Story Case

The Hewitt Stationery Company ordered, orally, from the Press Printing & Binding Company, an allotment of blank paper tablets of various sizes. The printing and binding company was to furnish the paper, cut it in the various sizes, and bind it into tablets. The job was completed and the tablets delivered at the place of business of the Hewitt Stationery Company. The Hewitt company carelessly left the boxes containing the paper standing out over night, and a heavy rainstorm damaged a large part of the paper. The Hewitt company refused to pay, maintaining that the transaction falls within the Statute of Frauds and, therefore, as a contract of sale, their agreement is not enforcible. Was the contract a contract of sale, or for labor and materials?

Ruling Court Case. Cooke Vs. Milliard, Volume 65, New York Reports, Page 352; Volume 22, American Reports, Page 609

Milliard, who was desirous of purchasing some lumber, went to Cooke's lumber yard and orally gave an order to Cooke for a certain quantity of lumber of the kind and quality in the yard, but which needed to be dressed and cut into different sizes. No particular lumber was selected, nor was any part of the lumber then in the yard in condition to be delivered. Cooke agreed to cut and dress the lumber as directed and to place it on dock and to give notice thereof to Milliard's agent, who was, thereupon, to send a boat and take the lumber away. Cooke prepared the lumber and placed it upon their dock, and notified the defendant's agent of the fact, as agreed; but the next day, and before it was removed, it was accidentally destroyed by fire. Cooke, however, sued Milliard for the price thereof.

Milliard contended this was a sale of goods, wares, and merchandise, and not enforcible because not made in writing, as required by the Statute of Frauds. Cooke contended that it was only a contract for labor, and not within the statute.

Mr. Justice Dwight said: "There are, at least three different views as to the meaning of the words of the statute. The English view lays special stress upon this point, whether the articles bargained for can be regarded as goods capable of sale by the seller at the time of delivery, without any reference to the inquiry whether or not they were in existence at the time of the contract. If a manufacturer is to produce an article which at the time of delivery could be subject of sale by him, the case is within the Statute of Frauds."

The Massachusetts rule is thus stated: "A contract for the sale of articles then existing, or such as the vendor, in the ordinary course of his business manufactures or produces for the general market, whether on hand or not, is a contract for the sale of goods to which the statute applies and must be in writing. But, on the other hand, if the goods are to be manufactured especially for the purchaser, and upon his special order and not for the general market, the case is not within the statute, and the contract need not be in writing,"

The New York rule is still different. It is held here by a long course of decisions, that an agreement for the sale of any commodity, not in existence at the time, but which the vendor is to manufacture or put in a condition to be delivered, such as flour from wheat not ground, or nails to be made from iron belonging to the manufacturer, is not a contract of sale. The New York rule lays stress upon the word "sale." There must be a sale of goods then in existence at the time the contract was made.

The court was of the opinion that this was a sale, within the New York rule, of goods then in existence, and, therefore, the contract was unenforcible, because the Statute of Frauds had not been complied with. Judgment was given for Millard.

Ruling Law. Story Case Answer

Suppose that one goes to a carriage maker and directs him to build a carriage. Is this a contract of sale, falling within the terms of the statute, and therefore must be in writing; or is it a contract for labor and material, and not within the terms of the statute? On this important point divers opinions are held.

According to the English law, if the article contracted for, at the time it is to be delivered, is such an article that it might be sold, then the contract is one for the sale of goods, wares, and merchandise, and must be in writing. If, however, the article, when ready for delivery is not such an article as could then be sold, the contract is one for labor and material, and not within the meaning of the statute.

According to the courts of Massachusetts, followed by many other courts, if the article is made especially for the buyer, the transaction is one for labor and material and not within the statute. If the article is not made upon a special order, but made for the general market, or is merchandise such as the seller ordinarily sells, the transaction is then regarded as a contract for the sale of goods, wares, and merchandise, and must be made in accordance with the terms of the statute.

The New York courts maintain yet another rule. If the article to be delivered is to be made into an entirely new article, then the transaction is one for labor and material and not within the statute. But if it is in substantial form for delivery, then it is a contract of sale, and not within the statute, even though it is to be changed or altered.

All of the states follow one of these last two rules. By the English rule, the test is an "ultimate result" test; viz., was the contract for goods capable of delivery at the time the contract was completed? If the contract called for a delivery of goods, it fell within the Statute of Frauds as a contract of sale, and not for labor and materials. Clearly, therefore, under the English rule, the paper ordered in the Story Case fell within the statute and the contract should have been in writing.

By the Massachusetts rule the test is known as the "special order test." If the contract involves goods or merchandise not ordinarily made for general market sale, it is a contract for labor and materials. The Story Case represents this situation. The paper there ordered can rightly be said to have been a special order, and, therefore, since the contract was for labor and materials, it did not, by the Massachusetts rule, need to be in writing.

By the New York rule the test is an "existence test"; viz., was the commodity ordered in existence at the time the order was given, or was it required to be put into a certain shape or condition to be delivered. This does not mean packing or crating, but a change in form or composition. By this test, the contract in the Story Case was not a contract for a sale, but was for labor and materials, and need not be in writing.

The Massachusetts rule is broader than the New York rule in that a commodity under the New York rule might be changed in form and yet not fall within the Massachusetts test of a "special order." The Massachusetts rule has the general support of American authority.