Laclede v. Amoco
|Laclede v. Amoco|
|Citation||522 F.2d 33|
|Date decided||July 10, 1975|
- Leclede Gas Company = plaintiff = "Leclede" = buyer
- Amaco Oil Company = defendant = "Amoco" = seller
- In 1970, Leclede and Amoco entered into a contract in Missouri by which Amoco would supply as much propane as Leclede required.
- 3 years into the agreement, Amoco announced that they would stop service because the contract had no mutuality due to Leclede's cancellation clause. Leclede could cancel at any year-anniversary of the delivery beginning date, as long as notice of cancellation was submitted at least 30 days in advance of the cancellation date.
- Amoco (seller) had no right to withdraw except at 1-year intervals.
- The 2 parties entered into specific contracts to supply propane to 17 development sites.
Leclede filed a diversity lawsuit in federal court seeking specific performance.
District court ruled that the contract was un-enforceable due to lack of mutuality.
- Whether Laclede's right of cancellation rendered all its other promises in the agreement illusory so that there was a complete failure of consideration.
- Whether or not the contract fails for lack of "mutuality of consideration" because Laclede did not expressly bind itself to order all of its propane requirements from Amoco.
- Is the proper remedy specific performance or damage?
There is consideration and mutuality. Laclede was bound by the contract to only purchase from Amoco. Specific performance is the proper remedy.
Stated another way,
- A contract doesn't lack mutuality merely because 1 party may cancel it, if the right to cancel isn't arbitrary or un-restricted.
- Specific performance is a proper remedy for breach of a long-term supply contract if the buyer can't reasonably replace the property covered by the contract.
- Because Leclede gained a legal detriment from the agreement there is mutuality. If the cancellation clause were unrestricted (if Laclede could cancel at any time for any reason), then there would be no legal detriment and therefore no mutuality. However, Laclede could only cancel under limit circumstances and a limited timeframe so the contract can't be invalidated by the cancellation clause alone.
- The contract is a requirement contract, that is, a contract by which Amoco would supply as much propane as Leclede required. That Leclede would buy only from Amoco wasn't explicitly in the contract doesn't matter; practice dictates that Amoco would be the only supplier.
- It's too difficult to determine the amount it would take to enter into a similar contract with another supplier, so specific performance is proper.