## Facts

- National Steel Castings Co. (National Steel) sent Lima Locomotive & Machine Co. (Lima) a written offer to furnish “all your requirements in steel castings for the remainder of the present year” at stated prices.
- The writing required Lima, on or before the 15th of each month, to provide the tonnage it wished to order during the following month; National Steel agreed to fill Lima’s orders up to that tonnage and to make deliveries as required.
- Lima accepted the offer in writing.
- National Steel refused to make deliveries under the agreement.
- Lima sued National Steel for breach of contract.
- National Steel defended on the ground that the agreement contained no enforceable promise by Lima (i.e., it was void for want of mutuality because Lima could choose to order nothing).
- The trial court agreed with National Steel and entered judgment in its favor.
- Lima appealed.

## Issues

1. Whether an agreement to supply “all [the buyer’s] requirements” for a stated period, with monthly quantity notices, is unenforceable for lack of mutuality because the buyer’s quantities are not fixed and might be zero.

## Decision

- The Sixth Circuit reversed the judgment for National Steel.
- The court held the requirements agreement was a binding contract supported by mutual obligation, not an illusory promise by Lima.
- The case was sent back for further proceedings consistent with the court’s view that the contract was enforceable.

## Legal Principles

- A requirements contract can be enforceable even though the exact quantity is not stated at formation; the quantity term may be measured by the buyer’s actual requirements during the contract period.
- A buyer’s agreement to purchase its “requirements” from a seller is not necessarily optional performance; it commonly carries an implied commitment that the buyer will obtain those requirements exclusively from the seller and that its stated requirements will reflect good-faith business needs.
- Lack of a fixed quantity does not, by itself, make a contract void for want of mutuality when the agreement supplies an objective standard (actual requirements) and the parties’ obligations are reciprocal.

## Conclusion

The Sixth Circuit treated the parties’ “all requirements” writing as an enforceable requirements contract, rejecting the trial court’s view that Lima made no binding promise; because the agreement imposed reciprocal duties measured by Lima’s good-faith requirements, National Steel’s refusal to deliver could constitute a breach, and the case was returned for further proceedings.


Lima Locomotive & Machine v. National Steel Castings, 155 F. 77 (1907)