Wagner Excello Foods, Inc. v. Fearn International, Inc.

601 N.E.2d 956 (Ill. App. 1992)

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Nature of the Case

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Facts

P and D entered into a five-year agreement wherein P agreed to manufacture various pasteurized fruit drink concentrates. D was to purchase 150,000 cases of concentrate of assorted varieties the first year, 300,000 cases the second year, and at least 450,000 cases in each of the final three years. A price was not included, but P and D would review the price per case of each product every four months. Thirty days before the end of each four-month period, P was required to notify D of, and substantiate, any proposed price changes for the upcoming period. If D failed to object, the new price would go into effect. If D objected, P and D would seek to 'mutually agree' on the price change. If they were unable to agree, the agreement terminated 30 days after the end of the four-month period. At the end of five years, the agreement would automatically extend on a year-to-year basis until one party terminated through written notice between 120 and 90 days before the expiration of the agreement or its extension. P spent $900,286 to be able to perform under the contract. D purchased 19.2%, 12%, and 8.9% of the required amounts in years one thru three. At the end of the third-year P and D executed a revised agreement. It provided that orange juice prices would be determined by the future prices as published by the Wall Street Journal on certain specified dates and that the agreement would expire on December 31, 1988, if notice of termination was given by November 1, 1988. If notice of termination was given after November 1, 1988, the agreement would expire 60 days after either party notified the other of termination. In the ten months, D purchased 7.1% of the required amount of cases. On November 16, 1988, D notified P of its intent to terminate their relationship effective at the end of the year. D did not purchase any juice for the fifth year of the initial agreement. P sued D. In response to the breach of contract claim D claimed that (1) the initial agreement between the parties was merely an agreement to agree as there was no fixed price and the agreement would terminate in the absence of an agreement on price by the parties; (2) the revised agreement constituted a novation of the original agreement; and (3) the plaintiff waived its right to enforce the minimum quantity terms of the agreement. In response to P's promissory estoppel claim, D contended that P had waived its claim or that the revised agreement's novation of the initial agreement barred recovery. The judge dismissed the claims. The judge ruled that it was unreasonable for P to expend almost a million dollars in reliance on such short-term contracts and that the minimum quantity guarantees had been waived by the revised agreement. P was allowed leave to amend to seek damages for sales after the revised agreement. On that breach of contract claim, the judge ruled the quantities did not survive the revised agreement. P appealed.