## Facts

- A public utility, through its agent, solicited bids for stainless steel condenser tubing for a nuclear power plant and contracted with a steel producer to supply the tubing.
- The fixed-price contract required fabrication and delivery in three 1976 shipments for $1,127,387.82.
- The contract included limited escalation tied only to buyer-caused delivery delays and stated no other escalation applied.
- The contract permitted only the buyer to cancel; the seller remained obligated to perform.
- Before any delivery, the seller notified the buyer that raw material and labor costs had increased substantially and demanded additional compensation to perform.
- The buyer refused to renegotiate and, citing U.C.C. § 2-609, demanded written adequate assurances that the seller would perform under the contract as written.
- The seller did not provide adequate assurances within the statutory period and effectively conditioned performance on revised pricing.
- The buyer treated the failure to assure performance as anticipatory repudiation, purchased substitute tubing from another supplier at a higher price, and sued for cover damages and incidental expenses.

## Issues

1. Whether the seller’s insistence on additional compensation and failure to provide adequate assurances constituted anticipatory repudiation and breach as a matter of law under U.C.C. § 2-609.
2. Whether the seller’s defenses of commercial impracticability (U.C.C. § 2-615), mutual mistake, unconscionability (U.C.C. § 2-302), and buyer bad faith raised genuine disputes of material fact barring summary judgment on liability.

## Decision

- The court granted summary judgment for the buyer on liability, holding the seller repudiated and breached by failing to provide adequate assurances and by conditioning performance on new price terms.
- The court rejected the seller’s commercial impracticability defense as a matter of law; market-driven cost increases in a fixed-price contract did not excuse performance on these facts.
- The court rejected the mutual mistake defense as a matter of law because the alleged mistake concerned future market conditions and profitability expectations, not an existing fact at contract formation.
- The court rejected the buyer bad-faith defense as a matter of law; enforcing contract terms and demanding assurances did not constitute bad faith.
- The court denied summary judgment on unconscionability, finding factual development necessary regarding the commercial setting and alleged one-sided risk allocation.
- The court denied summary judgment on damages, reserving the amount of cover and incidental damages for later determination.

## Legal Principles

- Under U.C.C. § 2-609, when reasonable grounds for insecurity exist, a party may demand adequate assurances; failure to provide adequate assurances within a reasonable time (not exceeding 30 days) may be treated as repudiation.
- A seller’s conditioning of performance on price increases inconsistent with a fixed-price contract can support a finding of anticipatory repudiation when coupled with failure to assure performance as written.
- U.C.C. § 2-615 commercial impracticability is narrowly applied; substantial increases in input costs generally remain a seller’s assumed risk in a fixed-price supply contract absent contractual reallocation.
- Mutual mistake doctrine does not apply to mistaken predictions about future economic conditions or expected profitability.
- Refusal to renegotiate and insistence on performance consistent with the contract’s risk allocation, without more, does not establish bad faith.
- Unconscionability under U.C.C. § 2-302 requires examination of the contract’s commercial setting, purpose, and effect and may require trial-level factual findings even in commercial transactions.

## Conclusion

The court held the seller breached by repudiation after demanding additional compensation and failing to provide adequate assurances, rejected impracticability, mutual mistake, and bad faith defenses on summary judgment, and allowed trial on unconscionability and the amount of cover and incidental damages.


Louisiana Power & Light Co. v. Allegheny Ludlum Indus., Inc., 517 F. Supp. 1319 (E.D. La. 1981)