Foxco Industries, Ltd. v. Fabric World, Inc.

Fabric World, Inc. (defendant), a retail store, had a contract to purchase approximately $36,000 of “first quality” seasonal, spring fabric from Foxco Industries (Foxco) (plaintiff), a manufacturer. When the fabric’s market price dropped 20 percent, Fabric World canceled its order. However, Foxco had already made most of the order and refused to cancel. Fabric World agreed to accept the order only if all the delivered fabric was flawless. Foxco believed that perfection was impossible for such a large order, so it canceled the shipment and sued Fabric World for breaching the contract. Nine months after Fabric World canceled the order, when the fabric was seasonally appropriate again, Foxco resold much of the order at 50 percent of the contract price, receiving only around $10,000. At trial, the parties disputed the meaning of the contract term “first quality.” Fabric World argued that first-quality fabric had no flaws. Foxco sought to introduce evidence of standards from the Knitted Textile Association (the association), an organization with over 1,500 textile-industry members. Under these standards, some flaws were acceptable in fabrics designated as first quality. Fabric World objected that the evidence was irrelevant to interpreting this contract because Fabric World was not an association member and did not know about these standards. The court overruled the objections and admitted the evidence. Also over Fabric World’s objections, the court instructed the jury that it could award damages under Uniform Commercial Code (UCC) § 2-709. The jury found that Fabric World had breached the contract and awarded Foxco $26,000 in damages. Fabric World appealed.