Roth v. Sharon

• Roth Steel Products = "Roth" = plaintiff = manufacturer of steel tubing
• Sharon Steel Corp. = "Sharon" = steel producer
• In 1972, Roth contracted to buy steel from Sharon
• Prices of steel were high in 1972
• Sharon offered a discount to Roth for all of 1973
• In 1973, steel prices soared on the market
  • In March 1973, Sharon notified Roth of a price increase
• Roth objected that the price increase would contravene the contract
• After negotiations, Sharon relented to resume the discounted price until June 30th of 1973 only whereupon the price would increase.
  • Roth reluctantly agreed.
• In 1974, the parties formed a new contract on a per-order basis.
• With the new 1974 contract in effect, Sharon delivered the steel orders late with concomitant prices increases
• Roth learned, in 1974, that Sharon was contributing to the hike in steel prices on the market

• Roth sued Sharon in federal district court for contract breach.
• Roth won $550,000 in damages

Does a party attempting to enforce a contract modification have to show that the other party was actually motivated by a legitimate commercial reason to seek modification?

Yes. To enforce a contract modification, party must show that its behavior was consistent with reasonable commercial standards of fair dealing & that it was actually motivated by a legitimate commercial reason.

Sharon breached the 1972 contract whereby it sought to increase prices in 1973.

With regards to the 1974 individual contracts between the 2 parties, additional factual findings are needed.

Affirmed the 1972 contract in favor of Roth while vacating the 1974 contract

Circuit Judge Celebrezze: Article 2 of the Uniform Commercial Code allows parties to modify a contract if they act in good faith.

The court's opinion is that Sharon's attempt to increase prices in 1973 was carried out in bad faith.