Before HASTINGS, Chief Judge, and DUFFY and SCHNACKENBERG, Circuit Judges.
Plaintiff Erving Paper Mills (Erving), a Massachusetts corporation, brought this diversity action against defendant Hudson-Sharp Machine Co. (Hudson-Sharp), a Wisconsin corporation, seeking $300,000 in damages for breach of contract.
The district court entered judgment dismissing the action, with costs to Hudson-Sharp, due to failure of the contract to comply with the statute of frauds. The district court's opinion is reported at 223 F.Supp. 913 (1963). Erving appealed.
Erving operates a paper mill and manufactures and sells paper napkins. Prior to 1956, Erving generally marketed napkins in cardboard packages. About 1956, Erving began marketing its product in re-usable polyethylene bags. The napkins were placed in these bags and sealed by hand.
By July, 1956, the demand for these napkins in re-usable bags had increased to the point where Erving was interested in investigating the use of machines for packaging.
In July, 1956, Erving was contacted by Cletus Wetli, vice-president of Hudson-Sharp. Hudson-Sharp was engaged in designing, manufacturing and selling various types of machinery, including a wrapping machine known as the Campbell Wrapper.
Wetli familiarized himself with Erving's packaging needs and on July 17, 1956 wrote Erving, in pertinent part, as follows:
"Under separate cover I am sending you two packages of napkins wrapped in polyethylene in a manner that we can accomplish on a standard Campbell wrapper.
"This machine will operate at any speed between 20 and 60 packages per minute. The machine is illustrated on the enclosed photograph #832.
"The price of the machine, complete, f.o.b. Green Bay, Wisconsin is $13,150.00.
"These sample packages are not just as tightly wrapped as I wanted them but you understand that we can make it tighter on the machine.
"After you have received these samples, I would appreciate your comments."
Following this letter, there were numerous communications and negotiations between Erving and Hudson-Sharp and on August 20, 1956 Erving placed a purchase order with Wetli for two Campbell Wrappers. Wetli transmitted the order to Hudson-Sharp with the following memorandum, in part:
"Attached is a purchase order for 2 machines at $13,150.00 each, P.O. #11198.
"The purchase order is explanatory in itself so I am not going to go into further details at this time except to caution that the package must be very tight with a short end as possible. You have received samples of their requirements and before proceeding with the machine actually, I would rewrap these samples and return them to Erving for them to give us a definite confirmation as to their satisfaction.
"As discussed with Mr. Campbell over the phone, we are sure that we can sufficiently compress these napkins in polyethylene and make the longitudinal seal, then using a short crimp on the ends, the bulk of the napkins would come back and produce a sufficiently tight package."
As a result of negotiations two or three days after August 20, 1956, the purchase price was reduced to $11,000 per machine and a new purchase order was written. This purchase order was identical to the first except for reduction in price and immaterial grammatical corrections. It stated:
"Model #2W10 Campbell Wrappers
"Each wrapper to efficiently polyethylene wrap 1/4 fold, 13 1/2", luncheon napkins, both 160 ct. & 250 ct. package sizes as samples to be submitted by Hudson Sharp ...