772 F.2d 906 (6th Cir. 1985), 83-5730, Godchaux-Henderson Sugar Co., Inc. v. Dr. Pepper-Pepsi Cola Bottling Co. of Dyersburg, Inc.

Docket Nº:83-5730
Citation:772 F.2d 906
Case Date:August 29, 1985
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 906

772 F.2d 906 (6th Cir. 1985)




No. 83-5730

United States Court of Appeals, Sixth Circuit

August 29, 1985

Editorial Note:

This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA6 Rule 28 and FI CTA6 IOP 206 regarding use of unpublished opinions)



On Appeal from the United States District Court for the Western District of Tennessee

Before: ENGEL and MERRITT, Circuit Judges; and SPIEGEL, [*] District Judge.

ENGEL, Circuit Judge.

Few events in American business life are so likely to make enemies of erstwhile business friends and colleagues as sudden and unexpected changes in market conditions. The appeal in this Tennessee diversity case involves, as the district judge expressed it, 'an honest to goodness contract dispute between obviously excellent businessmen.'

The dispute concerns two contracts for the purchase of sugar by Dr. Pepper-Pepsi Cola Bottling Company of Dyersburg, Inc. (Dr. Pepper), as the purchaser, and Godchaux-Henderson Sugar Co., Inc. (Godchaux), as supplier of the sugar.

Dr. Pepper belongs to a cooperative organization of bottling companies known as Miss-Ark-Tenn (the Co-op), which performs various services for its member bottlers, including negotiating sugar purchases. In 1974 or 1975, the Co-op and its individual member bottlers began purchasing sugar from Godchaux.

Customarily, Godchaux's broker would contact the Co-op's general manager with an offer to sell sugar at a specified price. After deciding whether to buy for the Co-op at the offering price, the general manager would contact the member bottlers to determine which of them wanted to purchase sugar at the offering price for their individual needs. The general manager then would inform Godchanux's broker which bottlers had agreed to purchase. Godchaux would send each purchaser a written contract setting forth the agreed price, the contract period, and a specific quantity of sugar to be purchased. The purchasers usually would sign the written contract and return a copy to Godchaux; however, even when the purchasers failed to sign and return the contract, both parties would perform their obligations under the agreement.

Although the written contracts often covered more than one quarter of a year, the prices usually were set by quarters. Therefore, contracts covering more than one quarter often contained more than one price term. The quantity terms listed in the contracts were determined unilaterally by Godchaux based upon the amount of sugar purchased by the bottler during the same quarter of the preceeding year. Although the bottlers knew how these quantity terms were calculated, neither they nor Godchaux paid much attention to the listed amounts in actual practice. 1 For example, from the fourth quarter of 1978 through the second quarter of 1980, Dr. Pepper three times purchased less and four times purchased more than the contract amount for the particular quarter. 2 The bottlers would order sugar from Godchaux against their contracts as needed, usually over the telephone.

All went well until the autumn of 1980. At a meeting in October 1980, representatives of Godchaux told members of the Co-op that they expected sugar prices to rise sharply soon and suggested that the members 'book' their sugar needs for the first and second quarters of 1981 at then existing prices. After the meeting, the Co-op decided to book one-half of its sugar requirements with Godchaux for the first quarter of 1981. Don Adams, the general manager of the Co-op, contacted W. E. Burks, president of Dr. Pepper, and Burks also agreed to book one-half of Dr. Pepper's first quarter needs with Godchaux at that time. Burks later received a written contract numbered 1598, which he signed and returned to Godchaux. The contract price was $48.50 per hundredweight (cwt.), and because to a clerical error the quantity listed was 1750 cwt. although it should have been 750 cwt. 3

Approximately two weeks later, Adams notified Burks that the Co-op had decided to book at that time the remainder of its first quarter needs at $45.80 per cwt. and all of its second quarter needs at $46.65 per cwt. Burks agreed to have Dr. Pepper's needs booked the same way. This agreement was memorialized in a written contract numbered 1634, which Godchaux sent to Dr. Pepper. The quantities listed were 700 cwt. for the first quarter and 2000 cwt. for the second quarter. No one at Dr. Pepper signed or returned a copy of this contract to Godchaux. 4

Dr. Pepper subsequently refused to purchase any sugar from Godchaux during the first two quarters of 1981. Instead, it used surplus sugar that it had in inventory during the first quarter and purchased 1400 cwt. from a different supplier during the second quarter.

Godchaux brought a diversity action in the United States District Court for the Western District of Tennessee seeking damages for the breach of both contracts. Following trial, the district judge entered judgment for Godchaux, reformed the quantity term of contract No. 1598 to reflect the correct amount, and awarded damages for the full quantities in both contracts and attorney fees as provided in the contracts.

Dr. Pepper appeals.

While we generally agree with the findings of fact and conclusions of law of the district judge, we are bound, from an examination of the record, to conclude that his finding that the agreements in question were not requirements or needs contracts are...

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