Iowa Court Enforces Oral Agreement for the Purchase of Hay

Overview

The Iowa Court of Appeals recently affirmed a judgment in favor of one brother against another in a case alleging breach of an oral contract for the sale of hay.

Facts

The brothers entered into an oral agreement under which the seller alleged that his brother agreed to purchase 400 bales of hay at the price of $65 per bale. The buyer paid the seller for only half of the hay, even though the seller delivered all 400 bales to the buyer. The cattle of the buyer’s tenant had apparently eaten most of the additional hay by the time the trial occurred. The seller filed a breach of contract action against the buyer, seeking $13,000, the alleged contract price for the 200 bales for which he had not received payment. The buyer’s defense was that he had only contracted to buy 200 bales. He contended that he only wanted “first dibs” on purchasing the remaining hay.

The district court ruled in favor of the seller, finding that his testimony was more credible than that of his brother. The trial court awarded the seller $13,000 plus interest.

Court of Appeals

On appeal, the court of appeals affirmed, finding that the buyer had not preserved several errors for review. The buyer alleged that he should have been able to offer evidence to prove that his brother was an alcoholic. He contended that this evidence would call into question the seller’s memory of the contract terms. The court found, however, that the buyer had failed to make an offer of proof so as to preserve error for this claim. Nonetheless, the court ruled that the buyer did not show that he was prejudiced by the evidentiary ruling. The seller had offered testimony of the buyer’s farm manager, who stated that the buyer had told him he agreed to purchase 400 bales of hay from the seller. 

The court also found that the buyer had failed to preserve for review the argument that the contract was not enforceable under the statute of frauds which requires contracts for the sale of goods for $500 or more to be in writing to be enforceable. Because the buyer did not raise the issue with the district court and they didn’t consider it on their own, it could not be considered by the court of appeals.

Conclusion

Although several litigation errors were brought to light in this case, the result was likely correct. As the court pointed out, independent evidence established the terms of the oral agreement. As such, the excluded evidence relating to the seller’s alleged alcoholism would not likely have allowed the buyer to prevail.

The same result would also likely have resulted even if the buyer had asserted his statute of frauds defense, although this is a closer question. It is true that under Iowa Code §554.2201(1), contracts for the sale of goods (including hay) must be in writing if the goods cost $500 or more.  This defense, therefore, should have been asserted in the buyer’s answer to the seller’s petition.  The seller, however, could likely have overcome the statute of frauds limitation by showing that he had fully performed under the contract. The seller delivered the hay to the buyer, and the buyer’s tenant apparently used the hay to feed his cattle. The seller had therefore performed based on his reliance on getting paid for the 400 bales, the buyer had benefited, and the buyer would likely have had a duty to reject the delivery of the hay before he could protest the existence of the contract. The buyer’s farm manager’s statement also served as an admission by the buyer that he agreed to purchase the additional 200 bales of hay. This evidence would likely have been sufficient to establish the liability of the buyer to the seller as an exception to the statute of frauds defense if it had been properly asserted.