Thursday, December 26, 2013

Sunflower Electric Cooperative, Inc. v. Tomlinson Oil Company, Inc. case brief

Sunflower Electric Cooperative, Inc. v. Tomlinson Oil Company, Inc. case brief summary
7 Kan. App. 2d 131 (1981)

CASE SYNOPSIS
Appellant public utility challenged a decision from a Kansas trial court, which relieved appellee oil company of liability for breach of contract for the sale and purchase of natural gas, under the doctrine of impossibility of performance.

CASE FACTS
The public utility had contract to purchase gas from the oil company from production under certain leased gas fields. The oil company breached the contract on the first day was never able to deliver the minimum amount of gas called for by the contract thereafter, and defended its breach under the doctrine of impossibility of performance because the gas field was exhausted.

DISCUSSION

  • On appeal, the court reversed the order in favor of the oil company and held that the oil company assumed the risk that reserves might be insufficient as demonstrated by: 
  • (1) the language of the contract making purchase and availability of gas to the public utility the essence of the agreement, 
  • (2) the oil company's foreseeability that the reserves might not be sufficient, and 
  • (3) the oil company's expertise and superior knowledge as to the possibility of inadequate reserves. 
  • If the producer wished to be relieved of liability where its reserves were unknown, appropriate language could be inserted in the contract, but in this case, it was not. 
  • Damages were assessed in the amount of the ascertainable increased costs to the public utility.

CONCLUSION
The court reversed the judgment in favor of the oil company and remanded with directions to enter judgment for the public utility in an amount determined by the court.


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