Laclede Gas Co. v. Amoco Oil Co.
Citation: 522 F.2d 33 (8th Cir. 1975)
Facts
Laclede Gas had a long-term requirements contract with Amoco to supply propane gas to residential developments. Amoco terminated the contract, claiming it was illusory. Laclede sought specific performance because natural gas was difficult to obtain from alternative sources.
Issue
Is specific performance available as a remedy for breach of a requirements contract for propane gas, or are money damages adequate?
Holding
Yes. Specific performance is available. The court rejected the argument that the contract was illusory (Laclede’s needs provided consideration) and found that damages were inadequate because the propane market was uncertain and long-term alternative supply could not be reliably obtained.
Rule
Specific performance — adequacy of legal remedy: Specific performance is available when money damages are an inadequate remedy. Damages are inadequate when: (1) the subject matter is unique, (2) calculating expectation damages is too speculative or difficult, or (3) the market for substitute performance is uncertain or unavailable. Long-term supply contracts for commodities can satisfy these requirements when alternative supply is uncertain.
Significance
- Classic specific performance case for long-term supply contracts
- Demonstrates that commodities (normally not “unique”) may support specific performance when substitute supply is unavailable or uncertain
- The UCC § 2-716 allows specific performance when goods are “unique or in other proper circumstances” — courts have read this broadly
- Also important for rejecting the illusory contract argument: a requirements contract is supported by the buyer’s actual requirements as consideration, even though the buyer could reduce requirements to zero