## Facts

- Simcala, an industrial coal user, issued a 1998 blanket purchase order to ACT for an estimated 17,500 tons of “Black Creek” coal at $78.50/ton, “approximate” and “to be shipped as required.”
- The arrangement functioned as a requirements contract governed by Ala. Code § 7-2-306(1) (UCC § 2-306(1)).
- Simcala purchased 7,200 tons in 1998 (about 41% of the estimate), buying roughly 6,000 tons from January to mid-May, then suspending orders for several weeks and later buying about 1,200 tons in July and August.
- Simcala cited furnace problems attributed to ACT’s coal but did not claim the coal failed to meet contract specifications.
- ACT’s source mine closed in August; ACT asked Simcala to buy surplus in September, but Simcala placed no September orders.
- In early October, Simcala ordered 600 tons, which ACT could not deliver because the surplus had been sold; ACT presented uncontroverted evidence it could secure alternate supply by mid-October for further orders, but Simcala placed no more orders.
- After a bench trial, the court found Simcala’s 41% purchases were unreasonably disproportionate to the estimate, found no bad faith by Simcala, and awarded ACT $101,850 lost profits plus $10,690 interest and costs.

## Issues

1. Under Ala. Code § 7-2-306(1), may a buyer in a requirements contract reduce purchases to a level unreasonably disproportionate to a stated estimate if the buyer acts in good faith?
2. Did ACT’s inability to deliver a single 600-ton October order excuse Simcala from purchasing quantities approximating the stated estimate?

## Decision

- The Supreme Court of Alabama affirmed the judgment for ACT.
- The court held § 7-2-306(1) prohibits unreasonably disproportionate decreases (as well as increases) from a stated estimate, even where the buyer acts in good faith.
- The court held ACT’s one-time inability to deliver the 600-ton October order did not excuse Simcala’s reduced performance because it did not substantially impair the value of the whole contract and Simcala did not pursue available UCC remedies such as demanding adequate assurances.

## Legal Principles

- In a requirements contract, § 7-2-306(1) measures quantity by the buyer’s actual good-faith requirements, but independently limits demanded or tendered quantity to amounts not unreasonably disproportionate to any stated estimate.
- The “unreasonably disproportionate” limitation applies symmetrically to both upward and downward deviations from a stated estimate; good faith alone does not authorize a drastic reduction.
- A single shortfall in an installment setting does not justify treating the entire requirements contract as excused absent substantial impairment of the whole contract’s value.
- A buyer uncertain about future performance may seek adequate assurances under Ala. Code § 7-2-609 rather than unilaterally curtail performance.

## Conclusion

The court enforced the stated estimate as a meaningful constraint in a requirements contract, holding that a buyer who purchases only 41% of the estimate breaches § 7-2-306(1) even without bad faith, and that a seller’s isolated non-delivery of one order did not excuse the buyer’s overall under-purchasing.


Simcala, Inc. v. Am. Coal Trade, Inc., 821 So. 2d 197 (Ala. 2001)