## Facts

- Eastern Air Lines and Gulf Oil had a long-running relationship for the supply of aviation fuel.
- On June 27, 1972, the parties executed Gulf’s standard-form aviation fuel agreement, as amended, governing Gulf’s supply of jet fuel to Eastern at specified cities and supplementing a prior contract still in effect.
- The agreement functioned as a requirements arrangement: Eastern would buy its jet-fuel requirements in specified cities from Gulf, and Gulf would supply Eastern’s reasonable, good-faith requirements.
- The contract used a price-escalation formula tied to posted crude-oil prices published in Platt’s Oilgram Service; the contract language bound the parties to the specified Platt’s entries.
- After execution, federal two-tier crude-oil price controls affected which prices were published; Platt’s continued to publish controlled “old oil” prices but not certain uncontrolled prices.
- Gulf asserted the Platt’s-based formula forced sales at a thin margin or loss because Gulf’s costs were affected by higher-priced foreign and “new” oil not captured by the formula.
- On March 8, 1974, Gulf demanded a substantial price increase and threatened to discontinue supplying Eastern within fifteen days if Eastern did not agree.
- Eastern refused and sued for breach, seeking mandatory injunctive relief requiring continued supply at contract prices; the court entered a preliminary injunction by agreement maintaining performance pending trial.
- Trial evidence indicated Gulf’s profits increased during the relevant period and that claimed cost increases were not substantiated as external, unavoidable production-cost increases.

## Issues

1. Whether the agreement was a valid requirements contract under U.C.C. § 2-306 or unenforceable for lack of mutuality.
2. Whether Gulf’s nonperformance or threatened cutoff was excused by commercial impracticability under U.C.C. § 2-615 due to oil-market changes and price-control effects on the contract’s Platt’s-based pricing mechanism.

## Decision

- The court held the agreement was an enforceable requirements contract under U.C.C. § 2-306 and not void for lack of mutuality.
- The court enforced the contract’s pricing mechanism as written, finding the Platt’s-based formula clear and unambiguous.
- The court rejected Gulf’s commercial impracticability defense under U.C.C. § 2-615.
- The court found Gulf did not prove the kind of extreme hardship required for excuse; reduced profitability, without more, did not justify nonperformance.
- Gulf’s attempt to impose a unilateral price increase or terminate supply constituted breach, and Eastern was entitled to continued performance under the contract.

## Legal Principles

- A requirements contract is enforceable where the buyer’s demands are governed by good faith and are not unreasonably disproportionate to estimates or prior requirements. (U.C.C. § 2-306.)
- Clear and unambiguous contractual price terms are enforced as written; a court will not rewrite an agreed index or formula to account for later market changes.
- Commercial impracticability requires more than increased expense or decreased profitability; the burden must be extreme such that holding the party to the bargain would be unjust. (U.C.C. § 2-615.)
- The party asserting impracticability bears the burden to show the supervening event and resulting hardship were sufficiently severe and not within the risk allocation reflected in the contract and the parties’ commercial setting.

## Conclusion

The court enforced the parties’ jet-fuel requirements contract and its Platt’s-based price formula, holding that Gulf’s threatened cutoff and demand for higher prices were not excused by commercial impracticability because Gulf showed, at most, reduced profitability rather than the extreme hardship required to avoid performance.


Eastern Air Lines, Inc. v. Gulf Oil Corp., 415 F. Supp. 429 (S.D. Fla. 1975)