Columbia Nitrogen v. Royster Co.

451 F.2d 3 (4th Cir. 1971)

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Nature of the Case

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Facts

P manufactures and markets mixed fertilizers. D is primarily a producer of nitrogen, although it manufactures some mixed fertilizer. P had been a major purchaser of D's products, but D had never been a significant customer of Royster. In the fall of 1966, P constructed a facility which enabled it to produce more phosphate than it needed in its own operations. Royster (P) contracted with Columbia Nitrogen (D) to sell a minimum of 31,000 tons of phosphate per year for three years for a specific price per ton that was adjustable based on the cost of production. There was an option to extend the term of the contract. During the contract, phosphate prices fell precipitously, and D purchased less than one-tenth of the contract minimum because it was unable to resell at a competitive price. P did lower its prices on shipments for three months in 1967 but specified that subsequent shipments would be at the original price. Even with these concessions, P’s price was still substantially above the market. D did offer to honor the contract at current market prices and to resell it without a brokerage fee. P insisted on the contract price. When D refused shipments, P took the product and sold it for D’s account at a price substantially below the current price. P then sued D. At trial, D offered evidence on usage of trade and course of dealing between the parties; contract prices were merely quotations and the actual sales prices are frequently adjusted to reflect actual market conditions. D offered evidence of the actual prior dealings with P that showed wide variations in its contracts with P. The court refused to admit such evidence; it was incompetent to vary the plain, unequivocal terms of the written contract. Judgment was given to P for $750,000. D appealed; the excluded evidence was admissible under UCC Section 2-202.