Wickham &
Burton Coal Co. v. Farmers' Lumber Co.
179 N.W. 417 (1920)
Salinger, J.
I. The counterclaim alleges that
about August 18, 1916, defendant, through an agent, entered into an oral
agreement “whereby plaintiff agreed to furnish and to deliver to defendant
orders given them” for carload shipments of coal from defendant f. o. b. mines,
“to be shipped to defendant at such railroad yard stations as defendant might
direct, at the price of $1.50 a ton on all orders up to September 1, 1916, and
$1.65 a ton on all orders from then to April 1, 1917. ”It is further alleged that “said coal
ordered would be and consist” of what was known as plaintiff's Paradise 6 lump,
6x3 egg, or 3 x2 nut coal. It is next alleged that defendant has for several
years last past been engaged in owning and operating what is commonly known as
a line of lumber yards, located at different railroad station points tributary
to Ft. Dodge, where defendant has its principal place of business; that at
these several lumber yards, among other merchandise and commodities, the
defendant handles coal in carload lots, with purpose of selling the same at
retail to its patrons. Then comes an allegation that the agent made oral
agreement “that plaintiff would furnish unto defendant coal in carload lots,
that defendant would want to purchase from plaintiff” on stated terms, with
character of the coal described, and that the oral contract was confirmed by
the letter Exhibit 1. It is of date August 21, 1916, and recites that plaintiff
is in receipt of a letter from their agent--
“asking us to name you a price
[repeating the price and coal description found in the counterclaim]. Although
this is a very low price, our agent, Mr. Spalding, has recommended that we
quote you this price, and we hereby confirm it. Any orders received between now
and September 1st are to be shipped at $1.50. We would like to have a letter
from you accepting these prices, and if this is satisfactory will consider same
as a contract.”
On August 26, 1916, the defendant
responded:
“We have your favor of the 21st
accepting our order for coal for shipment to March 31, 1917.”
The basis of the counterclaim, so far
as damages are concerned, is the allegation that a stated amount of coal had to
be purchased by defendant in the open market at a greater than the contract
price, and that therefore there is due the defendant from the plaintiff the sum
of $3,090.
The demurrer asserts that the alleged
contract is void because there is no consideration between the parties, because
it appears affirmatively that the offer was simply an offer on part of
plaintiff, which might be accepted by giving an order until such time as it was
actually withdrawn or expired by limitation, each order and acceptance of a
carload lot constituting a separate and distinct contract, and void because the
agreement could not be enforced by the plaintiff on any certain or specified
amount of tonnage, or for the payment of any specified tonnage.
II. The demurrer makes, in effect,
three assertions: (a) That the arrangement between the parties is void for
uncertainty; (b) that it lacks consideration; (c) that it lacks mutuality of
obligation. We have given the argument and the citations on the first two
propositions full consideration. But we conclude these first two are of no
importance if mutuality is wanting.
. . . [W]hile a writing may be so
uncertain as not to be enforceable, a perfectly definite writing may still be
unenforceable because there is no mutuality of obligation.
And the asserted lack of
consideration is bottomed on the claim that mutuality is lacking. Appellant
does not deny that a promise may be a consideration for a promise. Its position
is that this is so only of an enforceable promise. That is the law. If, from lack of mutuality, the promise is not
binding, it cannot form a consideration. . . .
The question of first importance,
then, is whether there is a lack of mutuality. In the last analysis the
counterclaim is based on the allegation that plaintiff undertook to furnish defendant
such described coal “as defendant would want to purchase from plaintiff.” The defendant never “accepted.” Indeed, it is its position that it gave
orders, and that plaintiff did the accepting. But concede, for argument's sake,
that defendant did accept. What was the
acceptance? At the utmost, it was a
consent that plaintiff might ship it such coal as defendant “would want to
purchase from plaintiff.” What
obligation did this fasten upon defendant? It did not bind itself to buy all it
could sell. It did not bind itself to buy of plaintiff only. It merely “agreed” to buy what it pleased. It may have been ascertainable how much it
would need to buy of some one. But there was no undertaking to buy that much,
or, indeed, any specified amount of coal of plaintiff.
