McMichael v. Price

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Citation.2010 U.S. App.

Brief Fact Summary.

The Defendant, McMichael (Defendant) and the Plaintiff, Price (Plaintiff), signed an agreement for the sale of all the sand Plaintiff can sell in exchange for a discount from the market price for ten years. Defendant refused to buy and Plaintiff sues for breach.

Synopsis of Rule of Law.

Where the consideration on one side is an offer or an agreement to sell and on the other side an offer or agreement to buy, the obligation of the parties to sell and buy must be mutual.

Facts.

Plaintiff, who was beginning a new sand selling business, but had prior experience, entered into a contract to sell sand to the Defendant. Defendant promised to purchase all sand that the Plaintiff could sell, provided it was good quality, at a reduced price from market value. The agreement was to last for a period of ten years. Defendant ceased purchasing sand before the end of the term of ten years.

Issue.

Is there mutuality of obligation where the obligations to buy and sell differ?

Held.

Yes. Affirmed. Plaintiff was bound by a solemn covenant of the contract to purchase all the sand he was able to sell from the Defendant and a breach of this obligation could have resulted in a claim for damages. This differs from a situation where the consideration on one side is an offer or an agreement to sell and on the other side an offer or agreement to buy and the obligation of the parties to sell and buy must be mutual. Here, the Defendant is bound to purchase all the sand the Plaintiff can sell which results in a mutual obligation by both parties.

Discussion.

The court sees the intent of the parties to enter into a mutually binding contract. There was no “free way out” by either party that would result in the contract being unenforceable.