Feld v. Levy

• Henry S. Levy & Sons, Inc. = "Levy" = defendant = wholesale bread-baking business = seller
• Mr. Feld = "Feld" = plaintiff = buyer of bread crumbs

The 2 parties entered into a contract; Feld would purchase all crumbs Levy produced.

Each party could cancel the contract by giving a notice 6 months in advance.

After 11 months into the contract, Levy (seller) learned that crumb production was turning up a viable profit.

Consequently, Levy stopped production. Feld was left hanging.

Levy announced that he would resume crumb production in exchange for a higher price. In response, Feld rejected the price bump.

Feld (crumbs buyer) sued Levy (seller) for breach of contract.

Does a seller under an output contract have an unconditional obligation to continue production of its goods for the term of the contract?

What happens if a supplier decides to stop producing the materials contracted for?

Levy argued that the contract didn't requires him to produce crumbs--only to sell to Feld any crumbs produced.

No. A seller under an output contract can stop production of its goods without facing liability for breach of contract if it does so in good faith.

Affirmed the denial of summary judgment from both parties

If the seller's continued production of a product could endanger the existence of its business as a whole, then the seller is excused performance.

Duty of good faith = Section 2-306 of the Uniform Commercial Code

• Contracts_Ayres/9th_ed._Outline#C._Duty_of_Good_Faith