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Friday, November 18, 2005

Turkeys, Oral Contracts and Mr. Gouge

Turkeys_1George R. Whaley had been a poultry farmer for some 35 years. For 20 of those years, under oral contract, Whaley supplied turkeys to H&H Poultry Co., a poultry processor. Whaley would pay for the poults, feed and labor, and would provide the necessary housing and equipment. In return, H&H compensated Whaley on a per pound live weight basis on the date of pickup, at a price determined by a day to day variable market value in the turkey growing Shenandoah Valley area of Virginia and North Carolina.  (Image source: Wikipedia).

Whaley would routinely call H&H in the spring to determine how many turkeys H&H wanted and, without more details, would buy the poults and raise them. For the six years before the dispute arose, for the Thanksgiving market, Whaley grew 24,000 turkeys for H&H.

One year in the late 1970’s, Whaley made his spring telephone call to H&H. H&H had a new controlling stockholder and chairman of the board, Mr. Gouge (yes, that was his name). Whaley testified that Mr. Gouge put in an order for 24,000 turkeys. After the conversation, Whaley purchased 24,000 poults, built 40 new rain shelters at $2000 each, purchased 60 feeders for $6000 each, and installed an underground pipe which he otherwise would not have needed. Come November, Whaley called Mr. Gouge to remind him it was time to weigh a cross section of the turkeys to see what size they were. Mr. Gouge denied making the order.

Mr. Gouge died before he could be deposed. The president of H&H denied emphatically that H&H told Whatley to grow turkeys that year. The president testified that “Whaley was told that if he put turkeys in, he was on his own.” H&H claimed that it had completely changed its processing equipment and building, and could no longer process turkeys.

From the bench, the trial court issued a ruling concerning whether an enforceable contract existed:

Gentlemen, I have determined that I could not get any better of a feeling for a close case, where I believe people may sincerely feel they are telling the story as it is, than I have now, and there is no need to deliberate on the matter. I am convinced that judgment must be and shall be entered in favor of the plaintiff in this case.

The trial court awarded Whaley damages (the difference between what Whaley would have received under the oral contract with H&H the day after the breach and the amounts he received from another poultry processor, plus loading costs usually borne by H&H).

The Delaware Supreme Court affirmed the determination that an enforceable contract existed and affirmed the damages award.

Likewise, the Delaware Supreme Court affirmed the trial court’s denial of H&H’s motion to amend its answer to include the statute of frauds as an affirmative defense. H&H had waited three years to move to amend, and this inexcusable neglect would prejudice Whaley – especially because of Mr. Gouge’s death before his deposition.

H&H Poultry Co. v. Whaley, 408 A.2d 289 (Del. 1979).

[Meredith R. Miller]

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