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Facts: A contract was made between the plaintiffs and defendants where the
plaintiffs obligated themselves to sell and deliver their cotton. The defendants
agree to purchase whatever was planted by these farmers on specific acreage at a
price agreed upon within a specific time period, irrespective of what the price
might be at harvest time. Meanwhile, the price of cotton skyrocketed to at least
double the price agreed upon.
Issue No.1: Should a contract for the advance or forward sale of a crop product
be enforceable when the price of the crop unexpectedly skyrocketed after the
signing of the contract due to unforeseeable events?
Summary of Arguments: The plaintiffs argue that the contract they made was for a
reasonable price, at current market value. They had no way of knowing the market
price would increase by more than double. They feel they should not be bound to a
contract they made since the circumstances changed unforeseeably . The defendants
have cited (13) cases that arose regarding the enforceability of contracts for the
sale of cotton due to the unexpected rise in the price. In each, validity of the
contracts has been upheld.
Reasoning: The contract was made to limit the risks to the farmers associated
with growing and selling their crops. By firm forward selling, the farmer shifts
many of his risks to the buyer. The farmer guarantees neither quality nor
quantity. In this way the farmer is certain they will sell whatever is produced.
The contract was created as a safeguard for the farmers, so it cannot be void just
because circumstances changed that make the contract unappealing. If the price had
gone down, the farmer would have been paid what was in the contract and so gave up
this risk.
Judgment/order: The US District court upheld the validity of the contract, and
dismissed the plaintiff's plea to void the contract.
Contract formation
Mutuality
Sale of food in restaurant not covered under UCC because of element of service