Beech Aircraft Corporation v. Ross
| Citation | 155 F.2d 615 |
| Decision Date | 14 June 1946 |
| Docket Number | No. 3242.,3242. |
| Parties | BEECH AIRCRAFT CORPORATION v. ROSS. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
Chas. G. Yankey, of Wichita, Kan. (Harvey C. Osborne and J. G. Sears, Jr., both of Wichita, Kan., on the brief), for appellant.
Paul R. Kitch and Howard T. Fleeson, both of Wichita, Kan. (Homer V. Gooing and Wayne Coulson, both of Wichita, Kan., on the brief), for appellee.
Before PHILLIPS, BRATTON, and MURRAH, Circuit Judges.
Beech Aircraft Corporation, as the manufacturer of airplanes for the United States Army and Navy, entered into a contract with the Douglas Aircraft Corporation to build wings for its A-26 Airplane. The A-26 had never been manufactured when Beech took the contract and its design required the production of many thousands of different parts for which new "toolings" and "jigs" would have to be made. Beech entered into a sub-contract with Milburn M. Ross, doing business as Ross Engineering and Equipment Company to make the new "toolings" and "jigs," and to manufacture certain parts. The contract was evidenced by purchase order No. 1007 and No. 1066, each of which set forth the quantity and price of each unit.
The "purchase order contracts" contemplated reduction or method changes, and provided that such change in price should be subject to negotiations prior to acceptance by the sub-contractor.1 The prices stipulated in the sub-contracts were subject to revision after completion of the first one hundred units, based upon a cost analysis during the period of fabrication.2 Any change in the contracts was to be effected by mutual agreement through the medium of supplemental sub-contracts.3
In December 1943, before delivery of any units under purchase order contract No. 1007, Ross wrote Beech regarding a "revision of unit price per first one hundred units." Thereafter, the parties executed sub-contract "supplement No. 2" providing for a "tenfold" increase of the price of each unit covered by the original sub-contract, and providing further "these price increases are made due to an underestimate on the original sub-contract and are subject to final revision after completion of the first one hundred (100) units, and are retroactive over the entire sub-contract."4
Statements were rendered and settlements were made from time to time in accordance with the revised prices under the supplemental contract. Delivery of the first one hundred units under the contracts was completed in May, 1944. In late June or early July of the same year Beech made a cost analysis, based upon a time study of Ross' shop operations. As a result of this analysis Beech suggested that the unit prices be lowered, and conferences were held in an attempt to mutually agree on a new price. When the parties were unable to reach an agreement on a revision of prices Beech ceased paying Ross' invoices. It continued, however, to accept delivery of parts at the prices contained in the contracts, as supplemented, and to extend the contracts with orders for additional parts until September 1944, when it finally cancelled the contracts. Ross brought this suit on the contracts, as supplemented, to recover the unpaid balance of the alleged contract price for units manufactured and delivered to Beech in the sum of $98,865.43.
Beech's defense to the suit there, and here, is that the prices established by the contracts, as supplemented, were mere estimate, it being the plain intention of the parties to finally revise the unit prices, based upon experience gained from production and a time study of Ross' operations after the first one hundred units had been produced. Accordingly, it tendered a cost analysis of Ross' operations, based upon a time study, and argues that since the parties are unable to mutually agree upon a final revision of the prices the court should judicially determine a price, based upon a reasonable profit, to be retroactive over the entire contract.
The trial court held that by the original purchase order contracts the parties agreed in writing to negotiate price revisions only by mutual agreement; that the parties did so revise the price schedule by the execution of the supplemental contracts, and the prices thus established were binding upon the parties to the contracts until revised by mutual consent, or until the contracts were cancelled under their provisions. In so holding, the court pointed out that there was nothing in the contracts or the supplements to indicate that upon failure of the parties to negotiate new prices, resulting in a cancellation of the contracts, the court was authorized to write a contract for the parties, thereby establishing prices upon which they did not, and could not agree.
It is true that the prices stipulated in the supplemental contracts were subject to final revision, after completion of the first one hundred units, and that the finally revised prices were to be retroactive over the entire sub-contract, but the supplemental contracts provided no formula for final revision of the prices. The parties obviously intended to rely upon the provisions of Item XXV (see footnote 2), which provides for revision after completion of the first one hundred units based upon an...
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