Flanagan v. Federal Coal Co.

Background\n\nA coal dealer (the seller), Flanagan, made a written contract on August 19, 1920 with a coal-buying company (the buyer) to supply about two hundred cars of Tracy City run-of-mine coal. The agreement fixed the price at nine dollars per ton f.o.b. cars at the mines and scheduled deliveries from September 1 to December 31, 1920, at roughly fifty cars per month. The buyer bought coal to resell, gave Flanagan orders, and Flanagan took bills of lading at Tracy City in the buyer’s name and consigned shipments to that buyer’s customers in other States.\n\nReasoning\n\nThe State Courts refused to let Flanagan recover because his license as a coal dealer had expired when the buyer refused to accept the coal. The Court considered whether these transactions were steps in sending coal from the mines to purchasers in other States. Finding that the parties understood and followed a business course that sent coal out of state, the Court held the contract was part of interstate commerce. That meant a state licensing rule could not be used to invalidate the contract, so the Court reversed the state courts’ judgment.\n\nReal world impact\n\nThe decision protects deals that are made as steps in shipping goods across State lines from being undone by a local licensing lapse. Sellers and buying firms that arrange consignments out of state will have stronger ability to enforce contracts when the factual record shows the shipments were meant for out-of-state customers. The opinion resolves this appeal on its facts, so similar future disputes will turn on whether the transactions in each case are shown to be part of interstate commerce.\n\n