Nature of the Case
To access this section all you need to do is click here and register.
Facts
D manufactures capacitors for electronic products. Tantalum is an elemental metal, as rare in nature as uranium, used in the manufacture of those products. In January 2001, D entered into a multi-year supply contract with P, a major supplier of tantalum powder and wire. In the years immediately preceding the contract, the tantalum market favored buyers and D purchased it from P at preferable prices without entering binding, long-term contracts. P is one of three significant producers of tantalum powder. By mid-2000, P produced approximately fifty percent of the world's total processed tantalum. All suppliers of tantalum powder sell nodular powder but only Cabot sells flake powder, which can operate at higher voltages. P holds a patent on the process to make flake powder and D uses that powder in certain high-performance products, including pacemakers and military technology. The market for tantalum has been volatile. Periods of high demand, supply shortages, inventory hoarding, and sharply rising prices have been followed by recurring episodes of reduced demand, overproduction, large customer inventories, and rapidly falling prices. By April 2000, P was supplying approximately twenty percent of D's total tantalum product requirements. The parties signed 'letters of intent' setting forth estimates of D's anticipated tantalum needs and agreed-on prices for each type of product. Sales deviated from the prices and quantities stated in the documents without protest from P. D contends that the documents were binding contracts; entitled 'letters of intent' only because they did not establish specific amounts of product that would be purchased; and were akin to 'requirements contracts.' In January 2000, the parties signed two letters of intent, one pertaining to tantalum powder and the other to tantalum wire (letters of intent). In the letter pertaining to tantalum powder, which encompassed ten different product grades, there was a 'take or pay' provision for one grade of product, C606, requiring D to take a specified amount of that product no later than eighteen months after the commencement of 'this contract' on February 1, 2000. A worldwide shortage of tantalum developed and demand for electronic products using tantalum capacitors reached unprecedented levels. D's orders increased by more than 200 percent and D announced a dramatic increase in sales over prior years. Supplies of raw tantalum were severely limited. In August 2000, P notified all of its customers that, in the future, it proposed to commit its limited production capacity to those customers who were prepared to enter into binding, long-term supply contracts. Getting to the point D claimed that P lied and tried to blackmail D by claiming all its powder product was sold unless, of course, D signed a long-term contract. D claimed that P was obligated by the letters of intent to continue selling to D particular quantities of tantalum powders and wire through January 2002, and January 2001, respectively. On November 7, 2000, they memorialized the terms of a basic agreement to a binding, five-year contract, under which D would purchase specified quantities of tantalum powder and wire at stated prices. The chief executive officer of D wrote, 'I think we have a fair agreement for both parties . . . hope you agree.' P agreed to D's demand for 'most favored customer' protection, and D also obtained a right to purchase additional tantalum products in the event that P was to expand its plant capacity. The parties agreed that the agreement would supersede all prior agreements (including the letters of intent) and released each other from all claims arising thereunder. In January 2001, they executed the contract (supply contract), effective January 1, 2001. In May 2001, the parties negotiated changes to the contract. By October 2003, AVX had purchased tantalum products worth more than $342,809,000 in 739 separate transactions under the supply contract. On July 26, 2002, D commenced an action in Federal court. AVX alleged that the 2000 letters of intent were binding contracts and that the supply contract was void because it had been executed by D under economic duress. The action was dismissed for lack of diversity jurisdiction. P commenced this action in March 2003, seeking a declaration that the supply contract was a valid and binding contract. D asserted economic duress with regard to the supply contract. P filed a motion for partial summary judgment, which was allowed. This appeal resulted.
Support@ bsmsphd.com
Casebriefs Co