Modern Dairy of Champaign, Inc. went into bankruptcy and the trustee brought adversary actions to recover payment for deliveries of milk that the dairy had made to two school districts, McLean and Cham-paign. The districts conceded nonpayment but sought to offset, against the payments due, damages that they claimed to have sustained when the dairy had stopped delivering milk to them. They argued that their contracts with the dairy were requirements contracts, by which they mean not only that they agreed to buy all their requirements of milk from the dairy, which is the usual meaning of the term, e.g., Canteen Corp. v. Former Foods, Inc.,
So we must consider whether the school districts obligated themselves to buy their milk requirements from the dairy, for if so that triggered the reciprocal obligation to supply those requirements, and then the dairy’s termination of deliveries was a breach of contract entitling the districts to an offset. The districts had invited bids, and the bid specifications provided that the milk would be supplied in quantities to be determined by the district’s food manager. The specifications contained an estimate of the quantities likely to be demanded. The dairy submitted bids, listing the price of its milk, and the districts accepted the bids and issued purchase orders. McLean’s order is for “milk products for the 1996/97 year as per your bid,” and Champaign’s is for milk “to be ordered throughout the 1996-97 school year ... as per ... your bid quotation.” The dairy ceased deliveries in October 1996, well short of the end of the school year (indeed quite near the beginning).
Nothing in the scanty documents that record the parties’ deal explicitly requires the school districts to take all, or indeed any, of their milk needs from the dairy. If in the course of the school year another dairy offered to supply the districts’ needs at a lower price, Modern Dairy could not point to any contractual language indicating that it would be a breach of contract for the districts to switch. So far as the contractual documents are concerned, all there is is the dairy’s agreement to sell milk to the districts at a specified price that it cannot raise during the school year: in other words, a buyer’s option. A clause requires the dairy to pick up any unused milk the day before scheduled vacation days and credit the school districts; and it would be odd, to say the least, if the dairy had agreed to do this with respect to milk supplied by other dairies; and so it could be argued that the clause assumes that the school districts were obligated to take all their requirements from Modern Dairy. But while this could be argued, it is not. The parties treat the clause as requiring Modern Dairy merely to pick up any unused milk that it had sold the districts.
The parties introduced extrinsic evidence to show that the districts were, or were not, obligated to buy all their requirements from Modern Dairy. The evidence turns out to be irrelevant. The districts put in evidence that Modern
When a contract is ambiguous, extrinsic evidence is admissible to disambiguate it; and the determination of the contract’s meaning becomes a matter for trial. E.g., Farm Credit Bank v. Whitlock,
Even in such a ease, however, if the contract is not a single document, but must be reconstructed from a series of documents, the determination of the contract’s meaning is an issue for trial. Glass v. Kemper Corp.,
Twice, though, we’ve mentioned the alternative of a buyer’s option; and it might seem that the districts should be complaining not of the breach of a requirements contract but of the dairy’s refusal to honor the option. There is language, particularly in McLean’s request for bids, suggesting that Modern Dairy committed not only to a price, but also to satisfying the school district’s school-year milk needs (for example, “The vendor is required to furnish to each location the number of milk containers requested by the Food Service Supervisor or school principal”). However, the school districts insist that the issue is whether they were obligated to buy all their milk requirements for the school year from Modern Dairy, and they assume that if the answer is “no,” they lose. They may
The judgments are reversed and the eases remanded for further proceedings consistent with this opinion.
Reversed and Remanded.
