TROUT, Chief Justice.
This appeal involves a contract dispute. Lonnie Lickley (Lickley), a potato grower, entered a preseason potato growing contract with Max Herbold, Inc. (Herbold). After harvest, a dispute arose as to the price to be paid. Following a bench trial, the court awarded Lickley $33,000 in damages. The trial court found that because a substantial portion of the potatoes delivered failed to meet agreed upon standards, the contract required the parties to renegotiate a price. However, the parties could not agree, so the trial court set the price for the substandard potatoes at $7.55 per cwt., the market price at the time of delivery. Herbold appeals and Lickley cross-appeals.
FACTUAL AND PROCEDURAL HISTORY
In 1995, Lickley entered a "One Year Potato Growing and Sales Contract" with Herbold. Lickley agreed to plant, cultivate, harvest, and deliver 12,000 cwt. of Russet Burbank potatoes. The contract set a base price of $6.15 per cwt. Then, depending on the quality of the potatoes delivered, the contract provided for price adjustments.
To determine the quality of each load and establish a purchase price, the contract provided for inspection by the "Federal-State Inspection Service." Paragraph (C)(4)(b) of the contract set minimum quality standards providing:
Over six days, Lickley delivered twenty-three truckloads totaling just over 12,000 cwt. of potatoes. Herbold accepted the shipments and commingled the potatoes with deliveries from other growers. Results from the inspections showed that the combination of loads delivered on each of the first four days failed to meet the minimum standards. Viewing all six days deliveries as a whole, eighty-five percent of the potatoes graded below the "U.S. No 1 two inch or 4 ounce minimum" standard.
Herbold notified Lickley that the potatoes were substandard and calculated a net price of $3.22 per cwt. using the pricing formula set out in the contract. Because a number of the accepted potatoes were "rejectable," Lickley sought to renegotiate the price under the contract insisting upon $8.00 per cwt. Herbold rejected the offer. At a second meeting, Lickley requested $5.00 per cwt. and Herbold countered offering to waive the freight charges of $4,096 or to increase the initial $3.22 per cwt. offer to reflect that amount. Lickley refused, and this litigation ensued.
In January 1996, Lickley filed a complaint alleging that Herbold breached the contract by failing to renegotiate a price for the "rejectable" potatoes. Lickley asserted that he suffered more than $80,000 in damages, the market value of the potatoes at the time of delivery. Herbold answered claiming that Lickley failed to deliver conforming potatoes. While it accepted the goods, Herbold argues that Idaho law only requires that it pay the contract price.
Following a bench trial, the late Judge Granata found that the contract only required Lickley to deliver 12,000 cwt. of "field run potatoes" and that Lickley fully performed his obligations under the agreement. Herbold accepted all shipments. Because Herbold accepted "rejectable" potatoes, the contract required the parties to renegotiate a price for those potatoes. Judge Granata ultimately concluded that Herbold failed to negotiate in good faith and, as a result, determined that a reasonable price would be $7.55 per cwt., the market price at the time.
Both parties appeal.
STANDARD OF REVIEW
Herbold brings this appeal asking this Court to review the district judge's interpretation of the potato growing contract. Where the language of the contract makes clear the intentions of the parties, the interpretation and legal effect of the contract are questions of law over which we exercise free review. First Security Bank of Idaho v. Murphy, 131 Idaho 787, 791, 964 P.2d 654, 658 (1998). When interpreting any one contract provision, we must view the entire agreement as a whole to discern the parties' intentions. Id. However, this Court will not set aside findings of fact unless they are clearly erroneous. Hunter v. Shields, 131 Idaho 148, 151, 953 P.2d 588, 591 (1998). If the district court's factual determinations are supported by substantial and competent, albeit conflicting, evidence, we will not disturb
The contract contemplated just this event, providing the following:
Using the contract's pricing formula for conforming potatoes, Herbold calculated the purchase price for each day's deliveries. The net result was $3.22 per cwt. for all the potatoes delivered. Lickley rejected Herbold's initial offer for this amount. The parties met twice and failed to agree upon a price.
