Jon-T Chemicals, Inc. v. Freeport Chemical Co.

Decision Date20 May 1983
Docket NumberNo. 81-2412,JON-T,81-2412
Citation704 F.2d 1412
Parties36 UCC Rep.Serv. 154 CHEMICALS, INC., Plaintiff-Appellant, v. FREEPORT CHEMICAL COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Brantly Harris, Houston, Tex., for plaintiff-appellant.

Lawrence L. Bellatti, Houston, Tex., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before BROWN, GOLDBERG and HIGGINBOTHAM, Circuit Judges.

PER CURIAM:

This diversity case arises from a suit brought by Jon-T Chemicals, Inc. (Jon-T) against Freeport Chemical Company (Freeport). The suit is based upon Freeport's alleged breach of a sales agreement. Trial was before a jury which returned a verdict in favor of Freeport. In this appeal Jon-T On February 28, 1978, Jon-T and Freeport entered into a written contract with a two years' term whereby Jon-T agreed to buy (i) not less than 10,000 nor more than 12,000 short tons of phosphoric acid from Freeport during the first year of the contract. The first year of the contract ran from July 1, 1978 through June 30, 1979. The contract also provided that Jon-T was to buy not less than 12,000 nor more than 14,000 short tons of phosphoric acid in the second year of the contract. The second year of the contract was to run from July 1, 1979 through June 30, 1980.

complains of the district court's (i) instructions to the jury, (ii) evidentiary ruling which disallowed admission of a transcript of a taped telephone conversation between officials of Jon-T and Freeport, and (iii) grant of partial summary judgment in favor of Freeport. Convinced that the jury's verdict is supported by the evidence and the district court's actions were proper, we affirm.

On January 12, 1979 R.K. Hoddinott, vice-president and sales manager for Freeport, sent two letters to Jon-T. The first letter (the transmittal letter) referred to an attached "agreement to terminate the phosacid contract on June 30, 1979." The second letter (the cancellation agreement) confirmed the agreement effective June 30, 1979, between the parties to cancel the sales contract of February 28, 1978 (the original sales agreement) in consideration of a $100,000 payment by Freeport to Jon-T. Both letters included an instruction that if Jon-T accepted and agreed with the provisions of the letters, it was to sign them and return copies to Freeport. Both the transmittal letter and the cancellation agreement were signed by John H. Thomas in behalf of Jon-T.

Orders for acid under the sales contract were ordinarily placed by Jon-T with Freeport by teletype or telex and were then transferred to Freeport's all rail shipping schedule. The all rail shipping schedule reflected orders placed by Freeport's customers, including Jon-T and the customers of Jon-T, such as Borden Smith-Douglas at Streator, Illinois. Prior to the time of the alleged breach, Jon-T had occasionally instructed Freeport to ship some of the acid sold to Jon-T under the sales contract to one of its (Jon-T) customers, Borden Smith-Douglas in Streator, Illinois.

Jon-T selected the route for the railcars to follow from Freeport's plant in Uncle Sam, Louisiana, to Streator. The cars were routed over the Illinois Central Gulf Railroad, the Burlington Northern Railroad, and the Norfolk and Western Railroads. The record reflects that the usual roundtrip transit from Uncle Sam, Louisiana to Streator, Illinois took 21-25 days.

When the Chicago area was crippled by severe snowstorms beginning in January 1979, the shipment of acid from Freeport's Uncle Sam plant to Jon-T's customer, Borden Smith-Douglas in Streator, Illinois, was severely inhibited. It is undisputed that adverse weather conditions existed during this portion of the contract period. The cold facts show that all kinds of weather records were set for Chicago's 1978-79 winter. Snowfall was abnormally high. It was bitterly cold.

