## Facts

- A cotton buyer (Weathersby) sought to purchase all cotton grown by a Mississippi farmer (Gore) on 500 acres during the 1973 crop year under a forward contract priced at $0.30 per pound.
- The contract negotiations were conducted through Louis B. Strong, a Memphis cotton executive who signed the contract proposal and wrote “agent only” after his signature.
- Because Gore previously experienced a buyer’s nonperformance on a forward contract, Gore insisted that the buyer provide security for performance.
- The parties contemplated reciprocal $25,000 performance bonds; Gore provided his bond, but the buyer did not provide the required bond within the expected timeframe.
- Approximately two months after contracting, and months before harvest, Gore notified Strong that he was canceling due to the buyer’s failure to provide the required bond and that he would sell elsewhere.
- After the cancellation notice, Weathersby tendered a letter of credit as purported security, but Gore maintained it did not satisfy the agreed bond requirement.
- By the time delivery would have been due, market prices for cotton had sharply increased (to about $0.80 per pound).
- The parties agreed substitute cotton was available on the open market, but Weathersby made no attempt to purchase substitute cotton.

## Issues

1. Whether Strong acted as Weathersby’s agent so that Strong’s actions and knowledge bound Weathersby regarding contract terms and performance obligations.
2. Whether the buyer furnished the required $25,000 performance bond (or an acceptable equivalent) within a reasonable time, such that Gore’s cancellation was wrongful or justified.
3. Whether the jury was properly instructed on agency and on the legal significance of the bond requirement and timing.
4. Whether specific performance was an available remedy for a forward contract for cotton when substitute goods were available and damages were measurable.

## Decision

- The Fifth Circuit reversed and remanded the judgment entered for Weathersby.
- The court held that the district court’s jury instructions were deficient on (a) Strong’s agency relationship to Weathersby and (b) the reasonable-time question tied to the buyer’s obligation to provide the bond.
- The court held the letter of credit tendered by Weathersby did not satisfy the contract’s $25,000 performance bond requirement.
- The court held specific performance was improper because substitute cotton was available and monetary damages could provide adequate relief.

## Legal Principles

- A principal may be bound by an intermediary’s conduct and knowledge when the intermediary functions as the principal’s agent in negotiating and forming the contract.
- When a contract requires security for performance, whether a party provided the required security within a “reasonable time” can be material to whether the other party may treat the contract as canceled.
- A letter of credit is not necessarily an acceptable substitute for a bargained-for performance bond; equivalence and timeliness depend on the contract’s terms and purpose.
- Under UCC-based remedies for sales of goods, specific performance is generally unavailable when the goods are obtainable in the market and damages (including contract/market differential) are adequate.

## Conclusion

The Fifth Circuit set aside a decree compelling delivery of cotton under a forward contract because the trial court did not properly instruct the jury on agency and the timeliness of the buyer’s required bond, and because specific performance was unavailable where cover was possible and damages could compensate the buyer.


Weathersby v. Gore, 556 F.2d 1247 (5th Cir. 1977)