L.F. Brands Marketing, Inc. v. Dillard’s, Inc., No. CA07-1210.
Plaintiff sold clothing to defendant for many years under a contract that contained a merger clause. Under the parties’ agreement, defendant could deduct markdown allowances and chargebacks from the amount owed to plaintiff. The total of these markdown allowances and chargebacks was negotiated orally by the parties throughout each fashion season.
In December 2003, plaintiff went out of business. A short time later, defendant deducted markdown allowances and chargebacks based on the parties’ agreement. Plaintiff filed suit, and defendant counterclaimed that the amount of markdown allowances and chargebacks was in excess of the amount defendant owed plaintiff.
At trial, the trial court submitted an interrogatory to the jury that (1) defined course of dealing and (2) allowed course-of-dealing evidence to give particular meaning to and supplement terms of the contract. The jury found for defendant and awarded it $1,265,938.98. Plaintiff filed a motion notwithstanding the verdict, claiming that the merger clause of the parties’ agreement superceded any prior or contemporaneous oral agreements. The trial court denied the motion.
On appeal, the Arkansas Court of Appeals held that, under UCC contracts, course-of-dealing and course-of-performance evidence is allowed to supplement and explain a contract, even if the contract has a merger clause. Accordingly, the court affirmed the judgment.
