MANSFIELD PRO. GAS COMPANY v. Folger Gas Company
14 U.C.C. Rep. Serv. (West) 953, 204 S.E.2d 625, 231 Ga. 868 (1974)
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Rule of Law:
Under Uniform Commercial Code § 2-615, a seller may allocate limited supply among all customers during a shortage unless the contract contains an explicit and affirmative provision stating the seller assumes a greater obligation to perform even if contingencies make performance impracticable.
Facts:
- Mansfield and Folger entered into a written contract for the sale and delivery of propane gas.
- The contract stipulated that Mansfield would supply Folger's propane requirements for a five-to-seven-year term, up to a maximum of ten million gallons.
- Folger was Mansfield's only customer with a long-term, high-volume written contract.
- For approximately one year, Mansfield fulfilled its obligations under the contract without issue.
- An 'energy crisis' subsequently caused a shortage in the supply of propane gas available to Mansfield.
- On June 18, 1973, Mansfield informed Folger that it intended to allocate its limited supply of propane gas among all its customers.
Procedural Posture:
- Folger (appellee) brought an action against Mansfield (appellant) in the trial court.
- Folger sought a declaration of rights and injunctive relief to enforce the contract as written.
- The case was heard by a trial judge, who found in favor of Folger.
- The trial court ruled that the contract was not governed by the Uniform Commercial Code and ordered Mansfield to perform the contract.
- Mansfield appealed the trial court's judgment to the Supreme Court of Georgia.
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Issue:
Does a written requirements contract that does not contain an express provision guaranteeing performance despite supply shortages constitute a 'greater obligation' under UCC § 2-615, thereby exempting the buyer from the seller's fair and reasonable allocation of scarce goods?
Opinions:
Majority - Gunter, Justice
No. A written requirements contract does not, by itself, constitute a 'greater obligation' that exempts a buyer from allocation under UCC § 2-615; such an exemption requires an explicit contractual provision that the seller will perform even if contingencies arise that make performance impracticable. All contracts for the sale of goods are governed by Article II of the Uniform Commercial Code. The court reasoned that the 'allocation' rule in UCC § 2-615 is the default for all sales contracts when performance becomes impracticable due to an unforeseen contingency. Folger argued that its unique written contract represented the 'greater obligation' mentioned in the statute, thus exempting it from allocation. However, the court held that an exception to allocation must be supported by an affirmative and explicit provision in the contract itself. Without a clause where the seller expressly waives the right to allocate and guarantees performance, the seller retains the right under the UCC to allocate its limited supply in a fair and reasonable manner among all its customers, including those with and without written contracts.
Analysis:
This case, a matter of first impression, establishes a significant precedent for the interpretation of UCC § 2-615's 'greater obligation' clause. The ruling clarifies that the default rule is allocation during shortages and places a high burden on buyers who wish to contract around it. By requiring an explicit and affirmative contractual waiver, the court provides a clear standard for commercial drafting, forcing parties to proactively address the risk of supply chain disruptions. This decision protects sellers from being disproportionately burdened by a single large contract during an industry-wide crisis, unless they have expressly agreed to assume that specific risk, thereby promoting a more equitable distribution of scarce resources among a seller's entire customer base.