The district judge found that Herbold breached the contract by failing to renegotiate in good faith. Herbold challenges this conclusion on appeal. However, whether or not Herbold negotiated in good faith is ultimately of no consequence in this case. The fact remains that Herbold accepted the goods and that Lickley is merely attempting to recover what he believes to be the contract price. The only issue, then, is whether the district judge properly concluded $7.55 per cwt. to be the contract price for the rejectable potatoes.
So long as the parties intend to enter a contract, their agreement will not fail for indefiniteness where they do not settle the price. I.C. § 28-2-305. It is clear from the record that Herbold and Lickley intended to enter an enforceable agreement. Where the contract leaves the price open for negotiation and the parties fail to agree, § 28-2-305(1) provides: "In such a case the price is a reasonable price at the time for delivery...." Lickley and Herbold failed to agree upon a price. Lickley argued below that the market price, approximately $7.50 per cwt. at the time for delivery, was the reasonable price. Herbold argued that the market price is not a reasonable price. Instead, a reasonable price could not exceed the price as calculated under paragraph C of the contract.
The district judge determined the market price of $7.55 per cwt. to be a reasonable price at the time for delivery. So long as this factual determination is supported by substantial and competent evidence, we will not disturb this finding on appeal. Without
However, a more reasonable interpretation of this provision leads to the ultimate conclusion reached by the trial court. The "combination of loads" language reflects the fact that multiple loads could be and were delivered on a given day. However, the inspection service, as is reflected in the record, sampled each day's deliveries as a whole. The "combination of loads" received on each of the first four days did not conform while the "combination of loads" delivered on the last two did. Therefore, the trial court properly concluded that only the loads delivered on the first four days were rejectable.
For the reasons stated above, we affirm the decision of the trial court. Pursuant to Appellate Rules 40 and 41, we award costs and reasonable attorney fees to Lickley on appeal.
Justices SILAK, WALTERS and KIDWELL, concur.
Justice SCHROEDER, dissenting.
I respectfully dissent from the opinion of the Court affirming the district court's determination that the market price was the reasonable price for the rejectable potatoes. It is contrary to the purpose of the contract and commercially unreasonable to award Lickley more for rejectable potatoes than he would have received had he delivered conforming potatoes. The district court recognized this in its initial decision which was amended without explanation. Finding of Fact No. 32 in the first decision stated the following: "The `open price term' is found by the court to be $5.05 per cwt., as reflected in Defendant's Exhibit F; the court rejects the use of the $7.50 per cwt." The district court explained its rationale in Conclusion of Law No. 17:
The reason buyers and sellers enter contracts such as this is to lock into a predictable price. The potato grower wants to ensure his costs are covered in case of a poor market, and the buyer wants to ensure a supply at a predictable and affordable cost in case of high demand. By entering pre-season contracts the grower takes the risk that the market price will exceed the contract price. Similarly, the buyer takes the risk that the contract price will exceed the crop's value at the time for delivery. In this case the contract provides a formula to calculate the price for non-rejectable potatoes. Lickley could not reasonably have expected to be paid more for rejectable potatoes than he was for the potatoes meeting the contract's minimum standards, and Herbold could not have expected to pay more for rejectable potatoes than for conforming potatoes. As an illustration, Herbold could have rightfully rejected the potatoes, and if Lickley could not fulfill his obligations, Herbold would have been able to recover the difference between the market price and the contract price for conforming potatoes. See I.C. § 28-2-713. The reasonable price of rejectable potatoes at the time for delivery must be determined with regard to the contract price for acceptable potatoes. If a third person reading this contract had asked, "Does this mean Lickley can make more money by delivering rejectable potatoes than by delivering conforming potatoes?," the answer surely would have been "no" from both parties. The purpose of the contract is defeated by such an interpretation. In the amended decision the district judge found that $7.55 cwt. was a reasonable price at the time for delivery, an amount higher than the contract price for conforming potatoes. In
This Court should vacate the decision of the district court and remand the case for a determination that reflects the purpose of the contract and the clear intent of the parties. Affirming the district court gives Lickley a benefit he could not have contemplated under the contract.
Moreover, if a buyer wrongfully rejects goods, the seller's damages generally include the difference between the