It is
instructive to apply the bargain theory of consideration here—even though the
court does not explicitly do so. Assume that the court’s description of
parties’ bargain is correct, that Wickham & Burton Coal promised to supply
coal the specified prices, and that Farmers’ Lumber promised to buy “what it
pleased.”
Under the bargain theory, Farmers’
Lumber’s promise to buy what it pleased is consideration for Wickham &
Burton Coal promise to sell at the specified price only if Wickham & Burton
Coal made its promise in order to get Farmers’ Lumber’s promise in exchange.
The situation is well stated in some
of the cases. In Crane v. Crane, 105 Fed. at 872, 45 C. C. A. 96, 99, it is put
thus:
“Should the contract under discussion
be upheld, the plaintiffs in error would be held to occupy this advantageous
situation: If the prices of dock oak lumber rose, they would by that much
increase their ratio of profits, and probably come into a situation to outbid
competitors, and increase also the quantum of orders; if, on the other hand,
prices fell below the range of profits, the orders could be wholly
discontinued. On the contrary, the situation of the defendant in error would be
this: Should prices fall, it could not compel the plaintiffs in error to give
further orders; but, should prices rise, the orders sent in would be
compulsory, and the loss measured both by the increase of the ratio of profits
and the probable increase of the quantum of orders.”
In American Cotton Oil Co. v. Kirk,
68 Fed. 793, 15 C. C. A. 540, 542, it is said:
“If the market price of oil should
fall below the contract price, then, according to their contention as to the
terms of the contract, the plaintiffs could purchase their supply of oil
elsewhere and at the lower price, resorting to the contract when, and only
when, the price stated was lower than the market price, and this without respect
to time. Such a contract is one-sided and without mutuality.”
The “contract” on part of appellee is
to buy if it pleased, when it pleased, to buy if it thought it advantageous, to
buy much, little, or not at all, as it thought best.
A contract of sale is mutual where it
contains an agreement to sell on the one side, and an agreement to purchase on
the other. But it is not mutual where there is an obligation to sell, but no
obligation to purchase, or an obligation to purchase, but no obligation to sell.
13 Corpus Juris, 339.
In this case,
there is an “obligation to sell” on the part of Wickham & Burton Coal,
but, on the court’s view, no “obligation
to purchase” on the part of Framers’ Lumber.
There is no mutuality or
enforceability where the agreement is that, on 60 days' notice, either party
might cancel same “for good cause.” Cummer v. Butts, 40 Mich. 322, 29 Am. Rep.
530.
Under Linder v. Mid-Continent, the mere
existence of the cancellation clause described above
(a)
would indicate a lack of consideration.
(b)
would not indicate a lack of consideration.
A provision that it is understood the
purchase of apples commences “as soon as it is deemed advisable by both parties
to this contract, when apples can be purchased in sufficient quantities to
insure getting a carload in a reasonable length of time, not to exceed three
days on fall apples,” lacks mutuality. This because no party is compelled to
deem anything advisable, and the courts cannot deem it for them. Woolsey v.
Ryan, 59 Kan. 601, 54 Pac. 664.There is such uncertainty as to destroy
mutuality where the obligation to take is conditioned upon being “as long as we
can make it pay.” Davie v. Lumbermen's
Co., 93 Mich. 491, 53 N. W. 625, 24 L. R. A. 357. It is said that, under such an agreement,
plaintiffs must be presumed to be the sole judges of whether it would or would
not pay them to do the work and of how long they should continue it, and that
the defendant has no voice on whether or not plaintiffs could make it pay, and
no right to say in what manner they should conduct the work in order to make it
pay.
[The decision continues with a number
of similar examples.]
. . .
The demurrer should have been
sustained.
Reversed.