Contracts

Brief

Eastern Air Lines, Inc. v. Gulf Oil Corporation

Procedural History:

• Eastern is not in violation of the established contract.

Facts:

• Gulf is suggesting that Eastern violated the contract between the two parties by manipulating its requirements through “Fuel Freighting”.
• It is well known that requirements can vary from city to city depending on whether it is economically profitable to freight fuel.
• Gulf and Eastern have been dealing with each other for 30 years now.
• Liftings of fuel have been known to vary.
• All of these factors are known to oil companies, including Gulf, and are taken into account when forming their contracts.
• Evidence shows that Eastern had increased its requirements on multiple occasions with no protest from Gulf.

Issue:

• Is Eastern operating in bad faith and thus violating the contract?

Holding:

• No.

Reasoning:

• The court concludes that freighting is an established industry practice that is inherent in the nature of the business.
• There is no suggestion here that Eastern is operating at certain Gulf stations but taking no fuel at all.
• If a customers demands under a requirements contract become excessive, under U.C.C., protects the seller, and in the appropriate case, would allow him to refuse to deliver unreasonable amounts demanded but this will not eliminate the basic contract obligation.