65 Cal.App.5th 383
Cal. Ct. App.2021Background
- Paradise Ranch Mobile Home Park, rural and not connected to a public water system, relied on well water that became insufficient or potable only intermittently.
- In 2002 the park (through its manager) and RMR entered a one‑page written service contract: RMR to be the park’s primary potable water hauler at a fixed price of $110 per 3,200‑gal load and to guarantee delivery "as long as the park needs water to supplement its well water production or another supply of water becomes available."
- RMR invested in custom potable water trucks and provided regular deliveries for years; the park changed ownership in 2010 and (the trial court found) ratified/assumed the 2002 contract.
- In 2015 the park purchased its own water truck, began using it, and ceased requesting RMR deliveries; RMR sued for breach of contract.
- The trial court found breach but held the contract had no express duration term and was terminable on reasonable notice, awarding RMR only three months’ damages; RMR appealed the damages ruling.
- The Court of Appeal held the contract contained an express termination event (a requirements/exclusive‑dealing arrangement) and remanded for damages from breach to the date of trial (about four years).
Issues
| Issue | Plaintiff's Argument (RMR) | Defendant's Argument (Park) | Held |
|---|---|---|---|
| Was the contract terminable at will or did it contain an express duration/termination event? | The language and surrounding circumstances create a requirements/exclusive‑dealing contract: RMR guaranteed to supply all the park’s trucked water "as long as the park needs [truck] water," terminating only if park obtains another supply (public system or sufficient wells). | "Another supply of water" should be read literally to include water brought in by the park’s own truck (or other non‑RMR truckers), so the park could cease using RMR and the contract was effectively terminable. | The contract contains an express duration clause. It is a requirements/exclusive‑dealing contract that endures until the park obtains another supply (e.g., connection to public water or adequate well production); the park’s unilateral use of its own truck did not automatically terminate the agreement. Remand for damages from breach to trial. |
Key Cases Cited
- Consolidated Theatres, Inc. v. Theatrical Stage Employees Union, 69 Cal.2d 713 (court’s three‑step test for fixing contract duration and when to imply a term)
- Zee Medical Distributor Assn., Inc. v. Zee Medical, Inc., 80 Cal.App.4th 1 (contracts tied to events or performance can supply an express duration)
- Parsons v. Bristol Development Co., 62 Cal.2d 861 (admitting extrinsic evidence to ascertain contracting circumstances and purpose)
- Wood v. Lucy, Lady Duff‑Gordon, 118 N.E.214 (implying obligations to give business efficacy to exclusive arrangements)
- Walpole v. Prefab Mfg. Co., 103 Cal.App.2d 472 (when trial court makes no finding on undisputed evidence, appellate court may assume findings consistent with that evidence)