NationPoints Trucking, Inc, has a requirements contract with Oil & Gas Corporation that obligates Oil & Gas to supply NationPoints with all the gasoline it needs for its vehicles for one year at $2.30 per gallon. A clause inserted in small print in the

Question

contract by NationPoints, and not noticed by Oil & Gas, states, "The buyer reserves the right to reject any shipment for any reason without liability." For six months, NationPoints orders and Oil & Gas delivers under the contract without any controversy. Then, because of a war in the Middle East, the price of gasoline to Oil & Gas increases substantially. Oil & Gas tells NationPoints it cannot possibly fulfill their contract unless NationPoints agrees to pay $2.50 per gallon. NationPoints, in need of the gasoline, agrees in writing to modify the contract. Later that month, NationPoints learns it can buy gasoline at $2.40 per gallon from Purified Fuel Company. NationPoints refuses delivery of its most recent order from Oil & Gas, claiming, first that the contract allows it to do so without liability, and second, that it is required to pay only $2.30 per gallon if it accepts the delivery. Discuss NationPoints's contentions.

Answer 1

The contract clause in very small print that allows NationPoints to refuse any ship¬ment deliv¬ery for any reason would be challenged by Oil & Gas as being uncon¬scionable and therefore invalid. Although NationPoints would be given an opportunity to present evidence that such a clause is proper in a commercial setting, the fact that the clause is in small print, very one sided, and grossly unfair if enforced would allow a court to declare the clause illegal (or at least limit its application) while still enforcing the balance of the requirements contract. Some courts, however, would not permit the argument of unconscionability to enter into this case because the contract is between two businesses with equal bargaining power.
NationPoints's second contention is incorrect. Under the UCC, any agree¬ment to modify an ex¬isting contract is binding without consideration, providing the modification was sought in good faith and meets the requirements of the Statute of Frauds. In this case, NationPoints agreed in writing to the change in price, which was induced through no fault of Oil & Gas by a market price increase dictated by war in the Middle East. Thus, NationPoints is obligated to ac¬cept delivery and pay the higher price.