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United States District Court for the Southern District of Florida - 415 F. Supp. 429
tl;dr:
Plaintiff contracted to supply fuel to Defendant. Oil prices went up significantly, but Defendant continued to pay the old price under the contract. Plaintiff accused Defendant of fuel freighting and breaching the duty of good faith.Video Summary
Case Summary
In Eastern Air Lines v. Gulf Oil Corp. (1975), an airline sued an oil company for breach of contract regarding jet fuel prices. The airline claimed that the oil company threatened to stop supplying fuel unless the airline paid a higher price than agreed upon in their contract. The oil company argued that the contract was not binding, lacked mutuality, and was not feasible due to government-imposed price controls and an oil embargo.
The court granted a preliminary injunction and proceeded to trial. The court ruled in favor of the airline, finding the contract valid, enforceable, and not impractical. The contract obligated the oil company to supply all the jet fuel needed at specific locations at a price determined by an index reflecting crude oil market value. The court found the contract contained mutual obligations and risks and had a clear pricing method.
The court rejected the oil company's claim that the contract was impractical under the Uniform Commercial Code (UCC) because the oil company didn't demonstrate excessive burden or injustice due to unforeseen circumstances. The court held that the oil company assumed the risk of price fluctuations and supply disruptions with a fixed-price, long-term contract, and that government price controls and the oil embargo were foreseeable.
This case demonstrates how courts apply state law and the UCC to interpret contracts considering implied obligations and external factors, balancing justice and fairness while respecting party autonomy and discretion. It also emphasizes the importance of clear communication in contract drafting and dispute avoidance.
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The case involves a dispute between Eastern Air Lines and Gulf Oil Corporation over a contract for the sale and purchase of aviation fuel. Gulf threatened to cut off Eastern's supply of jet fuel if Eastern did not agree to a price increase. Eastern filed a complaint alleging breach of contract and requested preliminary and permanent mandatory injunctions. The court found that the contract is valid and enforceable, and Eastern's performance did not breach it. Gulf's commercial impracticability defenses are procedurally inapplicable as Gulf did not give Eastern the notice mandated by the section. The doctrine of commercial impracticability has its origins in the common law doctrine of frustration or impossibility, and recent American cases strictly construe the doctrine.
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