Yes. The power company broke the rules of the deal. The court said that in a 'buy all you need' contract, the law requires you to act in 'good faith,' which means you have to be fair and honest. The court found O & R was not acting in good faith because it was trying to take advantage of the low price to become a massive seller of power to other companies, which wasn't the original point of the deal. The court also said that demanding more than double the estimate was 'unreasonably disproportionate.' The estimate in the contract sets a reasonable ballpark, and demanding an amount so far outside that ballpark, just because the market changed, was unfair to the seller.

No, O & R wasn't being honest because it wanted more oil mainly to sell electricity to other companies and to use oil instead of gas, which wasn't part of the original agreement. It wasn't fair for O & R to ask for so much more oil than they first said they would need because Hess had no reason to expect O & R to need that much more, and the price of oil had gone up a lot, which neither company expected when they made the deal.

Yes. A buyer's demand that more than doubles the contract estimate, driven by taking advantage of a fixed price in a rising market to resell power and substitute fuels for profit, violates both the good faith and the 'unreasonably disproportionate' quantity provisions of UCC § 2-306(1). The court reasoned that UCC § 2-306(1) imposes two distinct limitations on a buyer: the requirements must occur in good faith, and they cannot be unreasonably disproportionate to the stated estimate. Regarding good faith, the court found that O & R's massive increase in non-firm sales to other utilities made those utilities 'silent partners' to the contract, and its consideration of selling its gas reserves instead of burning them constituted speculation and an attempt to take advantage of market conditions at Hess's expense. Regarding the 'unreasonably disproportionate' clause, the court held that O & R's demands for more than double the estimate were, as a matter of law, unreasonably disproportionate under the circumstances. This was not a normal expansion of business but a fundamental change driven by the fortuitous market shift, which was not within the reasonable expectations of the parties when the contract was formed.

Yes, O & R did not act in good faith because their increased oil consumption was due primarily to increases in sales of electricity to other utilities and a net shift from other fuels to oil. No, O & R's demands were unreasonably disproportionate to the estimates set forth in the contract because the demands exceeded the contract estimate by a significant margin without a reasonable basis for Hess to anticipate such an increase, and the market price of oil had more than doubled, which was not within the reasonable expectations of the parties when the contract was executed.

Orange & Rockland Utilities, Inc. v. Amerada Hess Corp.

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