When companies contract with one another for the sale and purchase of goods, those documents can later be used to prove liability if either party does not uphold its agreement. If the seller fails to deliver, the buyer can sue. If the buyer fails to purchase as promised, the seller can sue.
That’s what happened in the case of Peace River Seed Co-Op v. Proseeds Marketing, where the Oregon Supreme Court determined that the aggrieved seller was entitled to recover the market price – and not just the resale price – of the goods that were not purchased as promised.
Maximizing your compensation in the event of a breach of contract is something in which our Boston small business lawyers are experienced.
In the Peace River case, the primary facts were largely undisputed. The plaintiff is a Canadian firm that buys and sells grass seed for grass seed producers. The defendant is a corporation out of Oregon that purchases grass seed from a variety of sources to then resell to end users.
The two involved a broker to prepare multiple contracts for the parties throughout the life of their business relationship. The last contract required the defendant to purchase a certain amount of grass seed for a fixed price over the course of two years. Per that contract, the defendant was required to offer up shipping and delivery instructions to the seller.
However, during the course of the contract, the price of grass seed fell sharply. Eventually, the defendant refused to send the seller further shipping instructions for additional sale of the seed.
The plaintiff was left with a surplus of product that the defendant had been expected to purchase, but did not.
The plaintiff then canceled the contracts. Over the course of the next three years, the plaintiff was able to sell some of the seed that the defendant had originally ordered, though it did not sell for the fixed price agreed upon under the contract and not all of it was sold.
The two parties went to arbitration. An arbitrator sided with the plaintiff. The plaintiff then sought to enforce the award by court order, and the court granted its request, over the objection of the defendant.
The defendant appealed, and the appellate court ruled that the arbitration ruling was not binding. Then the case was remanded for trial.
In a bench trial, the court found that the defendant had breached the contract, the plaintiff was entitled to cancel the contract and also to seek damages. The trial court awarded damages to the plaintiff, and noted that the contract had stipulated a fixed price, regardless of the market price at the time of shipment.
The court noted that in this type of agreement, each party takes a risk in fixed market price agreements, and each hopes that they will gain certain benefits from this type of contract. Still, the plaintiff, the court found, was obligated to mitigate the damages and wasn’t entitled to recover more in damages than it actually incurred. Therefore, the court factored in the difference between the unpaid contract price of the product and the market price. This measure would factor in any seed that the plaintiff had resold.
The difference in some cases was pennies on the pound, but that made a big difference when talking about tens of thousands of pounds of seeds.
The trial court determined the plaintiff was only entitled to the resale price damages, less what it had already sold. The appellate court reversed, and that decision was upheld by the state supreme court.
Both buyers and sellers have several specific remedies when purchase contracts are breached. When a dispute arises, consultation with an experienced business attorney is necessary to mitigate the potential costs and/or maximize compensation for losses.
The Brown Law Firm, LLC, has offices in Belmont and Boston. For a free and confidential consultation, call 617-489-0817 or contact us online.
Peace River Seed Co-Op v. Proseeds Marketing, March 20, 2014, Oregon Supreme Court
More Blog Entries:
Massachusetts Non-Compete Agreements May Soon be Unenforceable, March 25, 2014, Boston Small Business Lawyer Blog