Baber v. Lay

• Citation: 305 S.W.2d 912
• Parties: G. H. BABER et al., Appellants, v. John LAY et al., Appellees.
• Decision Date: 11 October 1957
• Court: United States State Supreme Court (Kentucky)

Page 912

305 S.W.2d 912

G. H. BABER et al., Appellants, v. John LAY et al., Appellees.

Court of Appeals of Kentucky.

Oct. 11, 1957.

Joe Hobson, Prestonsburg, Hobson & Scott, Pikeville, for appellants.

Burke & Burke, Pikeville, for appellees.

STEWART, Judge.

In this case the single issue raised is whether a certain contract was lacking in mutuality and, if so, whether the contract was terminable at the will of either of the parties.

The uncontradicted facts are that on March 29, 1949, appellants, partners d/b/a 'Jacks Creek Mining Company', and appellees, partners d/b/a 'Virgie Coal Company', entered into a written contract whereby, briefly stated, appellees promised 'to sell and deliver all coal' to appellants which was mined from a particular mine in Pike County. The latter agreed to accept 'all coal which their equipment will permit them to process at the best advantage * * * and which market conditions will permit them to handle.' The price to be paid was $4.50 per ton, subject to revision by mutual consent. Appellants further agreed to attempt to find a market for the coal they were unable to handle in order that appellees might maintain a weekly operation of five days, with the understanding that appellees were free to sell their coal to others only if appellants were unsuccessful in their effort to find a buyer and could not accept the coal themselves. The agreement further gave appellants the right to reject any coal or cancel the agreement if in their opinion the coal was not clean and merchantable. The last provision of the contract provided two methods by which appellees could cancel upon the payment of a $5 consideration, but unless cancellation was made the agreement was to remain in force for a term of one year.

The parties hereto operated under the agreement until February 11, 1950, after which time appellees refused to deliver any more of their coal. Appellants brought this action to recover $3633.53, the amount of profits they alleged would have been made by them had the coal been delivered as promised under the contract. Subsequently appellants amended their complaint, requesting an accounting in order to establish the exact amount of the damages they claimed. The case was referred to a special commissioner who ruled in his report that the contract was unenforcible on the theory that it was unilateral and therefore lacked mutuality. Exceptions were duly entered to the report when filed, which were overruled, and the complaint was ordered dismissed.

The Jacks Creek Mining Company has appealed from this finding of lack of mutuality of obligation and makes the following argument: (1) The reservation of the right of cancellation is the only aspect of the contract which could make it unilateral; (2) the retention of the right to cancel did not make the contract unilateral because appellants reserved this right only if the coal was not clean or merchantable; and (3) even if the contract is void, the performance of its conditions by appellees has made it binding upon the parties.

The finding of the commissioner (and the circuit court) that the contract constituted nothing more than a continuing offer to sell which could be revoked at any time we believe to be correct. It is a well-settled rule that mutuality is an essential element of an executory contract, and where one party is not bound by the terms of a contract, neither party is bound. Venters v. Stewart, Ky., 261 S.W.2d 444; Consolidated Realty Co. v. Richmond Hotel & Bldg. Co., 253 Ky. 463, 69 S.W.2d 985.

An analysis of the language of the contract in the instant case leads to the inescapable conclusion that appellees could at their whim cease production without incurring any liability to appellants, because they failed to commit themselves to mine, in the first instance, or to continue to...