BRC Rubber & Plastics, Inc. v. Continental Carbon Co.
949 F. Supp. 2d 862
N.D. Ind.2013Background
- BRC Rubber & Plastics, Inc. and Continental Carbon Company entered a January 1, 2010 supply contract for all of BRC’s carbon black needs (N339, N550, N762) over five years.
- The agreement contemplated annual purchases around 1.8 million pounds and allowed rebates/penalties for volumes outside a defined range, with forecasts used for planning but not reserved production.
- In 2010 Continental supplied more than the estimated amount and granted a modest rebate; BRC’s requirements rose with automotive demand in 2011.
- In April 2011 Continental sought a price increase and began restricting shipments, subsequently downgrading BRC’s customer tier, and failing to confirm several purchase orders from BRC.
- BRC demanded adequate assurance of performance under UCC § 2-609; Continental failed to confirm/shipment and proposed price increases, prompting BRC to cover with alternative suppliers.
- BRC terminated the agreement on June 2, 2011 and filed suit; Continental later delivered additional shipments but the parties could not settle, and BRC stopped ordering in September 2011.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BRC’s April 26 orders were placed in good faith | BRC acted in good faith under the contract terms. | BRC’s increases were not in good faith or were unreasonably disproportionate. | BRC acted in good faith. |
| Whether the April 26 order was unreasonably disproportionate to the stated estimate | Orders were within the contract’s 1.8 million pound baseline and forecasted variability; not unreasonably disproportionate. | The May/June increases exceeded the stated estimate and were unreasonably large. | Not unreasonably disproportionate as a matter of law. |
| Whether Continental repudiated the contract by failing to provide adequate assurance and by limiting supply to 1.8 million pounds | Continental failed to provide adequate assurance and signaled performance limited to 1.8 million pounds, constituting repudiation. | Continental’s statements were interpretations of the contract, not a repudiation. | Continental repudiated the contract; BRC could terminate and seek damages. |
| Whether Continental's defense of commercial impracticability bars recovery | No; the shortage was not unforeseeable or beyond contemplation, and allocations were not fair. | Maintenance outages and demand increases were a basis for impracticability. | Commercial impracticability defense fails; no excuse for breach. |
Key Cases Cited
- Empire Gas Corp. v. Am. Bakeries Co., 840 F.2d 1333 (7th Cir.1988) (good faith variations allowed in requirements contracts)
- Ind.-Am. Water Co. v. Town of Seelyville, 698 N.E.2d 1255 (Ind. Ct. App.1998) (good faith standard for variations in requirements contracts)
- Westmoreland v. Colo. Westmoreland, 667 F. Supp. 636 (N.D. Ind.1987) (variance from estimated requirements evaluated for reasonableness)
- Orange & Rockland Utils., Inc. v. Amerada Hess Corp., 59 A.D.2d 110 (N.Y. App. Div.1977) (no rigid definition for 'unreasonably disproportionate' quantity)
- Lenape Res. Corp. v. Tenn. Gas Pipeline Co., 925 S.W.2d 565 (Tex.1996) (reasonableness of demand fluctuations in contract performance)
- Eden United, Inc. v. Short, 573 N.E.2d 920 (Ind.Ct.App.1991) (anticipatory repudiation requires clear intent not to perform under contract interpretation)