Companies’ agreement not a requirements contract, 7th Circuit holds

November 6, 2015

The 7th Circuit Court of Appeals vacated judgment in favor of a company that sued its carbon black supplier after it was unable to fulfill orders, holding the lower court erred in ruling in favor of the purchaser after finding the agreement between the companies was a requirements contract.

BRC Rubber & Plastics Inc. entered into a contract with Continental Carbon Co. for Continental to supply carbon black to the rubber products manufacturer. Continental was unable to complete orders for BRC in April 2011 based on high demand for carbon black and refused to fill subsequent orders by BRC. BRC sued, arguing that Continental had to fill every order BRC placed because it had a requirements contract with Continental. This type of contract is one in which the purchaser agrees to buy all of its needs of a specified material exclusively from the particular supplier and the supplier in turn agrees to fill all of the purchaser’s needs during the contract period.

The District Court agreed with BRC that the companies had a requirements contract, so Continental’s refusal to confirm and ship some orders was a breach and repudiation of the agreement. It awarded BRC nearly $1 million in damages.

“The parties’ agreement was not a requirements contract unless BRC was both obligated to buy some amount of carbon black from Continental and prohibited from buying carbon black from any other seller. In our view, neither condition is met, so we hold that the parties’ agreement was not a requirements contract,” Judge Ann Claire Williams wrote in vacating the lower court Thursday.

The 7th Circuit rejected BRC’s claims that certain language in the contract supported the requirements contract finding. The judges also declined to address BRC’s cross-appeal regarding the exclusion of certain testimony from the damages trial because it is premature. The District Court will need to revisit the lawsuit and make a decision that isn’t premised on the agreement being a requirements contract.

The case is BRC Rubber & Plastics Inc. v. Continental Carbon Company, 14-1416, 14-1555.


Recent Articles by Jennifer Nelson