McMichael v. Price
Facts
Price (P) entered into a ten year contract to deliver all the sand that McMichael (D) could sell within the United States. McMichael was to load all the sand in suitable railway cars for delivery to the initial carrier. McMichael agreed to furnish the quantity and quality of sand requested by Price by written or oral order, and agreed to supply the sand within a reasonable period of time. The contract also stipulated that McMichael was to accept all orders placed by Price and that Price in turn was required to place all of its orders with McMichael.
Within a few months Price began to dispute amounts due and owing to McMichael. Price brought this lawsuit and was awarded $7,512.51, which was reduced upon remittitur to $5,012.51. McMichael appealed.
Issue
- Is a requirements contract illusory and therefore unenforceable?
Holding and Rule of Law
- No. A requirements contract is not illusory.
McMichael contends that the contract between the parties was a mere revocable offer and was not valid and binding for want of mutuality. Attention is directed to the specific language of the contract which requires McMichael to furnish all of the sand of various grades and qualities which Price can sell and whereby Price is bound to purchase and accept from McMichael all of the sand of various grades and qualities which Price can sell. McMichael contends that Price was not bound to sell any sand and could simply escape liability under the contract by doing nothing. It is to be noted that the contract recites that Price is engaged in the business of selling and shipping sand from Tulsa to various points. The parties based their contract on this agreed predicate.
At the time the contract was executed Price was not the owner of an established sand business, but he was an experienced salesman of sand which was known by McMichael. It was anticipated by both parties that on account of Price’s experience, acquaintances and connections he would be able to sell substantial amounts of sand. In the nine months following the execution of this contract, Price’s average net profit per month was $516.88. Price was bound by the contract to purchase all of the sand he could sell from McMichael. The contention of McMichael that Price could escape liability by going out of business is without force and the contract is not illusory. The jury found that Price did not breach the contract by a failure to pay for the shipments but that McMichael did not keep a correct account of indebtedness and did not furnish correct statements of account.
Disposition
Judgment affirmed.