Name:
Empire Gas Corp. v. American Bakeries Co. CB 544
Parties Procedural History: $3,254,963 CB545 P brought suit for breach of contract and won jury verdict for
Factual History: P and D entered a contract on April 17, 1980 for approximately 3,000 conversion units, consisting of Fuel Tank, Fuel Lock Off Switch, Converter & appropriate Carburetor & small parts kit, at a price of $750 a piece. D agreed to purchase propane from exclusively from Pas long as prices stayed competitive for 4 years. D never ordered any equipment or propane. Legal Issue: Whether or not the judge erred in the jury instruction about letting the jury interpret section 2-306 of the UCC, and if so is it clear whether American Bakeries acted in good faith or in bad faith. Holding: The judge erred in reading the “unreasonably disproportionate” provision to the jury. However, because no reasonably jury could have failed to find bad faith, the error in instructing the jury on proportionality was harmless. Legal Reasoning: Even though Empire Gas has the burden of proof that American acted in bad faith, American not only introduced no evidence, but has no evidence that it would care to put before the jury Even though the judge erred in instruction, the judge did not make this decision until the instructions conferencgfe. Until then American had every opportunity and incentive to introduce evidence of why it decided not to convert its fleet to propane. The court cited to a similar case Southwest Natural Gas v. Oklahoma Portland Cement, where it was decided that if a buyer has a legitimate reason for change in its requirements, it may decrease the quantity. This is regardless of whether or not an actual amount was established. Rule of Law: In an output contract at a minimum that the reduction of requirements not have been motivated solely by a reassessment of the balance of advantages and disadvantages under the contract to the buyer It is difficult to hold the buyer to the terms of the contract so literally because then he would not only be bound to buy from one seller but also to fulfill the estimate requirement. American Promises that it will only be converted by Empire. Empire promises to stick to a fair price. He is also bound to meet the needs of the buyer. Famous Brands, Inc. v. David Sherman Corp.