BRC Rubber & Plastics, Inc. v. Continental Carbon Co., 876 F. Supp. 2d 1042

Background

BRC Rubber & Plastics, Inc. and Continental Carbon Company entered into a January 1, 2010 Supply Agreement governing the sale of furnace-grade carbon black through December 31, 2014.
BRC terminated the Agreement on June 2, 2011 and filed suit alleging breach of contract, anticipatory repudiation, and seeking declaratory relief.
BRC claims the Agreement is a requirements contract obligating Continental to supply all of BRC’s needs for carbon black; Continental contends it is either an open offer for orders or a contract to sell a specific quantity.
From 2010 through May 2011 the parties operated under the Agreement, with BRC purchasing roughly 2.6 million pounds in 2010 and, beginning in 2011, Continental experiencing capacity constraints and delays.
Continental, amid rising costs, sought accelerated payments and higher prices in 2011; BRC maintained base prices remained firm and demanded performance under the Agreement, including timely shipments.
By May–June 2011 Continental could not keep up with demand, missed a shipment in May 2011, and after assurances, shipments later continued inconsistently before termination.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Agreement is a requirements contract	BRC argues the Contract is a requirements contract binding Continental to all of BRC’s needs.	Continental argues it is not a binding requirements contract but an open offer for orders or a fixed-quantity contract.	The Court holds the Agreement is a requirements contract.
Whether the Agreement obligates BRC to buy all carbon black from Continental	BRC contends mutuality/coverage evidence implies exclusive purchase from Continental.	Continental argues no express exclusivity and thus no obligation to buy exclusively from Continental.	The Court finds BRC obligated to purchase all carbon black from Continental.
Whether the 1.8 million pounds per year is a fixed quantity or an estimate	N/A	Continental argues 1.8 million pounds is a fixed quantity term.	The Court treats 1.8 million pounds as an approximate annual requirement, not a fixed quantity.
Whether the Meet or Release provision negates exclusivity	BRC asserts the provision allows market- for better terms, not exclusivity being implied.	Continental contends the provision permits meeting offers but does not imply an unrestricted right to buy elsewhere.	The Court interprets Meet or Release as compatible with an implied exclusivity obligation.
Whether the Agreement’s terms harmonize with course of performance	BRC’s historical full-scope purchases align with a requirements contract.	Continental points to potential deviations but ignores course of dealing.	The Court finds course of performance/dealing supports a requirements-contract reading.

Key Cases Cited

Zemco Mfg., Inc. v. Navistar Intl. Transp. Corp., 186 F.3d 815 (7th Cir.1999) (definition and essential elements of a requirements contract)
Brooklyn Bagel Boys, Inc. v. Earthgrains Refrigerated Dough Prods., Inc., 212 F.3d 373 (7th Cir.2000) (buyer’s option vs. exclusive obligation for a requirements contract)
Ind.-Am. Water Co. v. Town of Seelyville, 698 N.E.2d 1255 (Ind.Ct.App.1998) (implied exclusivity in exclusive supply arrangements)
BKCAP, LLC v. CAPTEC Franchise Trust 2000-1, 572 F.3d 353 (7th Cir.2009) (harmonizing contract terms with course of performance; interpretation guidance)
Noble Roman’s, Inc. v. Pizza Boxes, Inc., 835 N.E.2d 1094 (Ind.Ct.App.2005) (quantity term ambiguity and the role of an estimate in a requirements contract)
Empire Gas Corp. v. Am. Bakeries Co., 840 F.2d 1333 (7th Cir.1988) (interpretation of requirements contracts where terms contemplate variable supply)
Structural Polymer Group, Ltd. v. Zoltek Corp., 543 F.3d 987 (8th Cir.2008) (right of first refusal within exclusive supply arrangements and mutuality)
In re Modern Dairy of Champaign, Inc., 171 F.3d 1108 (7th Cir.1999) (consideration of quantity terms and contract formation in similar context)