1. What is the significance of the conversion argument that Nutsco makes? Does it work?

2. What are Schutzman’s damages?

Schutzman sells roasted and salted nuts. Nutsco is a New Jersey wholesaler of cashews that imports the nuts from Brazil and then packs and sells them in the United States. In 2006, Nutsco used food broker Jim Warner to broker a contract between Nutsco and Schutzman, whereby Nutsco promised to deliver twelve 35,000-pound loads of super large, whole, first-quality (“SLW-1”) cashews. The contract also included an option allowing Schutzman to buy four loads of large, whole, first-quality (“LW-1”) cashews, if exercised by a certain date.

Schutzman later wanted to order more cashews. Warner amended the contract to add two additional loads. In March 2007, Warner sent a copy of the revised Contract Confirmation adding the two extra loads (loads 13 and 14) to both Nutsco and Schutzman.

Nutsco delivered 10 loads of SLW-1 cashews to Schutzman. After receiving the tenth load, however, Schutzman roast tested the cashews and determined that they did not qualify as “first quality” under specifications of the Association of Food Industries, Inc. (AFI), because of a high level of scorching. SLW-1 cashews must meet AFI standards for SLW-1.

At Warner’s request, Schutzman provided six cases of cashews from the tenth load for evaluation by Nutsco. Nutsco concluded after its own analysis that the raw cashews did not meet AFI Specifications for first-quality cashews. After Nutsco delivered the tenth load, it began arguing that the parties’ contract only provided for 12 loads of SLW-1 cashews and that Nutsco was not responsible for providing the two additional loads because there was no signed contract for the additional loads. Market prices for SLW-1 cashews had increased $2 per pound above the Schutzman contract price. Schutzman initially agreed to keep the load and pay the contract price on the condition that Nutsco deliver all remaining loads, including loads 13 and 14. Nutsco would not agree and Schutzman stored the tenth load in its refrigerated warehouse.

Schutzman did not pay for the rejected tenth load of SLW-1 cashews that Nutsco retrieved. Schutzman did pay all invoices for the nine preceding loads it received and accepted. Schutzman paid a reduced price on two of the invoices after Warner agreed that it could apply $1,750 and $1,284 in credit against these invoices.

Schutzman paid to purchase loads of SLW-1 cashews from other wholesalers. Schutzman paid $5.45 per pound for the additional five loads, or $367,850 more than it would have paid under the contract with Nutsco. Schutzman filed suit for damages in this amount.

JUDICIAL OPINION

STADMUELLER, District Judge … Schutzman asserts that it contracted with Nutsco for the purchase of 14 loads of SLW-1 cashews and that Nutsco breached this contract by providing only nine loads. Nutsco acknowledges that it never provided the full number of loads required by the contract. However, Nutsco asserts that it was only obligated to provide the number of SLW-1 cashew loads included in the original contract between the parties because it never authorized an amendment to the contract. ………………..