On August 15, the Iowa Court of Appeals affirmed a summary judgment in favor of a landlord, finding that a seed supplier could not recover where the customer was a custom farmer. This case highlights the need for written contracts over oral agreements.
The plaintiff in this case is a business that sells seeds and chemicals to farmers and applies them them to farmland. The defendant is a land owner who had entered into an agreement with a third-party farmer to “custom farm” the land defendant owned. That third-party farmer bought seed and chemical supplies through the plaintiff. The third-party farmer also arranged for the plaintiff to spray the soybean crop.
In this case, the plaintiff claimed that he had entered an oral contract with the defendant landowner for the crop inputs. He claimed that the defendant landowner had orally told the plaintiff to send him an invoice for crop inputs and for the spraying services, but the defendant had then failed to pay for the goods and services.
The trial court addressed two issues: the first was whether the defendant landowner had told the plaintiff to send him an invoice for the crop inputs. The court found that this dispute was irrelevant because the Statute of Frauds applied. Under Iowa law, contracts for sales of goods over $500 must be in writing to be enforceable. Seeds and chemicals are considered goods under Iowa Code § 554.2105(1) (2016). Because the alleged contract exceeded $500, the Statute of Frauds required it to be in writing in order for the court to enforce it.
The plaintiff argued that because the goods were received and accepted, an exception to the Statute of Frauds applied and the contract should therefore be enforced. However, the court found there was no evidence that the defendant landowner was the buyer of the plaintiff’s goods. Rather, the plaintiff acknowledged that the third-party farmer had purchased the soybean seed and arranged for the crops to be sprayed.
The second issue the court addressed was whether a partnership or agency agreement existed between the defendant landowner and third-party farmer. If there was a partnership, the third-party farmer’s liability could be imputed to the defendant landowner. The trial court found that the plaintiff did not offer any evidence of a partnership and “there is simply no evidence to support a finding that a partnership or other agency relationship ever existed.”
The Iowa Court of Appeals affirmed the trial court’s finding of no evidence that the third-party farmer was either an employee or a partner of the defendant. Therefore, the third-party farmer could not bind the defendant land owner to the contract.
The court affirmed the trial court’s ruling that the defendant landowner was not a buyer under the Iowa law because there was no evidence of a mutual agreement between the plaintiff and defendant landowner. Because the defendant landowner was not a buyer, the exception to the statute of frauds did not apply and the oral contract is not enforceable. The plaintiff argued on appeal that he should recover under an unjust enrichment theory since the defendant profited from the crop planted with the plaintiff’s inputs. The court found that it could not consider this argument, however, because the plaintiff did not plead unjust enrichment in his petition.
This case demonstrates the necessity of a written agreement over an oral contract. Courts will not enforce an oral agreement if it would violate the Statute of Frauds. It also alerts input suppliers to the need to understand who their customers are and to protect their interests by perfecting an agricultural supply dealer lien.
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