DB Orban Co. v. Lakco Pipe & Supply, Inc.
496 So. 2d 1382 (1986)
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Rule of Law:
For a valid contract of sale to be perfected, there must be a meeting of the minds or mutual consent between the parties regarding all essential terms, including the method by which the price is to be determined.
Facts:
- In April 1982, DB Orban Company (Orban) and Lakco Pipe & Supply, Inc. (Lakco) entered into discussions for the sale of steel pipe.
- The parties agreed on a price of $400.00 per net ton.
- Lakco understood the price would be based on the actual weight of the pipe.
- Orban intended to bill Lakco based on the pipe's theoretical weight and issue a credit at a later date once the actual weight was determined.
- Between April and June 1982, Lakco took possession of 103 segments of pipe from Orban.
- After paying two invoices, a purchasing agent for Lakco, Rodney Webre, discovered that Orban's billing method resulted in significant overcharges compared to a price based on actual weight.
- Lakco informed Orban that if it was not billed based on actual weight as agreed, Lakco would return the pipe.
- The parties also had disagreements concerning the quality and quantity of the pipe intended to be part of the sale.
Procedural Posture:
- DB Orban Company sued Lakco Pipe & Supply, Inc. in the district court (trial court) to collect the unpaid purchase price for steel pipe.
- Lakco filed an answer claiming no contract was formed and also filed a reconventional demand seeking the return of money paid in error and costs for storage and handling.
- Following a trial on the merits, the district court rendered judgment for Lakco on the main demand, finding that no contract of sale was perfected.
- The trial court ordered Orban to retrieve the remaining pipe but dismissed Lakco's reconventional demand.
- Orban, as plaintiff-appellant, appealed the judgment to the Court of Appeal of Louisiana, Third Circuit.
- Lakco, as defendant-appellee, answered the appeal, seeking review of the dismissal of its reconventional demand.
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Issue:
Does a valid contract of sale exist when the parties agree on a price per unit of measurement but have a fundamental misunderstanding about the method of calculating that measurement, such as using actual weight versus theoretical weight?
Opinions:
Majority - Doucet, J.
No, a valid contract of sale does not exist under these circumstances. For a contract of sale to be perfected under Louisiana law, three elements must concur: the thing sold, the price, and consent. The price must be fixed and determined between the parties. Here, there was no meeting of the minds as to the price because the parties had fundamentally different understandings of how it would be calculated—Lakco intended to pay based on actual weight, while Orban intended to bill based on theoretical weight with a later adjustment. This lack of mutual consent on an essential term, combined with disagreements over the pipe's quality and quantity, demonstrates that no contract was ever formed.
Analysis:
This case reinforces the foundational contract principle that a 'meeting of the minds' is essential for contract formation. It clarifies that an apparent agreement on a price (e.g., '$400 per ton') is insufficient if there is a material, underlying misunderstanding about how that price is to be calculated. The decision establishes that the method of price determination can be as essential as the price figure itself, and a failure to agree on this term is fatal to the formation of a sales contract. Future disputes involving similar pricing structures will look to this case to determine whether a disagreement over calculation methods constitutes a failure of mutual consent.
