## Facts

- Royster, a fertilizer manufacturer, completed a facility that created excess phosphate capacity and negotiated a multi-year phosphate supply arrangement with Columbia, a nitrogen producer that also made some mixed fertilizer.
- After negotiations, the parties executed a written contract under which Royster agreed to sell Columbia a minimum of 31,000 tons of phosphate per year for three years at stated prices subject to an escalation clause tied to production costs.
- The contract included a merger-type clause stating that verbal understandings would not be recognized and that the writing represented the final agreement.
- Shortly after execution, phosphate market prices fell sharply, and Columbia ordered substantially less than the contract minimum, claiming it could not resell competitively at contract prices.
- Royster temporarily reduced the price for certain shipments for three months in 1967 at Columbia’s request, while stating later shipments would revert to the contract price.
- Royster sold unpurchased phosphate on the open market at lower prices and sued Columbia for breach of the minimum-quantity obligations, obtaining a $750,000 judgment.
- Columbia defended on UCC contract-interpretation grounds, offering evidence of industry trade usage and the parties’ prior course of dealing to show that stated quantities and prices were treated as flexible in the trade.
- Columbia also asserted an antitrust defense and counterclaim based on alleged reciprocal dealing, advancing both coercive and non-coercive reciprocity theories.

## Issues

1. Whether the UCC required admission of evidence of trade usage and course of dealing to explain or supplement the contract’s price and minimum-quantity terms, notwithstanding the writing and merger-type clause.
2. Whether the district court properly (a) submitted coercive reciprocity to the jury and (b) refused to submit non-coercive reciprocity as an antitrust theory.

## Decision

- The court of appeals vacated the contract judgment and remanded for a new trial on the contractual issues because the district court improperly excluded proffered evidence of trade usage and course of dealing.
- The court held that the UCC allows such evidence to explain or supplement a written agreement even if the writing appears complete and unambiguous, unless the parties clearly negate it.
- The court rejected the view that the merger-type clause, as written, barred consideration of trade usage and prior dealings.
- The court affirmed the district court’s handling of the antitrust issues, including submission of coercive reciprocity and refusal to submit non-coercive reciprocity, and affirmed the verdict for Royster on the antitrust counterclaim.

## Legal Principles

- Under UCC § 2-202 and related provisions, course of dealing and usage of trade are admissible to explain or supplement a written sales contract; admissibility is not limited to resolving facial ambiguity.
- Standard merger or “no verbal understandings” language does not, by itself, exclude evidence of trade usage or course of dealing; exclusion requires a clear negation of those interpretive sources.
- UCC interpretation seeks reasonable consistency between express terms and commercial context; evidence should be evaluated for whether it explains or supplements the writing rather than being excluded as contradicting it.
- Antitrust liability for reciprocity generally requires more than voluntary reciprocal purchasing; absent coercion or a legally sufficient theory supported by the record, non-coercive reciprocity need not be submitted to the jury.

## Conclusion

The court required a retrial on the contract claim because UCC-based evidence of trade usage and prior dealings should have been presented to the jury to interpret the contract’s quantity and price obligations, while leaving intact the rejection of Columbia’s antitrust theories and the district court’s antitrust rulings.


Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3 (4th Cir. 1971)