Brief Fact Summary. Plaintiff Oglebay Norton Co. and Defendant Armco, Inc., entered into a long-term contract that required Defendant to pay for shipping via a primary and secondary pricing mechanism. After the parties were unable to agree on a shipping rate for the year 1986, Plaintiff filed a declaratory judgment action seeking to have the Court fix the shipping rate for the year.
Synopsis of Rule of Law. Since the parties intended to be bound to the contract, the trial court had the authority to set a shipping rate and require the parties to negotiate and mediate with each shipping season.
In Ohio, such agreements to agree are enforceable when the parties have manifested an intention to be bound by their terms and when these intentions are sufficiently definite to be specifically enforced.View Full Point of Law
Issue. • Did the parties intend to be bound by the contract despite the failure of the primary and secondary pricing mechanisms?
• If the parties intended to be bound, may the trial court set $6.25 per gross ton as a reasonable rate for the 1986 shipping season?
• May the trial court order the parties to use a mediator if they are unable to agree on a shipping rate for each annual shipping season?
Held. • Yes. This is a question of fact for the trial court to decide. The trial court recognized that the parties had a long-standing, close business relationship as evidenced by joint ventures, interlocking directorates, and Defendant’s ownership of Plaintiff’s stock. Since the trial court determined that the parties intended to be bound despite the failure of the primary and secondary pricing mechanisms, the Ohio State Supreme Court will not disturb the findings.
• Yes. Under the Uniform Commercial Code § 2-305(1), when the parties intend to be bound, as here, and the price has not been determined, the price is a reasonable price at the time of delivery. Here, the Court looked to the parties’ extensive course of dealing and comparisons of market prices to determine a reasonable rate.
• Yes. A trial court may order specific performance if the parties to a contract intend to be bound and a determination of long-term damages would be too speculative. Here, the trial court is merely facilitating the most practical manner to determine a rate for shipping each year.
Discussion. Where the parties to a contract intend to be bound (such an intent being a question of fact for the trial court), the trial court may set a reasonable price and order the parties to mediate, if necessary, to establish future prices.