Riley v. Capital Airlines, Inc. – Case Brief
Riley v. Capital Airlines, Inc., 185 F.Supp. 165 (S.D. Ala. 1960).
Facts: Riley (P) supplied water methanol to Capital Airlines. In April 1956 Capital Airlines gave Riley a blanket purchase order number to use for all orders. Riley claimed that it entered into an oral contract with Capital in August 1956 to provide Capital with water methanol for five years. In reliance on this agreement, P purchased an additional storage tank used exclusively by D and mounted on a saddle structure provided by D, and later purchased another storage tank also used exclusively for the benefit of D.
In July 1957 D invited P to bid on a five year contract to supply water methanol; P lost the bid. D canceled P’s purchase order number and stopped placing orders in September 1958 and P filed suit in federal district court.
The district court determined that while a contract had formed, it was necessary to determine whether the action was barred by the Statute of Frauds.
Issue: Can a plaintiff recover reliance damages where the remaining portion of an executory contract is void under the Statute of Frauds?
Holding and Rule: Yes. A plaintiff is entitled to reliance damages even if the remaining portion of an executory contract is void under the Statute of Frauds.
The court held that each delivery on the contract was enforceable to the extent that it had already been delivered. However, the executory portion of the contract could not be enforced, and the part performance doctrine could not take the executory portion of the contract out of the Statute of Frauds. P was not entitled to damages for breach of contract, but P was entitled to reliance damages (i.e. reasonable losses arising from purchase of equipment in good faith according to D’s specifications). The tanks were bought for $3,418.15 sold for $700 and P was entitled to recover $2,718.15.
Disposition: For P.
For another case involving the issue of reliance damages see Hoffman v. Red Owl Stores, Inc.