Because of the obvious hazard created by the snow and ice, the Illinois Central Gulf Railroad embargoed shipments from Freeport into Chicago. Furthermore, the Interstate Commerce Commission issued an order 1 authorizing railroads which operated Jon-T's first damages claim is based upon Freeport's failure to sell and deliver the contractually specified tonnage of acid during the first year of the sales contract. 2 Its primary argument on this claim is that the district court committed error when it failed to instruct the jury that Freeport was required to tender delivery of the phosphoric acid by any commercially reasonable substitute for the agreed type of carrier. The agreed type of carrier specified in the contract was by train. The commercially reasonable substitute, Jon-T asserts, was by truck. The argument is based upon Jon-T's reading of the Texas Business and Commerce Code, Sec. 2.614(a), 3 which indicates that a seller is to make delivery of the goods by any commercially reasonable substitute when the agreed type of carrier becomes unavailable. Jon-T asserts that delivery by truck would have been a commercially reasonable substitute for delivery of the phosphoric acid since weather conditions did not permit delivery by train.

in the Chicago area to reroute their rail traffic in order to help alleviate the problem of congestion of railcars in the area. Although occasionally Jon-T requested that Freeport deliver some of the acid to Jon-T's customers by truck instead of rail, there is no evidence that Jon-T requested shipment of acid by truck to Jon-T's customer, Borden Smith-Douglas in Streator, Illinois during the period of the embargo.

Freeport defended against its acknowledged failure to sell and deliver to Jon-T 598 short tons of acid during the first year of the contract by relying on the force majeure provision in the original sales contract which excuses a failure to perform if such failure is due, among other disasters--natural or humanly wrought--to inclement weather. The force majeure clause provided:

6. CONTINGENCIES:

(a) Seller shall not be liable for any failure or delay in performance hereunder which may be due, in whole or in part, to fire, explosion, earthquake, storm, flood, drought or other adverse weather condition, accident, breakdown of machinery or facilities, strike, lockout, combination of workmen or other labor difficulties (from whatever cause arising, and whether or not the demands of the employees are reasonable or within Seller's power to grant), war, insurrection, riot, act of God or the public enemy, law, act, order, proclamation, decree, regulation, ordinance, instruction or request of Government or other public authorities, judgment or decree of a court of competent jurisdiction, delay or failure of carriers or contractors, labor shortage or inability to obtain transportation equipment, operating materials, plant equipment or materials required for maintenance or repairs, curtailment or suspension of operations to remedy or avoid an actual or alleged violation or violations of Federal, State or local pollution standards as may be in effect from time to time during the contract period, or any contingency or delay or failure or cause of any nature beyond the reasonable control of Seller, whether or not of the kind hereinabove specified and whether or not any such contingency is presently occurring or occurs in the future. (Emphasis supplied)

* * *

* * *

It is clear from the provisions of article 6 that Freeport's failure to deliver the 598 short tons of phosphoric acid to Jon-T is excused. A contract which speaks so plainly about the duties and obligations of the parties upon the happening of identified events can hardly be interpreted to mean something totally different than what is provided by its express terms.

Furthermore, the sales contract also provided that delivery was to be made by rail "unless otherwise agreed " to by both parties. This, in effect, Freeport argues, takes the transaction outside of the Texas Business and Commerce Code. We agree with Freeport that the parties' agreement Section 1.102(c) of the Code states the general rule that the provisions of the Code may be altered by separate agreement of the parties and that matters relating to contract performance may be determined by agreement. It is thus elementary that the Code's provisions are to be given controlling weight only when there is no agreement between the parties or when the agreement is so ambiguous it can speak with no authoritative force on the transaction. However, when the parties have contracted and negotiated a specific agreement, the Code's provisions do not control. A leading treatise in the commercial area states that "[n]early all the Code law on seller's delivery and tender of delivery is gap-filling law. The parties are free to agree as they wish and the Code applies only to fill gaps." See J. White and R. Summers, Uniform Commercial Code 111-12 (2d ed. 1980).

controls this transaction rather than the provisions of the Texas Business and Commerce Code.

The sales agreement between Jon-T and Freeport expressly provided that delivery of the phosphoric acid was to be made by rail unless otherwise agreed. On its face, this language expresses the intention of the parties who negotiated and entered into the contract that delivery was to be by rail unless both parties mutually agreed to make delivery by another carrier. It was thus not error for the district court to decline to instruct the jury that Freeport should have considered delivery by truck when delivery by rail became impossible.

Despite the provisions of the contract terms, Jon-T argues that since the parties did not contract to make delivery by rail only then Texas Business and Commerce Code, Sec. 2.614 imposes a duty upon the seller to tender delivery by a commercially reasonable substitute. 4 This contention might...

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