McMichael v. Price

McMichael (defendant) had sand mining operation in Tulsa, Oklahoma.

Mr. Price (plaintiff) bought sand locally in Tulsa & shipped it across the United States.

The 2 parties entered a requirements contract whereby McMichael would provide as much sand as Price required.

McMichael (supplier) agreed to supply all the sand that Price could sell over the next 10 years. Price would pay 60% of the market price at the sand's destination.

After 5 months, McMichael refused to supply sands.

Price sued McMichael for breach of contract.

McMichael answered that the contract lacked Mutuality of Obligation. McMichael lost.

Is a contract requiring a seller (McMichael) to provide as many goods as the buyer (Price) requires void for lack of Mutuality of Obligation?

McMichael argued that the contract contained an illusory promise.

No. There is Mutuality of Obligation if the contract binds each party, making each party's performance mandatory, not discretionary.

Price was obligated to only purchase sand from McMichael under the terms and conditions of the contract. Thus, Price couldn't have bought sand from other parties without breaching the contract.