Protection Act.56